03/31/2011 03:34 pm ET Updated May 31, 2011

Jamie Dimon Worries That Financial Regulation Will Doom Banks, Forever

As you may or may not recall, in 2008, the insane, overleveraged derivatives casino that Wall Street had built for itself came crashing down, taking the part of the economy many of us enjoyed -- the part that allowed us to have "jobs" -- down with it. And the reaction was swift: "Here, banks, take several trillion dollars and live, my friends! Pay yourself bonuses and hire lobbyists and feel free to mark your assets to whatever fantasy value you would like." And no one was held responsible for any of this, except for unemployed people, who wanted "unemployment benefits" to pay for things like "some food."

Against this backdrop, there were a few naive, inexperienced and unserious people who thought, "Hey, maybe we should actually do something to prevent this from happening again? Like maybe some sort of regulation? Transparency in the derivatives market? Could we do something about predatory lending? Could we even just make a credit card agreement legible?" But those people were and are, of course, socialist monsters. Here's Jamie Dimon, still pillorying the idea of such a regulation yesterday:

Jamie Dimon, chief executive of JPMorgan Chase, launched a broadside against financial regulation on Wednesday, warning that new capital rules could be "the nail in our coffin for big American banks."

...Restrictions on debit card fees charged to retailers are also coming under attack in Congress...."It basically penalises us for having debit cards," he said. "I think it was very unfairly done in the middle of the night with no facts and analysis whatsoever. This is not the way legislation should be done."

So, Dimon sees "restrictions on debit card fees" as the final "nail in the coffin for big American banks." Which sounds worrying until you realize that this "nail" doesn't become dangerous until you gather some wood, plane it, sand it, assemble it into coffin shape, add hinges, upholster the interior, and put varnish and stain on the exterior, and then say, "Okay, now I better get those last few nails." And, as Kevin Drum points out, we're not there yet:

It's only been two years since the Great Collapse, and finance industry profits have already rebounded to their bubble-era levels. That's a strong sign that finance industry leverage is also returning to its bubble-era levels, which in turn means the industry is about as dangerous as it's ever been. And Dodd-Frank is a notably weak piece of regulation, about as weak as any bill could be and still be called regulatory reform in the first place. Wall Street got off easy, and Dimon knows it.

The Financial Times surmises that opposition to financial regulatory reform is really starting to ramp up now that we're years from the crisis and "anger at the financial industry" is on the wane. Drum and Matt Yglesias disagree on this. Yglesias says: "I see absolutely no reason to believe that anger at the financial industry has subsided," and Drum insists: "the fact is that the public was never really all that angry at the financial industry in the first place."

I'd split the difference on that score. Anger at the bailouts was definitely incoherent and inconsistent -- witness the fact that Russ Feingold, who voted against TARP, lost his seat in the U.S. Senate to bailout-baby Ron Johnson -- but it did animate people and it was lasting. At the moment, there's a movement afoot to satiate the populist hunger for a pound of flesh by serving up teachers and public sector employees as the real "vampire squids."

Meanwhile, it's worth reminding everyone that -- at a time when Jamie Dimon is asking us to imagine a coffin -- the financial services industry is well on the rebound:

Three years later, the financial sector, despite coming under scrutiny for its role in the financial crisis, has returned to prominence, accounting for 29 percent -- $57.7 billion -- of U.S. profits during a record-breaking fourth quarter last year, notes the Wall Street Journal. That might be the highest percentage of the post-recession period, per the Commerce Department's figures, but it's still no where close to a historic 2001 quarter when the finance sector recorded a record-setting 46 percent of all domestic corporate profits.

Before the 1990s, financial institutions rarely accounted for more than 20 percent of total corporate profits.

That the financial sector is again America's most dominant sector is even more amazing when, the WSJ notes, "the sector accounts for less than 10% of the value added in the economy."

All I can say is if this is the coffin-like environment that Dodd-Frank created, I deeply regret the fact that nobody attached the "Kill Jason Linkins Immediately Amendment" to the bill.

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