In his annual letter to shareholders, Jamie Dimon, the CEO of JPMorgan Chase, criticized the "demonization" of big banks and argued for the economic benefits of outsized financial institutions.
The letter, which drew the attention of The Financial Times and Politico's Morning Money, is mostly a broad breakdown of the bank's business, but also something of a rallying cry for the banking sector. (PDF of the letter here)
Dimon admits that JPMorgan "made its share of mistakes" during the crisis, but warned against "punitive" measures taken against banks. Should the banking sector diminish, Dimon argues, everyday Americans would likely suffer. "Contrary to popular opinion," Dimon writes, "Main Street owns our biggest banks through savings and retirement funds."
Here's more from Dimon:
"In the current political environment, size in the business community has been demonized, but the fact is that some businesses require size in order to make necessary investments, take extraordinary risks and provide vital support globally. America's largest companies operate around the world and employ millions. America's largest companies operate around the world and employ millions of people. This includes companies that can make huge investments - as much as $10 billion to $20 billion a year - and compete in as many as 50 to 100 countries to assure America's long-term success. Combined, big and small businesses spend $1.5 trillion per year on capital expenditures and $300 billion on research and development. It is estimated that more than 70% of the capital expenditures are made by large companies.
The productivity of our workers and the huge economies of scale of our corporations (generated from years of investing and innovating) are what ultimately drive our economy and income growth. Employees at large companies share in that productivity: Compensation and benefits for employees at large companies are substantially higher than at small firms.
It is estimated that large enterprises and large foreign multinationals active in the United States have accounted for the majority of U.S. productivity growth since 1995.
Companies such as Ford, Boeing, Pfizer, Caterpillar, Apple, Microsoft and Google are exemplars of initiative and innovation worldwide. Cutting-edge companies like Hewlett-Packard underpin vibrant networks of small and midsize suppliers and vendors. Academic research shows that these investments abroad actually create more jobs in the United States.
Dimon's letter drew the ire of Yves Smith at Naked Capitalism, who pointed out that the interests of large financial firms may not always match up with the interests of ordinary Americans. Here's Smith:
"...is what is good for the very biggest companies necessarily good for America? That is another tacit assumption in this argument. Given that large corporations have been shedding jobs, and in the last upturn, were net savers (as in were not borrowing to invest in their business, but were rather paying down debt rather than invest in growth) that argument seems like quite a stretch. While some large companies individually are exceptions, as a group, big companies were not creating jobs, nor were they investing in growth. And numerous studies have found that large companies are not innovative (yes, there are always exceptions, but smaller enterprises have consistently been found to be the hotbed of new ideas and processes; why do you think BigCos have to resort to devices like snunkworks to elicit similar behavior?)
So...do these really big companies actually need megabanks? I find this a stretch too. In all the years I have worked in the banking industry, I never heard anyone at McKinsey in the 1980s or 1990s recommend greater size as a way to win more business with major corps (and I've done a fair amount of interviewing of corporate treasurers and CFOs over the years myself)."