The J.P. Morgan chief fights restrictive bank regulation; who knows what OWS wants? But will protests influence bank regulators – for the worse?
As Occupy Wall Street enters is fourth week there is still no clear indication about what the protesters want, even as it spreads to other US cities. But if it continues to grow, will it prompt politicians and regulators to err on the side of stiffer regulation for financial institutions?
The protest is spreading to cities across the US; it has organization, libraries, support of unions and even an Occupy Wall Street journal. What’s missing is an exact set of terms it would accept to stop protesting. The one thing that is clear is that protestors don’t like banks or, seemingly, capitalism in general. So it’s possible that in an effort to placate the protesters, politicians, looking to curry favor with a block of (youthful) voters it sees as crucial to their election prospects, could start leaning on regulators to make current rules tougher – or at least to resist the bank industry’s attempts to water down coming rules.
The de facto head of that effort has been J.P. Morgan CEO Jamie Dimon, who does not sugarcoat how he feels about some of the regulations. Mr. Dimon directs most of ire at new Basel III rules, which call for all banks to hold 7 percent capital up from 3 percent. Basel III also calls for the world’s biggest banks to hold an additional 2.5 percent capital. There is also the infamous LCR, or liquidity coverage ratio, which requires banks to hold enough unencumbered, high-quality assets (that can be converted into cash to meet its liquidity needs) for 30 days. Dimon has called these rules anti-American bank.
What this means for corporate treasuries is that they should continue to cultivate other sources of financing – namely their own or the debt market – in case the banks end up having to hold even more capital and liquidity than is currently expected.
To be sure, while the protests get a little more coverage every day, beyond the media attention it is still a small blip on the radar screen. Nonetheless, it is yet another thing US banks will be paying attention to – along with Basel III, Dodd-Frank, Europe and Greek exposures.