Recently JPMorgan Chase & Co. reported a $2 billion trading loss that had occurred at its London office. Chase appropriately disclosed the loss to its regulators, to the Securities and Exchange Commission, and to the world through the media. In response, the bank-hating national media pounced on this news as a grand opportunity to vilify banks in general and Chase specifically.
Then the U.S. House of Representatives and the U.S. Senate demanded that Chase Chairman and Chief Executive Officer Jamie Dimon appear before their respective banking committees for a thinly veiled public flogging. Ironically Dimon had been the most revered and respected of the large U.S.-based worldwide bankers for his success in guiding Chase through the last few years of financial debacle.
Jamie Dimon certainly does not need me to defend him. He is an outstanding leader, and no doubt he has able advisers to help him traverse this rocky ground. I would, however, like to put into perspective what occurred.
Chase is a $2 trillion asset company that employs more than a quarter of a million people. Last year its net profit hovered around $19 billion. Thus a $2 billion loss is about 10 percent of a year’s profit. In comparison, the average Indiana-based bank is about $225 million in assets. A similar loss at one of these banks would total about $225,000. I suspect that most IBA-member banks in the past four years have experienced a single loan loss of $225,000 or more. Devastating, yes, but not a death blow.
I understand that Chase experienced a trading loss, and that my bank example cites a loan loss—but a loss is a loss. Dimon got called to testify before Congress. Not a single banker from Indiana was called before Congress to defend their losses, and none should have been. Neither should Dimon have been called. He has a board of directors and millions of shareholders that he answers to. It is their job to evaluate his performance. Shareholders lost some value, but not a single dollar of Chase’s loss will be shouldered by the Federal Deposit Insurance Corp., taxpayers or customers.
Regardless, Congress could not resist this opportunity. Bear in mind that this is the same group of “public servants” who have mismanaged the federal government into a $15 trillion debt … and that debt will affect taxpayers!