The leaders of big banks have mostly stayed mum on the uncomfortable ideas floated lately at the Federal Reserve Bank of Minneapolis — breaking up the big banks, raising their capital requirements or treating them like utilities.
But in recent days Jamie Dimon, the boss of JPMorgan Chase, made a vigorous case for the indispensability of large financial institutions, putting forth the industry's loudest reply yet to Minneapolis Fed President Neel Kashkari's push to end the phenomenon of too big to fail.
The chief executive of the largest bank in the United States took time in his annual shareholders letter to enumerate the benefits of banks like his not just for American multinationals and countries around the world, but also for community banks. He mentioned neither Sen. Bernie Sanders — who has pledged to break up the big banks as part of his presidential campaign — nor Kashkari in the letter, but warned generally against picking fights with large financial institutions.
"America faces enough real challenges without inventing conflict where none need exist," Dimon said. "Banks of all sizes do themselves and their stakeholders better service by acknowledging the specific value different types of institutions offer."
Kashkari, who has now been president of the Minneapolis Fed for just over three months, caused a stir in February when he said he and the economists at the regional bank would come up with a plan by the end of the year for ending "too big to fail." A first symposium was held in early April, attracting economists from across the country. A second forum will be held May 16, at which former Fed Chairman Ben Bernanke is scheduled to speak.
Executives at big banks and their national trade groups have so far not participated in Kashkari's effort or said much publicly, though with JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and U.S. Bank all slated to report their quarterly earnings in the next 10 days, executives are likely to get questions on Kashkari's initiative.
Dimon was the first to weigh in. In the midst of his 50-page letter, Dimon's answer to the question "Does the United States really need large banks?" took four pages.
He argued that banking as an industry accounts for a smaller share of the economy in the United States than in most large, developed nations. Also, the top five U.S. banks hold a smaller share of the nation's banking assets than do the largest banks in other countries.