May 16th, 2012
Econintersect: (Updated 2:02pm 16 May 2012) Amar Bhidé, Thomas Schmidheiny Professor of International Business, Fletcher School of Business, Tufts University, says that it is not humanly possible to manage the diverse activities of a financial super entity like JP Morgan Chase (NYSE:JPM). He says that the trading activities alone require the full time attention of the most talented CEO. This is not abstract commentary from a university professor - Bhidé has hedge fund management responsibilities in his personal resumé. He says in an interview with Bloomberg that
"JP Morgan is a systemically important, structurally defective bank, as are all other mega banks."
The Bloomberg video of the interveiew follows the Read more... break.
Follow up:Bhidé says that JP Morgan (and all mega banks) are actively soliciting "hot money" around the globe and they get it because those depositors feel
"they are essentially depositing their money with the U.S. government."
Watch the interview below.
Amar Bhidé is an occasional contributor to Global Economic Intersection, most recently participating in a Great Debate© about How to Resolve the Euro Crisis.
Bhidé has provided additional commentary to Econintersect:
To libertarian friends who recoil at legislative restructuring:
We know that conglomerates are usually not an efficient form (although there are exceptions) -- if Adam Smith were around surely he'd praise the specialization of organizations as he did of tasks.
But a) the inefficiencies of industrial conglomerates cant bring down the economy. b) there are at least some market mechanisms that put pressure on dysfunctional diversification (product market competition, raiders..).
These mechanisms dont exist in banking -- nor are there any demonstrated economies "economies of scope" in banking. Nothing to be gained for instance from bolting together a commercial lender and a hedge fund.
A radical "bust up" of systemically important, structurally defective banks is therefore a must
Dare we hope that the JPM debacle finally gets the ball rolling?