20 September 2022

Mandy Rice-Davies Applies*

Jamie Dimon, the CEO of JPMorgan Chase is having major butt-hurt over increased capital reserve requirements for banks.

He (Laughably) claims that this increases will cause a major risk to the economy.  What he really means that it can't make as much money because when times are good, the more JPM can leverage its money, the more profits they can generate, and the larger bonuses for ……… Wait for it ……… Jamie Dimon.

The federal reserve is tightening monetary policy, so increasing the required reserves of banks, particularly bigger ones, like Mr. Dimon's operation, are a sensible measure to prevent a Federal Reserve induced recession to turn into a full blown financial crisis:

Jamie Dimon, chief executive of JPMorgan, has warned US lawmakers that capital requirements for large banks pose “a significant economic risk” that is curtailing their capacity to lend to homebuyers and other customers.

Dimon said “the continued upward trajectory” of capital requirements is making it harder for banks to meet customer needs just as “storm clouds” are gathering on the horizon for the US economy.

“This is bad for America, as it handicaps regulated banks at precisely the wrong time, causing them to be capital constrained and reduce growth in areas like lending, as the country enters difficult economic conditions,” Dimon said in written remarks to the House committee on financial services.

Dimon lamented that JPMorgan, the largest US bank with $3.8tn in assets, must set aside more than $200bn in additional capital because of the impact of new rules.


However, JPMorgan, as well as Bank of America and Citigroup, are still facing higher capital requirements due to their designation as global systemically important banks. Dimon criticised the capital rules as “not reflective of actual risk”.

The storm clouds, he is referring to is deliberate policy by the Federal Reserve.

Typically, they raise rate and increase capital requirements.  Both have the effect of reducing the money supply.

The latter, IMHO, is a better policy if you want to reduce the money supply to cool off the economy. (I don't, I am more of MMT guy, but that's for another post)  It both pulls money out of the economy and reduces systemic risk.

It also reduces bank profits, but I consider that a win as well.

*Well, he would say that, wouldn't he? Seriously, know your history.


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