Why Jamie Dimon Should Be Indicted

Salon’s Alex Pareene went on CNBC on Friday to debate whether JPMorgan CEO Jamie Dimon should keep his job after the megabank has found itself facing numerous investigations for alleged crimes it committed over the past couple of years. Wonkblog’s Neil Irwin summed up the entire situation well:





Irwin continues on to note the systemic value of JPMorgan and the benefits such megabanks receive due to their size. That means these banks have an obligation to the whole economy, not just to maximizing shareholder value that CNBC analysts singularly focus on. Irwin concludes:

In that sense, Jamie Dimon’s role at the helm of JPMorgan is not just one of satisfying the company’s shareholders, but one with broad responsibility to steward one of the important institutions that supports economic growth. The CNBC video is evidence of how little, five years after the crisis, that sense of broad responsibility has permeated the world of Wall Street.

This is the perfect summation of the entire exchange. The problem is that Wall Street is never going to learn and understand this. They still don’t understand that banks have a societal duty to operate prudently and legally. They haven’t learned and they aren’t going to learn.

The question, then, is how to align incentives so that operating prudently and legally is in the best interest of Jamie Dimon and JPMorgan. Pareene suggests breaking up the banks so that their failure wouldn’t cause a financial crisis and require a government bailout. But in the absence of Congressional support for such a policy, there is another way to align these incentives: make CEOs and other executives have skin in the game.

This isn’t easy to do and federal agencies don’t have enough resources as it is, but there has to at least be an effort to hold individuals responsible for their bank’s actions. It’s too easy for bank executives to commit crimes, attempt to cover them up and then avoid a trial. The bank may face an investigation and have to pay a huge fine, but bank executives are never at risk of going to jail. That’s inexcusable.

If those executives suddenly faced criminal charges, their conduct would change quickly. The industry would change quickly. Executives would still try to maximize shareholder value, but they would also be concerned that the bank was doing so legally. If not, they could soon find themselves locked away. That’s a good incentive to make sure your bank isn’t breaking the law.

Best of all, this doesn’t require prosecuting every small thing that banks do wrong. It just requires prosecuting enough executives so that all of them are aware that if their bank commits a major crime, they will likely face charges.

You know where would be a good place to start? Prosecuting the leader of the bank that is about to pay the largest financial settlement in history.

That man? Jamie Dimon.

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