During the question-and-answer session following his prepared remarks to the International Monetary Conference in Atlanta, Ben Bernanke was asked by Jamie Dimon (yes, that Jamie Dimon) about whether the central bank and other regulators have considered how the litany of rules being drawn up as part of the Dodd-Frank financial reform bill interact with each other.
In something of a rambling answer, Bernanke allowed that there is a trade-off between the necessary restrictions to prevent a repeat of conditions that created and exacerbated the 2008 financial crisis and allowing banks enough rope to keep the economy moving by providing credit for businesses and consumers. During part of his response he spoke about shielding smaller, community banks from some of the more stringent requirements designed to rein in risk-taking at systemically important institutions.
Bernanke's answer to the JPMorgan Chase CEO did not make it seem as though regulators have gotten too far down that path. At one point the Fed Chairman said they still "have to figure out where the costs, exceed the benefits."
See "Bernanke Says Slow Recovery 'Frustrating,' Sticks To Second-Half Optimism."
Dimon expressed his concern that the litany of rules being written and the likelihood that new capital and liquidity constraints will be more onerous for large financial institutions in the past might slow down the recovery.
Wall Street pushback against efforts to curb the excessive risk-taking of the crisis era is an ebb and flow game, and Tuesday's comments from Dimon are a reminder that for all the talk about the big banks and their overseers being partners, the regulators are supposed to be the cops on the beat, protecting consumers and the system, not just the financial industry's biggest players.
- liquidity constraints
- Ben Bernanke
- the regulators
- Jamie Dimon
- 2008 financial crisis
- enough rope