What Jamie Dimon Gets That Matt Yglesias Doesn’t

JPMorgan Chase CEO Jamie Dimon understood that no Vice Chair for Supervision could make Jerome Powell’s Fed take regulation seriously. Why didn’t Matt Yglesias?

The Wall Street Journal recently reported that in the fall of 2023, JPMorgan Chase CEO Jamie Dimon told his fellow bank CEOs to circumvent Michael Barr, the Federal Reserve Board’s Vice Chair for Supervision, and instead directly pressure Fed Chair Jerome Powell to sabotage the Biden administration’s bid to strengthen capital requirements for roughly three dozen of the country’s biggest banks. The reason why is not hard to see: Powell and Dimon—two Wall Street vampires—speak the same language. Dimon has made a savvy political assessment and identified an effective strategy to push for lax regulation that will allow him to continue enriching himself and JPMorgan’s shareholders at the expense of the general good.

We at the Revolving Door Project made the same assessment in 2021 when we helped lead the ultimately unsuccessful fight against Powell’s renomination. Our case against giving Trump’s Fed pick a second term can be boiled down to two main points: 1) Powell’s ostensible dovishness on interest rates was “a product of historical contingency and political opportunism, not a reflection of any principled commitment on his part to maximizing employment;” and 2) his “well-documented ethical failures and regulatory weaknesses alone should have been disqualifying,” as one of us reiterated in February. 

We’ve been so vindicated on the first point that even Heatmap’s Robinson Meyer—one of Powell’s loudest cheerleaders in 2021—admitted in February 2024 that the Fed Chair’s prolonged campaign of rate hikes is slowing the pace of decarbonization (it’s also worsening housing affordability), an ongoing mishap society can ill afford. It’s hard to overstate the irony here: the Republican ex-private equity executive whom Meyer insisted would be an ally in furthering Biden’s green economic agenda is in fact undermining the Inflation Reduction Act’s investment incentives. 

We’ve also been proven right on the second point, though mea culpas have been in shorter supply. This reflects the sad fact that not enough people take seriously the Fed’s regulatory responsibilities and capacities. Case in point: Meyer and neoliberal blogger Matt Yglesias both argued that it’s silly for the climate left to focus so much on the Fed’s role as a potential Wall Street foe because, according to their wrongheaded formulation, the central bank is fundamentally a monetary policymaker, not a financial rulemaker and enforcer.

Yglesias, for his part, acknowledged the existence of the Fed’s regulatory duties and Powell’s deficiencies in this arena only to downplay both with this half-baked gem: “There isn’t a big financial regulation policy dispute happening in Washington right now.” That was in September 2021. Suffice it to say that in mid-2024, there are many such fights and Powell is doing his best to win them on behalf of Dimon and other super-wealthy bankers. (More on that later).

When they weren’t discounting the Fed’s regulatory obligations or the importance of upcoming financial policy battles, members of the pro-Powell camp advanced another claim: that the Fed chair’s longstanding penchant for deregulation could be offset by a strong Vice Chair for Supervision (VCS). Yglesias made this argument, but he was far from alone.

For context: the term of then-VCS Randal Quarles, a Trump appointee antagonistic to financial regulation, was slated to expire in October 2021. At the start of that year, Roberto Perli, head of global policy research at Piper Sandler investment bank, said that “Dems can influence Fed regulatory policy a lot more by naming a new Vice Chair for Supervision once Quarles’ term ends.” Months later, he was echoed by Sean Tuffy, described as “Twitter’s most prolific financial regulation shitposter,” who had this to offer: “Just replace Quarles as FinReg point man... When people complain about Powell’s track record, they’re mostly complaining about Quarles anyway.”

Like Tuffy, Employ America executive director Skanda Amarnath tried to absolve Powell, arguing that he “tends to follow the appointees of the administration in power,” thus implying that Quarles is to blame for Trump-era deregulation. “What makes Powell a dismal regulator?” asked Amarnath. For a good answer, see our colleague Max Moran’s piece in The American Prospect on the subject! Amarnath insisted that Powell has a “mixed” regulatory record because he “went along” with Fed Chair Janet Yellen (his boss) during the Obama administration and then “went along” with VCS Quarles (his subordinate) during the Trump administration. “The totality of Powell’s regulatory record,” he later added, “would be best described as a moderate willing to defer to appointees of the sitting executive.” (We’ll revisit this).

An August 2021 Washington Post article also captured the conventional wisdom at the time. The piece referred to the VCS as the “top banking cop” at the Fed and suggested that whomever Biden appointed to be VCS would be well-positioned to implement an ambitious regulatory agenda. Amarnath’s faith in Powell’s fondness for following others notwithstanding, the VCS is subordinate to the Chair. Or, put differently, the Fed Chair runs the Fed. All of the Fed’s professional staff report, ultimately, to the Chair. The VCS is not a strong position unless the Chair makes it so—which is contingent upon alignment.

This means that Powell (or someone else if Biden had taken our advice and nominated a candidate who was a strong regulator and more committed than Powell to the Fed’s full employment mandate) would be the Fed’s “top banking cop” by definition. Better Markets executive director Dennis Kelleher cut through the noise in the 2021 WaPo piece: “You cannot counterbalance the strong deregulatory views of Fed Chair Powell, who controls the Fed’s agenda, priorities and staff, with a vice chair for supervision who has a directly conflicting agenda that would repudiate three years of Powell’s votes and congressional testimony.”

As we at RDP argued around the same time, Biden’s VCS “will not be able to restore regulatory safeguards or develop new ones without Powell’s approval. There is little reason to believe that Powell, who continues to defend every one of the Fed’s deregulatory actions, will repudiate his record of the last three years and support its reversal.”

The most interesting thing about the WSJ’s revelation that Dimon instructed his Wall Street brethren to bypass Fed VCS Michael Barr is that it proves just how wrong Powell’s apologists were. Barr cannot simply neutralize Powell’s propensity for deregulation. When push comes to shove, Powell controls the Fed, and there was no reason to think that Powell would suddenly change his tune after pushing a deregulatory agenda for years. The simple fact is that the Fed Chair has the bureaucratic tools to discipline the Board of Governors, including the VCS, in almost all cases. If only Powell’s proponents understood how to read an org chart, we might not find ourselves in such dire straits.

Amarnath told us that Powell “tends to follow the appointees of the administration in power.” How’s that going? Is Powell taking his cues from Barr, Biden’s VCS? Far from it.

To begin with, Powell is actively hindering the Biden administration’s effort to increase capital requirements, precisely as Dimon and his colleagues requested (perhaps Powell is indeed deferential, but to Wall Street overlords rather than Democratic regulators). At issue are draft rules proposed in July 2023 by the Fed, FDIC, and OCC that would require banks with at least $100 billion in assets to beef up their capital reserves to better absorb losses. Those rules, part of an international standard-setting process called Basel III Endgame, are meant to help avert future financial crises. Although Powell claimed to support the proposal last summer, he told Congress in March 2024 that he is advocating for “broad, material changes.” 

Between his initial backing of the proposal and his recent reversal, Powell met with big bank CEOs more than a dozen times, including four meetings or calls with Dimon, the WSJ reported. Big bank CEOs met with Barr 15 times during the same period, and Dimon also met with him this April and May, indicating that Dimon’s advice was not to ignore the VCS but rather to go above him. “I have not felt bereft of attention from the banking lobby,” Barr told the newspaper. He has since adopted the same language as Powell, so who’s following who?

As one of us wrote in March:

Powell has not ruled out re-proposing a watered-down framework, calling it a “very plausible option.” If he goes that route, it would almost certainly push the process into a new presidential administration. According to Powell, such a move may be necessary to achieve an outcome that has “broad support at the Fed and in the broader world.” Powell is now portraying that unattainable standard—as opposed to the 4-2 majority vote with which the original proposal passed—as tantamount to maintaining the Fed’s vaunted political independence.

But as historian Peter Conti-Brown, an expert on central banking and financial regulation, observed recently: “Throwing away regulatory reforms preferred by the party that won the last national election does not preserve Fed independence. It makes a mockery of it.” In threatening to thwart a proposal put forth by President Joe Biden’s Democratic appointees and initially approved with Powell’s support, Powell is simply “intervening in a way that Republicans and bankers prefer,” Conti-Brown noted.

But that’s not all. Powell is also blocking an executive pay rule aimed at disincentivizing “reckless bank risk-taking,” as Americans for Financial Reform put it. In addition, Powell has thwarted an international effort to require lenders to disclose how they plan to meet greenhouse gas reduction commitments.

So much for being “a moderate willing to defer to appointees of the sitting executive,” as Amarnath generously described him. 

One more thing about all those who backed Powell, regardless of his deregulatory record, due to his purported support for dovish monetary policy. We support full employment and robust financial regulation! There were candidates committed to both who would have been far better than Powell. Are people willing to admit that yet?

Why Dimon Trusts Powell

There’s a reason why Dimon told his big bank buddies to go above Barr and directly pressure Powell. Understandably, Dimon sees Powell as a reliable avenue for pushing his decades-long agenda of financial deregulation—of maximizing profits while socializing risks.

Dimon is the head of the riskiest bank in the United States, one that is pathologically embroiled in regulatory infraction lawsuits, and which has accordingly paid out billions of dollars in fines since 2013. Dimon must be elated that Powell is blocking regulatory efforts that he and other Wall Street vultures have consistently railed against.

Who benefits from Powell’s opposition to higher capital requirements for big banks? Dimon and his friends. From Powell’s opposition to limiting bankers’ record-breaking bonuses? You guessed it! Dimon and his friends. Given that JPMorgan Chase is a leading financier of the fossil fuel industry (and Dimon a top political supporter of Big Oil), we’re going to go out on a limb and say that he and his big bank buddies are the ones who benefit from Powell’s opposition to rules that would force lenders to align their investments with emissions reduction targets.

Powell and Dimon have made their money from the same industry, and as such share a class interest that provides the grounds for Dimon’s strategy. Powell was a partner at the union-busing and fossil fuel-investing Carlyle Group, a notorious private equity firm. Private equity firms rake in money by buying up businesses, gutting them, ruthlessly firing workers, and engaging in a litany of greedy corporate acts. These firms usually then sell these hollowed-out companies for a profit, at which point they’re likely to be bought by a bigger company, thus contributing to the corporate consolidation trend that has skyrocketed since the 1990s.

Ever since Dimon got his start by purchasing a loan shark that preyed on working-class communities in Detroit, the growth of his fortune (now over $2 billion) has been predicated on his ability to buy up failing companies and merge them into a new, larger, more powerful corporate entity.

As a former private equity bigwig, Powell is himself an opportunist (not least evidenced by his stock trades), who would naturally be receptive to the profiteering agenda pushed by Dimon and other big bank CEOs. It’s worth mentioning that on top of fighting tougher regulations, Powell is obscuring the Fed’s pandemic-era trading scandals. 

At the end of the day, the reason why we urged Biden not to reappoint Powell is because he’s exactly the type of person who opens doors for guys like Dimon to wreak havoc on the most vulnerable members of our society. It would be nice if everyone familiarized themselves with the Fed’s org chart.

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The above photo of JPMorgan Chase CEO Jamie Dimon was taken by Steve Jurvetson and is licensed under CC BY 2.0.