Photograph by Victor J. Blue/Bloomberg

The Morgan Stanley headquarters in New York.

With Republicans angry about the financial regulations pushed through by President Barack Obama and congressional Democrats, the securities and investment industry was the only major source of campaign contributions to switch sides in 2012 compared with 2008, giving a record amount of money to Republicans and allied outside groups, led by presidential nominee Mitt Romney.

“What they did was totally uncalled for and totally unbalanced,” said Senate Majority Whip Richard Durbin of Illinois, the No. 2 Democrat.

In the final three weeks of the campaign, for example, Morgan Stanley and Bank of America Corp. employees were the top donors to Romney, a co-founder of the Boston-based private equity firm Bain Capital LLC. After giving Obama $16 million in 2008, Wall Street employees this time gave Romney more than $20 million.

They also backed Republican congressional candidates who challenged such crucial financial institutions as the Federal Reserve and International Monetary Fund, said Rep. Barney Frank, a Massachusetts Democrat and former Financial Services Committee chairman.

“It’s really an example of Wall Street letting emotions get in the way of its judgment,” Frank said. “They put the narrowest definition of their own self-interest over things they knew were important.” The result? Reducing tax breaks cherished by the financial community such as capital gains and carried interest may become attractive to those looking to raise revenue from high-earners.

“I don’t think there’s any doubt that carried interest is the low-hanging fruit,” said Daniel Crowley, a partner at K&L Gates LLP, which represents JPMorgan Chase & Co.

Wall Street is too important to the economy to be left on the sidelines, though.

“The White House is going to need some level of buy in from Wall Street and the business community to get legislation through Congress,” said Dan Bryant, chairman of the public policy group at Covington and Burling LLP.

For example, Goldman Sachs Group Inc. chief executive officer Lloyd Blankfein and president Gary D. Cohn joined other corporate leaders at the White House for meetings to discuss the combination of tax increases and spending cuts due to take effect beginning in January.

The invitations went out even as Goldman employees, Obama’s top industry source of campaign cash in 2008, became Romney’s biggest in 2012, giving more than $1 million.

Also working in Wall Street’s favor are “relationships that have been built up over a long period of time,” said Holly Fechner, a partner at Covington and Burling and a former Senate Democratic aide. “I do think a lot of those relationships are still intact.”

Lawmakers are differentiating between campaigning and governing. “If we stick to the issues, both sides will do well,” said Sen. Jack Reed, a Rhode Island Democrat who is chairman of the securities, insurance and investment subcommittee.

Former Rep. Ken Bentsen, a Texas Democrat who is now executive vice president of the Securities Industry and Financial Markets Association, said he and his colleagues still visit the Capitol every week to meet with congressional staff members of both parties.

“You want to hear all sides of the argument,” Bentsen said. “That’s the view I’ve seen folks take before the election, and I assume they will take it after the election.”

Original post is Wall Street Hedged No Election Bets by Political Capital.

Photograph by Andrew Harrer/Bloomberg

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., at a House Financial Services Committee hearing in Washington on June 19, 2012.

JP Morgan CEO Jamie Dimon is familiar enough with the ways of Washington, D.C., that he’s made campaign donations to dozens of members of Congress — including some questioning him in committee hearings today and last week.

Spencer Bachus, the Alabama Republican chairman of the Financial Services Committee who led today’s hearing, received $2,000 from Dimon in March 2007, Federal Election Commission records show.

Dimon also has donated to Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat who led last week’s hearing, and Senator Richard Shelby of Alabama, who’s the committee’s top-ranking Republican. Dimon donated to Johnson in 2002 and 2008, when he was seeking re-election. He donated to Shelby in 2003 and 2007.

Bob Corker, a Tennessee Republican who also sits on the Banking Committee, got $2,000 in May 2011. Corker is favored to win re-election this year.

Dimon has also donated to Majority Leader Harry Reid of Nevada and his partisan counterpart, Minority Leader Mitch McConnell of Kentucky.

Dimon gave at least $155,000 to federal candidates and committees in the past three election cycles, according to the nonpartisan Center for Responsive Politics.

Original post is Dimon Before Congress Is Campaign Donor Meeting Beneficiaries by Political Capital.

Photograph by FPG/Getty Images

American banker and financier John Pierpont Morgan Sr., center, with his daughter Louisa Morgan and son John Pierpont Morgan Jr.

When banks failed and a broader economic collapse loomed in the panic of 1907, there was no Federal Reserve to come to the rescue. John Pierpont Morgan led a group of bankers in forming a pool of money to bail out stockbrokers and quell the chaos.

Now, 99 years after Congress created the Fed as a lender of last resort to defend against future crises, JPMorgan is the largest U.S. bank and some lawmakers want to sever one bond that ties lenders to the central bank: Executives sitting on the boards at the Fed’s 12 regional banks.

JPMorgan CEO Jamie Dimon, who returned to Congress today to testify for a second time about the firm’s $2 billion trading loss, faces louder criticism that his service since 2007 as a director of the Federal Reserve Bank of New York is a conflict of interest. Vermont Senator Bernie Sanders says letting Dimon and others be part of the entity that oversees Wall Street banks is “a clear example of the fox guarding the hen house.”

While the Federal Reserve Act signed by President Woodrow Wilson specifically included bankers when it created a decentralized institution with a Washington-based Federal Reserve Board and 12 regional banks, Sanders and others have backed bills to end the century-old practice. While the Sanders bill isn’t scheduled for any action, people are talking about it.

“It advances the discussion because of the timing, as clearly Dimon is what raised the issue,” said Mark Calabria, director of financial regulation studies at the Cato Institute and a former Senate Banking Committee aide.

Dimon has given no sign he plans to quit. He told shareholders in Tampa, Florida, last month that the New York Fed’s board of directors is “more of an advisory group.”

Chairman Ben S. Bernanke told Congress this month that the Fed takes a lot of action to negate conflicts of interest, and that the central bank will work with lawmakers to find an alternative if they want to change it.

Current and former district bank presidents, including Narayana Kocherlakota of Minneapolis and James Bullard of St. Louis, say getting input about the markets and economy from the bankers on their boards helps them do their jobs better.

“The creation of the Federal Reserve was controversial, almost a battle between banking interests in New York on the one hand with opposition and a lot of concern from the populist segment in Washington,” said Alfred Broaddus, former president of the Richmond Fed. “Whoever says ‘What’s that guy doing on the board?’ doesn’t know all the background.”

Caroline Salas Gage contributed to this post.

Original post is Politics of Fed Setup Come to JPMorgan by Political Capital.

Photograph by Andrew Harrer/Bloomberg

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., at a Senate Banking Committee hearing in Washington on June 13, 2012.

JPMorgan Chase & Co. CEO Jamie Dimon returns to Capitol Hill today at 9:30 a.m. to testify at a House Financial Services Committee hearing. Dimon, who appeared before the Senate Banking Committee on June 13, may face questions from lawmakers over whether the bank’s loss of at least $2 billion might have been prevented by the Volcker rule ban on proprietary trading.

Federal Open Market Committee policy makers begin a two-day meeting to decide on interest rates at 10 a.m. Federal Reserve Chairman Ben S. Bernanke said June 7 that Europe’s situation poses “significant risks” to the U.S. economy and that the central bank “remains prepared” to take action if necessary.

The Group of 20 nations will urge euro-area governments to take all steps necessary to protect their currency union, according to an excerpt of a draft of the statement that leaders will issue at the end of their two-day summit today in Mexico. Leaders including President Barack Obama will hold press conferences later today.

And the Senate Health Committee holds a hearing on the impact of Title IX, with testimony from Billie Jean King, winner of 11 Grand Slam mixed doubles titles among many other tennis triumphs.

Original post is Washington Daybook: Second Time Around by Political Capital.

Photograph by Andrew Harrer/Bloomberg

Daniel Tarullo, governor of the U.S. Federal Reserve, right, with Senator Sherrod Brown, a Democrat from Ohio, before a Senate Banking hearing.

Sherrod Brown said it last week — and when JPMorgan CEO Jamie Dimon comes back to Washington today, Congress is going to try to pinpoint whether the Democratic Senator is right.

Flash back a few days to Dimon, who has a reputation in DC as being one of the smartest bankers on Wall Street, testifying before a Senate committee. He blamed a poor investing strategy and management failures for JPMorgan’s now-infamous $2 billion trading loss.

“It appears executives and regulators simply can’t understand what is happening in all these offices at once,” Brown said at the hearing. “It demonstrates to me that too-big-to-fail banks are, frankly, too-big-to-manage and too-big-to-regulate.”

As Bloomberg’s Robert Schmidt and Phil Mattingly report today, while the main concern of lobbyists is still that regulators will write tougher rules against proprietary trading, they are also closely monitoring the emerging chatter about too-big-to-manage.

The talk of the town these days is whether some banks are too big and too complicated even for their own executives to handle. Brown has a bill that would cap the size of “mega-banks.” Thomas Hoenig from the FDIC wants a modern Glass-Steagall Act to separate riskier operations from units handling deposits.

“There seems to be growing interest in some type of breakup proposal,” said Sheila Bair, a former FDIC chairman.

Original post is Washington JPMorgan Probe Finding Banks Too-Big-To-Manage? by Political Capital.

Photograph by Michael Reynolds/EPA

Senator Jay Rockefeller on the Capitol.

A Rockefeller is probably good for a loan like this.

The question is why he needs it.

Today, for the first time, members of Congress divulged the details of their home mortgages as well as their general personal finances.

And Democratic Senator Jay Rockefeller of West Virginia has reported among the best interest rates on a 1998 line of credit from the National Bank of Charleston.

The value of the on-demand loan is listed as $5 to $25 million in that congressional parlance of ethics disclosure that brackets everything in wide ranges.

The interest rate is quite specific: NY Prime minus 1 percent.

The prime rate in New York yesterday was 3.25 percent.

Yet this is a lawmaker who reports assets of more than $50 million in one trust alone, with JP Morgan Chase Bank serving as trustee for a family trust established in 1934.
The income from those holdings last year ranged between $1 million and $5 million, according to Rockefeller’s disclosure. He also reports a 1952-vintage trust fund at Wachovia Bank in the range of $25 million to $50 million, which also produced an income of $1 million to $5 million last year.

America’s first billionaire, John D. Rockefeller established trusts in 1934 for his five sons and daughter consisting of oil company stocks and real estate. Another set of trusts were established in 1952 for his grandchildren.

The senator is John Davison Rockefeller IV, a former governor of his adopted home state, which he first moved to as a Vista worker in the Sixties. He was elected to the Senate in 1984.

He not only has a line of credit with the bank in West Virginia. His wife also has a mortgage on a condominium in his native New York City valued at more than $1 million. The interest rate on that 10-year loan  taken from JP Morgan Chase last year was 4.875 percent with an adjustable rate.

Bloomberg’s Richard Rubin contributed to this report. 

Original post is A Rockefellerian Line of Credit by Political Capital.

Photograph by Jonathan Ernst/Bloomberg

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., testifies at a Senate Banking Committee hearing on June 13, 2012.

JPMorgan Chase CEO Jamie Dimon may have spent more time at today’s Senate Banking Committee hearing bolstering the case against the 2010 financial regulatory overhaul than defending his bank.

While Dimon acknowledged and apologized for the failures that led to his firm’s $2 billion loss, he also served as an ally to many of the panel’s Republicans in their opposition to the Dodd-Frank Act.

Tennessee Senator Bob Corker gave his takeaway in an interview: it was becoming clear that Dodd-Frank was not the correct response to the 2008 financial crisis and “with the hearing today, that thought has gained momentum.”

Lawmaker after lawmaker on the Republican side of the dais voiced concern over the law, which they opposed, and the new rules and regulatory powers it created. Dimon, who did support some aspects of Dodd-Frank, generally echoed and validated their concern.

Asked about the Volcker rule, the provision in Dodd-Frank that bars banks from proprietary trading, Dimon said it was “unnecessary” and that lawmakers drafted it “so vaguely that it’s going to be hard for the regulators” to put it properly into the place. At one point he noted that he speaks to “a lot of business people and I do hear a lot of people saying it’s easier to be overseas.” When asked by Corker about whether the law achieved its core purpose, making the financial system safer, Dimon responded: “I don’t know.”

Senator Mike Johanns, a Nebraska Republican, even found a way to pitch Dimon for business in a line of questioning about the impact of the regulations on smaller banks in his state.

“What I worry about, though, you’re not located in my state and I doubt that you’re probably considering locating in my state, although it’d be a great place for you to do business,” Johanns said to laughs in the hearing room audience.

“We hope to be there one day,” Dimon responded.

Original post is Dimon: Republicans’ Regulatory Ally by Political Capital.

Jamie Dimon, chairman of the board, president and CEO of JPMorgan Chase & Co.

In Jamie Dimon’s testimony before Congress today, the JPMorgan CEO delivered a message on the economy that is getting lost in what one observer called the “political theater.”

Dimon, now the target of Senate questions about the bank’s $2 billion trading loss, is largely regarded as one of the smartest bankers on Wall Street.

He says the U.S. is risking a fiscal crisis sooner than many people anticipate, because policy makers are deadlocked on the budget — with Bush-era tax cuts set to expire at year’s end and automatic spending cuts looming as a result of the last debt-ceiling increase. Dimon said lawmakers’ inability to reach an agreement on budget issues “helped cause a little downturn last year.”

“The one thing to keep in mind about the fiscal cliff is it may not wait until Dec. 31,” Dimon told the Senate Banking Committee, according to a report by Bloomberg’s Noah Buhayar. “Markets and businesses may start taking actions before that, that create a slowdown in the economy.”

He urged approval of a compromise similar to the Simpson-Bowles plan, issued by the co-chairmen of President Barack Obama’s fiscal commission, which includes spending cuts and tax increases to balance the budget.

Dimon spent much of his time at the hearing challenging federal regulations and saying how it would be tough for federal agencies to set a version of the so-called Volcker rule that would ban proprietary trading for a bank’s own account.

Scrutiny around Washington has made Dimon’s appearance “political theater,” Gary Townsend, a founder of Hill-Townsend LLC, told Bloomberg TV’s Erik Schatzker today.

Original post is Jamie Dimon on the `Fiscal Cliff’ by Political Capital.

Photograph by Mark Lennihan/AP Photo

JPMorgan office building in New York.

That’s the estimated amount of trading losses at the chief investment office of JP Morgan Chase & Co. The losses may be higher, though the $2 billion figure probably will be mentioned today at a Senate Banking Committee hearing in Washington at which chief executive officer Jamie Dimon will be the lone witness. The hearing — “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?” — begins at 10 a.m. eastern.

Dimon will apologize for the trading losses, according to Bloomberg’s Dawn Kopecki and Phil Mattingly. “We have let a lot of people down, and we are sorry for it,” Dimon said in prepared remarks.

Mattingly writes about Banking Committee chairman Tim Johnson, a South Dakota Democrat who will lead the questioning of Dimon.

Bloomberg Government analysts have thought of some questions they would ask Dimon.

Also worth reading: “House Of Dimon Marred By CEO Complacency Over Unit’s Risk,” by Erik Schatzker, Bradley Keoun and Kopecki.

Original post is Magic Number of the Day: $2 Billion by Political Capital.

Photograph by Mario Tama/Getty Images

Jamie Dimon

Jamie Dimon, the JPMorgan CEO who spent months arguing for less regulation of the banking industry, is coming to Washington tomorrow to apologize after a $2 billion trading loss that’s now fueling calls for tighter banking regulation.

He plans to tell the senators grilling him that his traders didn’t understand the risks they were taking.

“This portfolio morphed into something that, rather than protect the firm, created new and potentially larger risks,” Dimon said in prepared remarks ahead of his appearance tomorrow before the Senate Banking Committee. “We have let a lot of people down, and we are sorry for it.”

Bloomberg’s Dawn Kopecki and Phil Mattingly got the testimony in advance. Among the highlights: “When we make mistakes, we take them seriously and often are our own toughest critic,” Dimon says. “While we can never say we won’t make mistakes — in fact, we know we will — we do believe this to be an isolated event.”

Original post is Jamie Dimon to Apologize Before Senate by Political Capital.