The CEO of the biggest member of America's banking system appeared before Congress this week with an apology.
As you've probably heard, JPMorgan made a $2 billion mistake in an effort to hedge the risks to its lending portfolio. The unexpected loss has brightened the spotlight that shines on the banking industry, and Jamie Dimon, CEO of JPMorgan, went to Washington, D.C., in an effort to dim its glare. He told lawmakers, "We have let a lot of people down, and we are sorry for it."
For many readers who have been frustrated with banks over the past few years, I'm guessing it's somewhat refreshing to hear the CEO of America's biggest bank willing to admit that his management has failed miserably. However, this wasn't an all-apologies session. While Dimon readily admitted that his bank made some serious errors, his prepared testimony pointed to a range of steps that the bank has taken to shed the image of banking evil. From statistics that show the bank has increased lending to small businesses to the bank's new prepaid card, Dimon was in full PR mode.
It's an election year, so I'm not surprised that some members of Congress are attempting to show just how tough they are on big banks. However, the reality is that many of the trading strategies they discussed are too complex for these lawmakers to truly understand, analyze and address in one day of testimony.
All in all, I felt like Dimon was able to dodge serious scrutiny. In fact, one question even allowed him to draw attention to Congress' inability to draft an effective outline of the Volcker Rule. When Sen. Jack Reed, D-R.I., asked Dimon if the Volcker Rule would have prevented this risky activity, the CEO simply replied, "I don't know what the Volcker Rule is. It hasn't been written yet."
To me, that's the biggest takeaway from this entire episode. Lawmakers can ask banking executives to come to Capitol Hill. They can scold them for irresponsible behavior. They can ask what they're doing to fix problems, but that's about it. Banks aren't going to comply with nonexistent guidelines.
What do you think? Should lawmakers attempt to apply more regulatory pressure to banks?