JPMorgan Chase pushes back at critics
Asks shareholders to reject call for breakup of Wall Street banks
NEW YORK — JPMorgan Chase is the largest bank in the country by assets. Its profit hit an all-time high last year, $24 billion, and it has more than 200,000 employees.
And the New Yorkbased bank wants its shareholders to know one more thing: It’s not too big to fail.
In a U.S. Securities and Exchange Commission filing last week, JPMorgan asked shareholders to reject the populist drumbeat calling for the breakup of Wall Street banks.
Since the 2008 financial crisis, JPMorgan and other large banks have been at the center of a debate about whether they are so large that they could pose a threat to the economy.
But that drumbeat has become louder in recent months. Democratic presidential candidate Bernie Sanders has made the issue the center of his campaign. Even Neel Kashkari, who managed the $700 billion Troubled Asset Relief Program used to rescue banks during the crisis, has piled on. Now president of the Federal Reserve Bank of Minneapolis, Kashkari said the issue needs to be studied.
“You can never eliminate all risk, and I don’t think we would want to, but I think we can go further than we’ve gone,” he said in a recent interview with CNBC.
Amid that backdrop, JPMorgan is fighting a proposal from shareholder Bartlett Naylor, a financial policy advocate for Public Citizen, a liberal activist group, that would direct the bank to establish a panel of its independent board members to study a breakup of its assets. Under the proposal, the massive bank would be broken into two smaller companies, one focused on lending to businesses and consumers, the other on investment banking.
Naylor pointed to some of JPMorgan’s most embarrassing missteps over the past few years to make his argument. In 2013, the bank lost more than $6 billion after its London traders placed bad bets on credit derivatives. The bank also has paid $30 billion in fines “because bank managers failed to prevent misconduct in a variety of operations,” Naylor said in his proposal.
“The crisis and subsequent events have also demonstrated that JPMorgan may be ‘too big to manage,’” Naylor said.
JPMorgan rejects that argument. In fact, the bank says, its size is a benefit.
“Clients and customers choose JPMorgan Chase because of the breadth and quality of the services we provide. It is what they want and what they need,” the bank said in its response to Naylor’s proposal. “Our diversification and scale are the key to this and enables us to serve our customers and clients, which include nearly 50 percent of U.S. households and approximately 80 percent of Fortune 500 companies.”
The company said it studied the benefits of a breakup last year. The study “concluded that splitting off one or more businesses would likely negatively impact longterm shareholder value,” JPMorgan said.
In a separate letter to shareholders, JPMorgan chief executive Jamie Dimon, who is fond of calling the bank’s balance sheet a fortress, also defended the bank. “Nearly every year since the Great Recession, we have improved virtually every measure of financial strength, including many new ones,” he said.
Shareholders can vote on Naylor’s proposal at the company’s annual meeting in May.