It is telling that that the firestorm of publicity that followed in the wake of a multibillion trading loss by JPMorgan Chase & Co. was not confined to the financial press as might have been the case five years ago. The disclosure made headlines in the mainstream media as well, replete with calls from Capitol Hill about the efficacy of the Volcker Rule in preventing such an event. Furthermore, we have a candidate for U.S. Senate, Elizabeth Warren, calling for JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon to resign his position as a director at the Federal Reserve Bank of New York. A cynic might suggest that candidate Warren is anxious to make political hay, but it is clear that the business of banking is now firmly resident in the realm of the political and will remain a central issue in the upcoming campaign.
The harsh reality is that many policy makers and citizens, as exemplified in the Occupy movement, think that large banks pose a serious threat to the American economy and its democratic political institutions. Bankers may find some solace from the fact that there is precedent for this acute hostility (e.g., Andrew Jackson’s bank war), but that is cold comfort in today’s environment where banks’ every action, from fee practices to collection efforts, are scrutinized, challenged, and portrayed in a negative light. Bankers may feel that this animus is unjustified, but it is the reality. It will take a prolonged period of time before this abates, and it is incumbent upon the industry to take explicit steps to assuage the mistrust of banks which is prevalent among the public and policymakers.