I caught a little bit of Jamie Dimon’s (Chairman and CEO of JP Morgan Chase) testimony before the House Financial Services Committee today. In that time, there were several points that had me scratching my head.
He spoke about what they (assumably the Financial Services industry) need, with regard to Regulation. From previous public testimony, I believe that Mr. Dimon would prefer no regulation at all–at least not with any teeth in it. Based on the Financial Melt-Down that the US and Western Europe went through, from late 2007 to early 2009,
I personally believe that industries should not be in a position to pick-and-chose the type of Regulation that they need–especially when they seek Federal Guarantees.
Mr. Dimon mentioned that Italy was a wealthy country that could recover from its financial problems. Italy’s GDP (Gross Domestic Product–the total of Goods and Services produced) is 1.590 Billion Euros, which provides a National Debt to GDP ratio of 123%. Italian Banks, which are grossly undercapitalized, have Total Bank Assets of 2,487 Billion Euros (65% greater than the Country’s GDP). At the same time, Unemployment is 10.2%. Does that look like a wealthy country that can easily recover, especially when their debt is being downgraded and their cost of borrowing is rising. Also, with the Austerity that is being imposed on Italy, the Economy will contract further; but the Debt won’t. Therefore, the Debt to GDP will continue to weaken.
Lastly, Mr. Dimon suggested that it is difficult for the Europeans to work-out a unified solution for 17 countries (that share the common Eurocurrency). Now, keep in mind that the EuroZone Debt Problem has been going on since February of 2010. The various countries are not unified, each is pursuing their own National Interests and this is the crux of the whole problem. Seventeen countries all pulling in opposite directions will not provide a unified solution–which is what is truly needed URGENTLY.
In previous Posts, I have suggested that the EuroZone Debt Problem is truly not in a position to correct itself. We need additional bank capital, tighter regulation and supervision of proprietary trading. Let’s not have a Great Recession II!