Jamie Dimon, CEO of JP Morgan Chase, also the darling of the Geithner administration because of their proactive public gestures, wrote an op-ed piece published in the Washington Post the other day. He makes arguments as to why too-big-to-fail should not be eligible for bailouts and how they should be wound down when they fail. He attacks the idea of breaking up the biggest banks and makes a half-hearted cry for better regulation, both done unsubstantially. Comically, he begins with, "And if some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail." Hopefully, he's helping people figure out what they should be for and against when it comes to reform by showing people what the reforms that would help the big banks and nothing much else.

Here's Dimon's 4 arguments against capping bank size, each point is not supported by any evidence. The big bankers continue to make these arguments without pointing to any concrete evidence that what they are saying is true:

1) A size cap doesn't prevent companies from being too interconnected to fail.

We need to stop insane interconnectedness across the board. We need to ban things like securities built on securities built on mortgage backed securities. Interconnectedness needs to fit into the equation in such a way that a non-interconnected bank can be allowed to get bigger than a very interconnected one.

2) Big banks that stay within their core area of competence build scale for the benefit of their shareholders and customer.

Then why do the biggest banks have the highest interest rates and overdraft fees? Why doesn't their size let them offer more reasonable rates? Scale seems to be promoting anti-competitive behavior rather than delivering any benefits to customers. Anti-competitive behavior is, of course, good for shareholders. So is the 10.2% unemployment rate and resulting efficiencies. Should we also keep 10.2% of Americans out of work?

3) Big banks have the capacity to lend to states and municipalities.

Big banks bankrupted the government by promoting the housing bubble (among other things). When it burst and people lost their homes and jobs, and town states lost a lot of their revenue. So, states and towns can lend at insane rates from private banks now that the fed government has been thoroughly drained by the same banks.

4) Capping U.S. bank size would make U.S. businesses work with foreign banks.
a. Well, even if that is true, we shouldn't have a system that leads to catastrophe and is immoral. Still, England is seeing some break up of big banks without worrying about this "problem"
b. Banks that are too big are more unstable and pose a risk to the system. They take on higher risks and have had lower requirements on how much cash to hold against their bets because they are bigger. These theoretically larger foreign banks will take down a fall eventually -- it's better to be safe than sorry.
c.

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