As I mentioned the other day, one of the reasons that the press, pundits, and politicians are taking such pleasure in bashing JP Morgan on its trading losses is because Jamie Dimon has been one of the most vocal critics of the Volcker rule and other financial reforms, insisting that they’re unnecessary and so costly as to make American banks uncompetitive.
And JP Morgan has also been one of the (if not the) most active institutions lobbying federal regulators for favorable Volcker rule interpretations and exemptions. For example, in the period between Dodd-Frank signing and proposed rule publication, JPMC met with federal regulators charged with Volcker rule implementation, either alone or with other industry members, a total of 27 times – more than any other single entity, organization, or person. (Table 8 at right shows this information, this paper has more details.)
This meeting activity continued after rule proposal, though the rate appears on first cut to have declined. I’ll have more detailed information on that down the road, as my RAs and I finish going through the meeting logs beginning the day after the Volcker rule proposal. JPMC also filed a substantial (65 page, not counting the appendix) comment letter complaining that the proposed Volcker rule was too restrictive and went beyond Congress's wishes as expressed in the statute, and outlining its suggestions for appropriate revisions.
Although it can sometimes be difficult to get an accurate sense of meeting content from logs, the Federal Reserve’s are pretty good and give at least some indication of the points being discussed. Those logs show that JP Morgan met with fed staff to argue that the proposed Volcker rule needed more narrow definitions of prohibited activity and more broadly defined exemptions, that the rule as proposed would negatively impact their own business and markets generally, and would render US banking entities uncompetitive. On the substance, the logs show that JPMC discussed with fed officials both the proprietary trading and fund investment restrictions of the Volcker rule, as well as concerns regarding the effective date, the conformance period, the use of specific metrics to gauge Volcker rule compliance, and the hedging, market making, underwriting, and customer service exemptions of the rule, among other items.
I should be circulating a draft of a new paper by the end of the summer that details these meeting logs and comment letters more systematically, and places them in the context of rule changes from inception to final product (whenever we finally have one). But even from the limited preview here, you can, I think, see why reform-minded commentators are taking particular pleasure in this JP Morgan misstep.