Just big enough

It seems rather hypocritical that an institution employing millions of individuals is telling another institution that employs only 260,000 people it is too big to manage.

From the start of the economic crisis around 2008, there was talk that many of the “big banks” were too big. Regulators looked at banks like Bank of America, Citigroup and JPMorgan Chase and said the “too big to fail” idea wasn’t working, and that these banks were really “too big to manage.”

The government responded to the crisis with attempts to revitalize the economy and clean up the big banks’ mess. The Trouble Asset Relief Program was passed in order to provide banks with enough capital to cover their losses. In reality, the government had to force some banks to accept this assistance — specifically JPMorgan Chase. At a time when other banks were completely falling apart, JPMorgan was strong enough to repay the $25 billion it was forced to take in less than a year and pay the government about $1 billion in interest on the money they didn’t want in the
first place.

Before TARP, JPMorgan Chase showed its financial strength. In March of 2008, Bear Stearns was on the verge of bankruptcy. The government turned to Chase to acquire one of the largest and most well-recognized investment banks. Chase bought Bear Stearns for about $250 million, a bargain price, but helped avoid further economic loss by preventing its bankruptcy and the subsequent fallout.

In 2011, Chase continued to show its financial strength. That March, the bank agreed to lend AT&T $20 billion in order to finalize its acquisition of T-Mobile. The loan not only showed how much muscle JP Morgan Chase could flex in lending, but it also gave a positive outlook to the economy and lending in general.

More recently, Chase has maintained its record of being a financial backup for non-federal governments. In February 2012, Chase, along with Barclays, loaned the state of California $1 billion to pay its bills.

In the meantime, our federal government continues to borrow and sink further in debt, and all President Obama is focused on is his re-election campaign. We elect our government leaders based on popularity and promises. Leaders of banking giants are chosen based on credentials, experience and skills.

Throughout this entire economic recession, Chase has remained incredibly financially secure, led by CEO Jamie Dimon. Throughout the crisis, Dimon has referred to the company’s balance sheet as a “fortress balance sheet,” and for good reason. In 2011, the company’s annual report claimed more than $59 billion in cash and due from banks. 

With almost $60 billion in cash, Chase is more than capable of handling the $2 billion loss, which is actually $900 million net after gains it recently incurred from bad trading. While the trading practices involved in the loss are completely inexcusable, they should have little meaning on how the bank is managed.

JPMorgan Chase under Dimon’s guidance has been a beacon of financial security throughout this crisis. One poor decision and subsequent news story should not reignite federal regulators’ debate about the “big banks.” Banks like JPMorgan Chase are vital — just ask the State of California’s employees and citizens or former Bear Stearns’ shareholders and investors.

­— wfgryna@indiana.edu