The Agenda

Lawrence Lindsey on Why Jamie Dimon Has Become a Punching Bag

Lawrence Lindsey’s op-ed in the Wall Street Journal on the J.P. Morgan’s $2 billion trading loss on a $200 billion portfolio makes a number of provocative observations. 

(a) He contrasts J.P. Morgan’s loss against the $28.8 billion taxpayers have lost on the federal government’s auto-industry bailout;

(b) he notes that J.P. Morgan made a $5.4 billion profit last quarter, and that it had repaid TARP funds in 2009 (though of course calculating the actual value of TARP is not an entirely straightforward proposition);

(c) yet Dimon has become a lightning rod because, Lindsey suggests, he has become a vocal critic of regulatory overreach:

J.P. Morgan takes risks. Some paid off, some didn’t, and in the end they made billions in profit. But Washington demagogues want to convey a different message. If you are politically incorrect and lose a sizable sum in any of your divisions, you will pay a terrible and very public price.

In the marketplace, the natural response will be to take fewer risks even if that means a lower profit. It also means fewer loans, which means fewer small businesses, which means fewer jobs. And lower profits mean less tax revenue.

The most direct impact of a political climate hostile to risk-taking will be on liquidity. Washington is undermining the institutions that comprise the greatest capital market in history.

This reminded me of Amar Bhide’s argument that U.S. financial markets are plagued by excessive liquidity. And indeed, Bhide offered a very different, more critical take on Dimon in an interview with Bloomberg Television’s Inside Track. I recommend reading Lindsey and then watching Bhide. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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