Sarkozy, Dimon Face Off Over Regulation

JPMorgan Chase Chief Executive Jamie Dimon got a surprise at the Davos World Economic Forum on Thursday when he rose to ask French President Nicolas Sarkozy not to impose over-regulation on banks.

But instead of agreeing, Sarkozy hit back, saying that financiers were responsible for the global economic crisis, Reuters reported.

Earlier in the day at another panel, Dimon had protested bank bashing, saying that it was “unproductive and unfair” that all banks were tarred with the same brush for mistakes that some bankers had made

 “Not all banks are the same and I just think that this constant refrain ‘bankers, bankers, bankers’ is just unproductive and unfair. People should just stop doing that,” he said, calling to mind a protest along the same lines earlier in the month by Barclays CEO Bob Diamond, who had told a U.K. parliamentary committee that “the period of remorse and apologies for banks” should stop.

When Dimon rose during the session with Sarkozy, first he praised nations’ efforts to keep the financial system afloat in 2008. But then he warned the G20 nations not to err on the side of overregulation of banks, saying, “too much is too much.”

Sarkozy responded by saying, “The world was stupefied to see one of five biggest U.S. banks collapse like a house of cards.” He went on to say, “We saw that for the last 10 years, major institutions in which we thought we could trust had done things which had nothing to do with simple common sense. That's what happened.”

Sarkozy then chided banks for resisting strong regulation. “There is an ocean between flexibility and the scandal we saw. So if people present me as obsessed with regulation, it's because there is a need for regulation,” he continued. “I don't contest the principle of securitization, but when one offshore country guaranteed 700 times its GDP, are we in the market economy or in a madhouse?”

The French president then attacked bonuses. “Bonuses don't bother me, provided there are also ... drawdowns when there are losses. When things don't work, you can never find anyone responsible. Those who got bumper bonuses for seven years should have made losses in 2008 when things collapsed.”

Dimon, who had voiced concern that “bad policy,” including stronger regulation, could make things more difficult for an industry coming back from disaster, had at the earlier session said that not all banks were on the brink of failure. However, Federal Reserve Chairman Ben Bernanke told a different story to a U.S. investigative panel in comments that were made public earlier in the day Thursday. Referring to the 13 most influential U.S. financial firms at the time, Bernanke said, “If you look at the firms that came under pressure in that period ... only one ... was not at serious risk of failure.” He included Goldman Sachs in the group of 12.