JPMorgan's Dimon says end "too big to fail"

NEW YORK Fri Nov 13, 2009 10:34am EST

Jamie Dimon, chairman and CEO of JPMorgan Chase, speaks at the Securities Industry and Financial Marketers Association annual meeting in New York,October 27, 2009. REUTERS/Shannon Stapleton

Jamie Dimon, chairman and CEO of JPMorgan Chase, speaks at the Securities Industry and Financial Marketers Association annual meeting in New York,October 27, 2009.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - JPMorgan Chase & Co Chief Executive Jamie Dimon called the idea that any bank is too big to fail "ethically bankrupt" and said regulators should have the power to wind down even the largest lenders.

"If some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail," Dimon wrote on Friday in The Washington Post. "Global economic growth requires the services of big financial firms. It also requires that big financial firms be allowed to fail."

JPMorgan is the second-biggest U.S. bank by assets and is considered by many the healthiest of the country's four largest traditional commercial banks.

Since the September 2008 bankruptcy of Lehman Brothers Holdings Inc, many analysts have viewed JPMorgan, American International Group Inc, Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc and others as too large to be allowed to fail, fearing the impact on markets and economies worldwide.

Dimon argued against caps on banks' size, saying increased scale can benefit customers, shareholders and the economy by permitting better products to be delivered fast and cheaply.

He advocated a regulatory system that would ensure that even the biggest banks could fail "in a way that does not put taxpayers or the broader economy at risk."

Dimon said regulators deserve authority to manage failures of large financial institutions, including the ability to replace management, sell assets, and wipe out shareholders and even unsecured creditors.

International cooperation is also necessary, he said, because of the global impact of a major failure. He pointed to the many multinational companies, not just in banking, that operate around the world.

The "too big to fail" idea is "politically, economically and ethically bankrupt," Dimon wrote.

"As Treasury Secretary Timothy Geithner recently put it, 'No financial system can operate efficiently if financial institutions and investors assume that government will protect them from the consequences of failure,'" Dimon went on. "The term 'too big to fail' must be excised from our vocabulary."

(Reporting by Jonathan Stempel; editing by John Wallace)

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