WASHINGTON/FRANKFURT (Reuters) - Masters of the universe are not always so masterful after all.
JPMorgan Chase Chief Executive Jamie Dimon’s squabble with the head of the Bank of Canada over bank regulation has managed to achieve only one thing — anger the central banker.
Once viewed as a star for helping the U.S. government prop up the now-defunct Bear Stearns during the 2008 financial crisis, Dimon is in danger of becoming a pariah among global supervisors. By attacking someone who could become the head of an influential regulatory body, Dimon may have undermined the banking community’s message that burdensome rules are harming the economic recovery, bankers said.
At a meeting last week between the world’s most powerful bankers and Bank of Canada Governor Mark Carney, Dimon tried to tell the central banker that banks were suffering under the weight of all the new bank rules. But his aggression drove a red-faced and visibly angry Carney out of the room, according to people familiar with the encounter.
Dimon referred to new global bank liquidity rules as “cockamamie nonsense,” according to one of the attendees at the closed-door meeting held by the Institute of International Finance on Friday.
He said the rules did not bear any relation to financial reality and they were constructed by regulators, academics and people who did not have market experience, the attendee said.
Major banks have lashed out at the slew of new rules being implemented in response to the financial crisis. They contend higher capital standards and other new regulations will impede their ability to lend and hurt the already-fragile economy. Their arguments appear to be falling on deaf ears with regulators.
Another person at the meeting said Dimon acted very aggressively and complained about a plan from the Basel committee of global regulators to force the world’s biggest banks to hold up to 2.5 percent in extra capital.
Carney, who spent more than decade at Goldman Sachs before becoming Canada’s central banker, was calm at first and tried to appease Dimon, responding: “I hear what you are saying. I don’t think it will surprise you that I am taking a different view. These are reasonable responses to the financial crisis,” one of the attendees recalled.
But Dimon grew increasingly aggressive, prompting Bank of Nova Scotia CEO Rick Waugh to jump in to try to smooth relations, the source said.
The outspoken Dimon has already blasted the new international bank rules as anti-American and went a step further at the meeting. “I have called it anti-American. The only reason I am calling it anti-American is because I am American. I also think it’s anti-European,” the attendee recalled him saying.
In the end, an agitated Carney left in the middle of Dimon’s tirade. Other chief executives such as Goldman Sachs’ Lloyd Blankfein and Deutsche Bank’s Josef Ackermann looked stunned, the sources said.
Ackermann, in his capacity as IIF chairman, tried to explain why Carney left abruptly, saying the central banker was on a tight schedule. A Canadian official said the meeting was running late and Carney had to leave the room because he had scheduled a press conference with Canadian journalists.
Some bankers were shaking their heads. “It was Dimon’s style that astonished all bankers, not the content,” said one banker familiar with the meeting. Another voiced concern that Dimon’s anger hurt his message. Others said they thought Dimon’s comments were appropriately delivered.
Once singled out by President Barack Obama for running a well-managed bank, Dimon has become increasingly vocal in his opposition to the new bank rules. For over a year, he has fought the administration privately and publicly over the Dodd-Frank regulation bill.
In June, Dimon took U.S. Federal Reserve Chairman Ben Bernanke to task and said new financial regulations could jeopardize the country’s economic recovery and job creation.
At the time, he was praised for speaking out. But Dimon may have exacerbated the already-tense relations between the banking community and its financial supervisors with his latest exchange, first reported by the Financial Times.
On Monday, Dimon called Carney to put his comments in context, a source close to Dimon said. Dimon told the central banker he had the utmost respect for him and that he thought the world of him, the source said.
The Bank of Canada and JPMorgan both declined to comment.
Other bankers tried to repair the damage. A source familiar with the matter said Blankfein sent an email and Ackermann sent Carney a formal letter in an effort to smooth things over.
Carney is rumored to be in line to become the next head of the Financial Stability Board — a body of international regulators that makes policy recommendations to the Group of 20 economies.
Two days after the encounter, Carney rejected bankers’ complaints in a public speech to the IIF, a lobby group for global banks.
“If some institutions feel pressure today, it’s because they have done too little for too long rather than being asked to do too much too soon,” Carney said on Sunday.
“While the worsening global economic outlook has implications for bank performance, it does not provide a rationale for delaying the implementation of Basel III (bank capital rules,)” he said.
Additional reporting by Lauren LaCapra in New York, Louise Egan in Ottawa and Cameron French in Toronto; Writing by Rachelle Younglai; Editing by Dan Grebler and Andrew Hay