Feature

Shareholders won’t fix big banks

Don’t count on shareholders to straighten out errant megabanks.

Jesse EisingerNYTimes.com

Don’t count on shareholders to straighten out errant megabanks, said Jesse Eisinger. That’s the takeaway from last week’s shareholder vote at JPMorgan Chase, which left Jamie Dimon’s dual role as chief executive and chairman untouched. Reformers have long hoped that shareholders might “ride to the rescue to solve the problem of Bank Gigantism,” but it turns out they’re “part of the problem.” Dimon’s failure to rein in reckless trading at JPMorgan may not qualify as a firing offense, but splitting his jobs was a chance to “diffuse a little power and increase oversight.” So why did investors back his dual role more enthusiastically than ever? “In some sense this was an act of reflexive class fealty.” JPMorgan’s shareholders chose to spite the union-backed pension funds pushing for reform. It’s a matter of greed, too: Complex megabanks give shareholders a lucrative piece of high-risk, high-reward bets with unlimited upside and capped losses—since the federal government holds the safety net. “If shareholders really believed that bailouts were a thing of the past, they would be acting responsibly. From the JPMorgan vote, we can see that they aren’t.”

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