JPMorgan Chase & Co. (JPM:US) Chief Executive Officer Jamie Dimon said extraordinary measures by central banks kept the financial crisis from worsening and urged governments to devise policies for growth.
“Most important now is good sustainable growth to make the central bank job easier,” Dimon, 56, said in a panel discussion at the World Economic Forum in Davos, Switzerland today. “It’s incumbent on governments to do good fiscal policy.”
Paul Singer, founder of hedge fund Elliott Management Corp., said that policy makers have been “lulled into security,” believing that quantitative easing, is “costless.” The banking industry is also “too leveraged and too opaque,” he added.
The Federal Reserve in September said that it would expand its asset-purchase program, known as quantitative easing to stimulate the economy. European Central Bank President Mario Draghi pledged in August to buy bonds to prop up some euro- region countries and has lent more than 1 trillion euros ($1.33 trillion) in three-year loans to banks to bolster credit supply.
UBS AG (UBSN) Chairman Axel Weber, speaking at the same panel in Davos, said the “short-term fixes” imposed by central banks will be paid for by future generations.
Central banks’ attempts to counteract the financial and sovereign debt crises are “pushing the problem down the road,” said Weber, 55, who is a former head of Germany’s Bundesbank.
“We are heading to a very dangerous environment,” said Weber.
Elliott’s Singer, in a discussion with JPMorgan’s Dimon on financial transparency,said the banking industry was saved by “the implicit and explicit guarantee of governments,” and today there is still the “same inability of outsiders to understand the financial condition of institutions.”
Singer, 68, acknowledged that his hedge fund is a client of New York-based JPMorgan.
Dimon was among U.S. corporate leaders that publicly called on lawmakers last year to avert the so-called fiscal cliff, a package of automatic spending cuts and tax increases that were set to take effect this month. In December, the CEO predicted that an effective agreement might unlock “a booming economy in a couple of months.”
Dimon and Weber criticized global regulators for making the capital and liquidity rules for banks too complex across different jurisdictions.
“You want good, strong regulation,” Dimon said. “There are a lot of bright regulators, but they are overwhelmed.”
Weber said the lack of global standards has made regulations for banks too “complex.”
Dimon has led financial-industry executives in warning that regulatory measures meant to curb risks in the wake of 2008’s financial crisis may bear unintended consequences and hurt the economy. At the forum in 2011, Dimon sparred with France’s then- President Nicolas Sarkozy over “bad policies” the CEO said would impede growth.
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