Whatever the 25 bank CEOs descending upon the White House this morning told the president and his economic team, we hope JP Morgan CEO Jamie Dimon repeated one line from the speech he gave at the Chamber of Commerce earlier this month. (It’s about 11:30 in.)
One of the main root causes [of the crisis], and this has been going on for a long time, was the huge trade and global financing imbalances which fueled very low rates and excess consumption, and over a long period of time I do not believe you can run those kind of trade deficits…
Dimon was getting at one of the root structural causes of the current crisis — America takes, the world (China especially) makes, an unsustainable situation sustained above all by an increasingly usurous financial services industry. As the CEO of PNC Financial Services just pointed out, banking is the biggest sector of the American economy — and it’s been to the detriment of everything else.
And while that might seem obvious, intuitive even, Dimon’s speech came just three days after Larry Summers told the Financial Times that the global trade imbalance wasn’t the problem anymore, that it had been eclipsed by more pressing emergencies, etc. etc.
Naturally Dimon went on to condemn the demonization of Wall Street and corporate America.But it was precisely Wall Street and corporate America that relentlessly lobbied the government over that very long period of time to enable those gaping imbalances to gape ever wider. What both Barack Obama and Jamie Dimon implicitly understand is that publicly traded corporations are not engineered to look out for their long-term interests. By allowing the financial sector to bloat “too big to fail”, the country lost the kind of industries that are too vital to fail — which is to say, manufacturing.
So if over the short term Obama pisses off Jamie Dimon, Lloyd Blankfein and Vikram Pandit, it’s only in the long term interest of everyone. If only one of them would circulate another inter-office memorandum explaining that.