J.P. Morgan Chase (NYSE:JPM) chief Jamie Dimon couldn't apologize enough for his bank's billions of dollars in trading losses, so on Wednesday he escalated by pleading for "Old Testament Justice."
An eye for an eye, a tooth for a tooth, and death to "big, dumb banks."
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"We have to get rid of anything that looks like too-big-to-fail," Dimon told the Senate Banking Committee. "We have to allow our big institutions to fail. It's part of the health of the system. We shouldn't prop them up. We have to allow them to fail."
Regulators should wind them down through the same orderly resolution process that got America out of the savings and loan crisis. Since 2008, regulators have been doing just that at hundreds of smaller banks, just not the lumbering leviathans that seem to deserve it.
"I wouldn't call it resolution," Dimon continued. "I think that's the wrong name. I personally would call it bankruptcy for big, dumb banks."
Here's how he further advised the Senate: "When you have bankruptcy, I'd have clawbacks. I'd fire the management. I'd fire the board. I'd wipe out the equity. And the unsecured [creditors] should recover whatever they'd recover like in a normal bankruptcy.
"I think the banks should be dismantled after that, and their name should be buried in disgrace. So there's a little Old Testament justice here."
It's a good thing he stopped with just a little. Old Testament justice sometimes includes children cursed to the seventh generation.
Dimon seemed willing to confess all the sins of large banks, even his. "There are some negatives to size," he conceded, even under the gentle questioning of a Republican Senator. "Greed, arrogance, hubris, lack of attention to detail."
Dimon, you see, is a classy groveler. No lawmaker can be harder on his industry than he can, himself.
The strategy worked. After Senators peppered him with questions for about two hours we still don't know exactly what kind of position J.P. Morgan took, except that it's described by the words "synthetic" and "credit."
We really don't know whether it was a hedge or a trade. And we don't even know whether the loss was $2 billion or $4 billion. But it's only billions. Who cares?
"We lose twice that every day here in Washington, and plan to continue to do that," Sen. Jim DeMint, R-S.C. told Dimon. "If we had a clawback provision, none of us would be getting paid here."
Dimon assured every money-losing Senator that if his unimaginably complex bank, with more than $2 trillion in assets, were to fail, because of some stupid bet or unexpected credit crisis, the U.S. taxpayer and the U.S. economy wouldn't be at risk.
The bank has drafted "a living will" that spells this out. So never mind all that banter about risks being imposed on insured deposits or on the taxpayers who put up an implicit guarantee for all systemically critical banks. If Dimon is wrong, well, then he has wished the Old Testament upon himself.
This is the guy who first called concerns about J.P. Morgan's trading a "tempest in a teapot," only to find himself steeping in the teapot weeks later. He is an admirably contrite and self-flagellating banker, but now he has really upped the ante in the event that he turns out to be wrong again -- to the point of invoking divine wrath.
"Many analysts have reached the conclusion that if you would have applied that Old Testament Justice in 2008 and 2009, J.P. Morgan would have gone down, and you would have been out of a job," Sen. Jeff Merkley, D-Ore., reminded Dimon. "How many companies in the history of the planet have been offered a half a trillion dollars in low-interest loans?"
"You were misinformed," Dimon retorted. J.P. Morgan took unprecedented billions from the government and the Federal Reserve only because it was asked to help save the system, Dimon explained. "They said, "Please, use these facilities,'" Dimon said. "We would have been OK."
Taking the money was only to help out those other big, dumb banks. Why should that keep J.P. Morgan from placing bets at the global finance roulette table?
"I've already confessed to the sins of the synthetic credit side," Dimon reminded Merkley. "We will never do something like that again."
And if they do, well, maybe the Old Testament God will sort it out. Wednesday's hearing proved once again that this task is beyond mankind.