Wall Street Gets Inside Your Head

If you embrace the rhetoric of Jamie Dimon, you've already lost

A combination of media fawning, slick public relations, and flair for the pseudo-intellectual has turned the release of Jamie Dimon’s annual letter to shareholders into something of a spectacle each year. The CEO of JPMorgan Chase, the largest U.S. bank, cuts an affable enough profile in public though he’s known to be mercilessly blunt in private, and he cultivates the letter as a kind of annual moment of extreme truth-telling, one in which he’s willing to admit the good and the bad about the bank and the environs in which it operates.

To read this letter is to be invited into a discussion within the rhetorical framework that is common among Wall Street types, one in which the titans of finance discuss the Big Issues of the Day with an ease suggesting they have the wisdom and vision to lead us into a glorious future. There’s no subject about which they can’t pontificate. They’ll talk about how they do well by doing good, and that they couldn’t do it without their great team. But it’s pretty clear that we should be grateful that they exist.

Plunk yourself down at an international conference of bigwigs like Davos — I was sentenced to this fate for 5 years running — and you can easily find yourself nodding in agreement. It seems mere rhetoric. And yet it’s the most sneaky process that Wall Street runs: a grinding, long-term effort to ensure we buy the assumptions it embeds in these words. 

Yes, Wall Street gets into your mind. And that has consequences. Consider this maxim – we will come back to it – that Dimon offers us in his letter about how we should regulate banks: 

“Ensure that safety and soundness come first but not at the expense of maximum long-term growth.”

It sounds oh-so-reasonable, in part because Jamie Dimon exploits Wall Street’s rhetorical framework with more subtlety and finesse than most. Despite his image as a banker’s banker, he’s highly political, and has even referred to government relations – that’s lobbying by any other name – as JPMorgan’s “seventh line of business.” He craves adulation from politicians, and cultivated a little-known Chicago legislator named Barack Obama while running a bank in the Windy City. In 2020, JPMorgan spent $2.8 million on lobbying, something the law defines very narrowly; the real total is much higher.

Indeed, if we consider only its name, there is no better example of the marriage of financial and political power than JPMorgan Chase. (I could make a case for Goldman Sachs deserving this title, but the symbolism of the name of Dimon’s bank is irresistible.)

J.P. Morgan, the gnarly-nosed founder of what became today’s bank, is perhaps the most prominent, and powerful, American financier who ever lived. Salmon Chase was Lincoln’s Treasury secretary, who presided over the creation of the American regulatory system for big banks, and later became chief justice of the Supreme Court. The New York-based Chase National Bank took his name as a posthumous honor; he had no role in the bank, financially or otherwise. 

Today, JPMorgan Chase defines big among American banks. It has $3.2 trillion in assets, or about 15 percent of U.S. GDP. Put another way, this bank is about the size of the entire British economy. JPMorgan’s closest competitor, Bank of America, is about a trillion dollars back. Big enough for ya?

If the influence of Wall Street in our society gets under your skin, then your tendency is to steam over the rank hypocrisy in Dimon’s letter, or any number of banker-authored texts. For example, Dimon salts this year’s letter with references to racial equity and wealth inequality, and even kicks it off with a reference to the “deeply felt social and racial injustice” of 2020, a phrase that even conveys a slight dismissiveness by suggesting the murder of George Floyd and so many others are feelings, as opposed to facts.

But as the time came to put some political skin in this game by joining a push led by Black executives to fight the voter-suppression laws being passed by Republican-controlled state legislatures — they were making a major public statement — Dimon made himself scarce:

JPMorgan Chase also declined to sign the statement despite a personal request from senior Black business leaders to the chief executive, Jamie Dimon, according to people briefed on the matter. Mr. Dimon has publicly declared that he supports Black Lives Matter and made a statement on voting rights before many other companies, saying, “We believe voting must be accessible and equitable.”

Choosing posturing over principle, or bland over bold, is garden variety corporate claptrap. Their more insidious babble lies elsewhere.

Buried on p. 43, we find what really interests Jamie Dimon, namely the principles that he believes should guide U.S. and international policy, for those are the conditions under which JPMorgan Chase does business, and how much money it makes. They come at us like Jamie’s Commandments, things that seem so obvious, so common-sense, that we can hardly object. But we should. 

Go back to that imperative Dimon throws at us in the letter: 

“Ensure that safety and soundness come first but not at the expense of maximum long-term growth.” 

This sentence balances two goals, one of which is familiar to bankers (safety and soundness) but pretty obscure to the rest of us. The other (growth) is familiar all of us, so let’s start with the notion of “maximum long-term growth.” Is this such a good thing? 

The evidence is piling up that economic growth, as measured by overall income, is a lousy metric for human welfare. About six years ago, the American economist Pavlina Tcherneva created a striking chart to illustrate who has benefited from growth in income over the past 70. Essentially, ever since the early 1980s, the top 10 percent harvested a majority of the gains, and by the years after the 2008 financial crisis, it was harvesting all the gains. 

Growth, it turns out, is really only something benefiting a small group of upper middle class to super-rich people. Simon Kuznets, the economist who all but invented the notion of Gross Domestic Product, commented that “the welfare of a nation can scarcely be inferred from national income,” an admonition that has seldom been so true as now. 

So really, in contrast to what Jamie Dimon tells us, we really should not worry too much about curtailing growth per se, at least not in the present historical moment. Our society’s structure does not channel the fruits of growth to a broad group, so growth of the sort he wants to protect and maximize isn’t something that should worry most Americans. They’re not in Jamie Dimon’s club. Growth is not a word that should warm our hearts as much as it usually does.

Safety and soundness are two things that we Americans like in a banking system, but usually when it’s too late: like in 1933 as FDR took office, or 2008, when financial markets melted down after the bankruptcy of Lehman Brothers. In both cases, the federal government came to the rescue. That’s because bankers constantly harp on the supposed tradeoff between a safe banking system and one that feeds the economy with credit to promote — you guessed it — growth. So, with a depressing regularity, policymakers have let Wall Street turn its institutions into casinos, as bankers assure us the system is safe and sound, and anything we might do to slow the party would be terrible for growth.

So, you can start to see what Jamie Dimon is getting at here. Safety and soundness are things we want in a banking system, and 10 years after a financial crisis, you can’t ignore the issue. But if we harness ourselves to this goal, the Wall Street casino starts to look like real trouble, in need of oversight and regulation at the very least. So Dimon would warn us off this goal for the sake of preserving growth, a chimerical notion for much of the country.

Is JPMorgan Chase a casino? Well, you’re unlikely to find people playing Texas Hold ‘Em en masse in one of Dimon’s banks or trading floors. But JPMorgan makes a lot of money off of the gyrations of financial markets. Look a little earlier in Dimon’s letter and you’ll find him bragging about JPMorgan being ranked number one in “fixed income, currencies, and commodities” trading. FICC, as it’s known, is that part of Wall Street that comes closest to those raucous, wild and wooly trading rooms pictured in the Leonardo di Caprio movie The Wolf of Wall Street or other cinematic portrayals of New York finance.

What’s more, much of this business has no socially redeeming value. A lot of what big banks do involves enabling trades by hedge funds and people with big pots of money at their disposal, or underwriting debt used to buy and sell companies. If the point of capital markets is to raise money for productive purposes, then many of Wall Street’s lines of business don’t make much sense. It is speculation for speculation’s sake.

There’s not much nobility left in Jamie Dimon’s admonition now, and an honest version of it would sound something like this: 

Let’s have a stable banking system, but not if it impinges on my ability to run a profitable casino, which might occasionally fall apart and require taxpayer assistance. Now, I’m gonna tell you it would harm economic growth to regulate or close my casino, but the truth is that the resulting growth won’t fatten your wallet anyway. 

It should infuriate us that Jamie Dimon or any other banker should make this kind of argument. From the New Deal through to the onset of banking deregulation in the late 1970s, there was no meaningful financial crisis in the United States, that is to say, no problem with safety and soundness. That’s because banking was heavily regulated, and banks did not tower over us in the manner that JPMorgan and a few others do today.

In fact, the historical record tells us that when we shut down the bankers’ casinos, when we make their business a humdrum, low-margin affair, it is in fact better for economic growth, and not the kind we have now either but an equitable increase in the national income. Put another way, precisely because we turned banking into something safe, sound and downright boring — and much less profitable for bankers — we ended up with the very thing Dimon warns us that these measures would endanger.

And yet, Wall Street’s logic still rattles around in our gray matter, haunting us with this notion that if we crack down on their highly profitable endeavors that it will only hurt us. People like Dimon have embedded their very lucrative roles into our conceptions of what makes an economy run effectively and convinced us how essential they are. They aren’t. But they have quite effectively trapped us inside a frame of mind that works well for them. That’s Wall Street at work — inside your head.