World Finance Chiefs Spar over Size of Bank Sector ; Dimon Apologizes Again but Offers Strong Defense of His Industry's Behavior

By Ewing, Jack | International Herald Tribune, January 24, 2013 | Go to article overview

World Finance Chiefs Spar over Size of Bank Sector ; Dimon Apologizes Again but Offers Strong Defense of His Industry's Behavior


Ewing, Jack, International Herald Tribune


Bankers have become slightly more contrite and their overseers may have softened their determination to constrain bank risk, but there are still widely differing opinions on issues like how big the sector should be.

Jamie Dimon, the chief executive of JPMorgan Chase, apologized again for the bank's recent $6 billion trading loss, this time in front of an audience that included the elite of the financial world.

But it was a diet portion of humble pie. Mr. Dimon went on to energetically defend his bank and the behavior of banks in general.

"If you're a shareholder of mine, I apologize," Mr. Dimon said at the World Economic Forum annual meeting here. But he quickly added: "We did have record profits. Life goes on."

Mr. Dimon's remarks may have exemplified the tone of the debate at Davos among bankers, economists and regulators Wednesday.

For the last five years, the financial crisis has been a dominant theme at the gathering, which attracts many of that melodrama's top protagonists. In that time, bankers have become slightly more contrite, and their overseers may have softened their determination to constrain bank risk taking. But there is still wide disagreement on basic questions like how big the banking sector should be.

Nor is there consensus on how central bankers and political leaders should be responding to the crisis. Axel Weber, who resigned in 2011 as president of the German Bundesbank because of his opposition to European Central Bank policy, said in Davos Wednesday that he remained concerned that cheap money was creating conditions for the next crisis.

Mr. Weber, now chairman of the Swiss bank UBS, said it was wrong to combat a crisis caused by excessive borrowing by encouraging even more borrowing. Record-low official interest rates and other emergency measures would eventually backfire, he said.

"We are trying to solve the crisis with more leveraging," he said during the same panel discussion in which Mr. Dimon made his comments. "We are having a better life at the expense of future generations."

But in other closed-door discussions, top central bankers, who under Davos rules could not be quoted directly, said those financial pump-priming measures had prevented a global depression and that the long-term consequences were not serious.

They noted that there had been no sign of the inflation and other dire consequences predicted by critics of the U.S. Federal Reserve's so-called quantitative easing financial stimulus program.

During an often contentious panel discussion in Davos that included several other bank executives, Mr. Dimon clashed with a top official of the International Monetary Fund about whether the banking system was still too dangerous.

Zhu Min, deputy director of the I.M.F., said the financial industry was too large in proportion to the overall economy. Banks still operate on too much borrowed money, he said, and still trade in overly complicated derivatives that were impossible for outsiders to understand.

"The whole financial sector is too big," Mr. Min said.

Mr. Dimon responded that JPMorgan was fulfilling its duty to lend to businesses and governments. …

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