During a Senate annual oversight hearing of Wall Street firms, Louisiana Sen. John Kennedy engaged in a pointed exchange with JPMorgan Chase CEO Jamie Dimon regarding government regulation and the financial stability of banks.
Kennedy questioned Dimon about whether JPMorgan Chase had ever been in a position where its liabilities exceeded its assets, which Dimon denied. Kennedy highlighted that three other banks had faced such a situation and subsequently failed within the year.
Kennedy expressed his view on the failures of these banks, attributing their collapse to poor management decisions and inadequate regulatory oversight.
“In my judgment, they went broke because their management did really stupid stuff. And because the FDIC and the regulators who were in charge of keeping them from doing stupid stuff sat there, like bumps on a log, sucking on their teeth, and watched them do stupid stuff. And in many cases, had to turn to you to clean up the mess,” Kennedy said.
He also criticized the Federal Deposit Insurance Corporation (FDIC), suggesting that its officials were preoccupied with personal misconduct rather than fulfilling their regulatory duties.
“Now, in fairness to the FDIC, it may have been that the people in charge of watching those banks, at the FDIC, were too busy urinating off the top of a hotel, or abusing young women who went to work for the FDIC. The FDIC chairman told us recently, yes, he knew about it, it happened, but he wasn’t the chairman yet and didn’t have the authority to stop it.”
Kennedy then posed a pointed question to Dimon, highlighting the irony he saw in the FDIC’s approach to regulation.
“Mr. Dimon, don’t you find it ironic, the FDIC is now turning to you and saying, ‘you know our track record, which is blemished at the FDIC, your bank isn’t broken but we’re going to tell you how to fix it.’ Do you find that ironic? They’re going to tell you how to fix it based on standards put together by bureaucrats in Basel, Switzerland, not by the United States Congress. Do you find it ironic that they’re telling you this and proposing this, isn’t that kind of like being given gun safety advice by Alec Baldwin?”
Dimon initially hesitated to respond, asking with a laugh, “Should I answer the question?” He then discussed the risks associated with the failed banks, noting they were “hiding in plain sight.” He also raised concerns about transparency in the rule creation process and the potential impact on American banks.
The discussion centered around the FDIC’s plan to revamp how banks manage their capital, using standards developed by the Basel Committee on Banking Supervision. This international committee aims to ensure consistent application of capital standards globally, enabling banks to withstand financial crises.
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