The Biggest Banks Aren’t Ready to Shrink

Jamie Dimon never quits. After Sandy Weill forced him out of Citigroup in 1999, Dimon staged a comeback that returned him to the pinnacle of banking as chief executive officer of JPMorgan Chase. After he was diagnosed with throat cancer last summer, he vowed to beat the disease with radiation and chemotherapy. Now he’s tussling with Janet Yellen’s Federal Reserve, which is ratcheting up the amount of capital the biggest banks must have on their balance sheets as a safety cushion for the next crash. The Fed’s tougher capital rules give the megabanks an incentive to shrink, but Dimon has no intention of doing so. CLSA Americas banking analyst Mike Mayo likens Dimon to the Black Knight in Monty Python and the Holy Grail, who keeps trying to fight while his arms and legs are being lopped off, saying, “It’s just a flesh wound.”

The conflict is being framed as Jamie vs. Janet, but the real issue is size. Are big banks like JPMorgan Chase unavoidably dangerous? Would cutting them down make the financial system safer? Are there other sources of risk that the government should be focusing on? Understanding the link between size and safety is more crucial than ever, because most of the biggest global banks—not just Dimon’s—are fighting to stay big and important. “We haven’t gone out of our basic businesses,” Goldman Sachs CEO Lloyd Blankfein told Bloomberg TV in January, likening regulation to “background noise.”