By Pam Martens and Russ Martens: December 31, 2024 ~

The Bank Policy Institute calls itself “a nonpartisan public policy, research and advocacy group…” In fact, it’s a registered lobbyist for the megabanks on Wall Street. The Chairman of its Board of Directors is Jamie Dimon, the Chair and CEO of JPMorgan Chase, the largest bank in the United States. The rest of its Board consists exclusively of the top executives of large banks, including Goldman Sachs, Citigroup, Bank of America and Wells Fargo.

So when the Bank Policy Institute decides to sue the Fed, one of the key regulators of the Wall Street megabanks, you can be certain that Jamie Dimon has a dog in this fight. (Plaintiffs in the lawsuit against the Fed, which was filed on Christmas Eve, include other bank-funded groups as well.)

Dimon sits atop not just the largest bank in the U.S. but also the bank designated as the riskiest bank in the U.S. by its regulators. And despite its unprecedented criminal history, the U.S. Department of Justice continues to nonchalantly toss it deferred-prosecution agreements for its criminal acts.

Dimon is the only Wall Street megabank CEO to have remained in that post since the financial crisis of 2008 – notwithstanding his bank losing $6.2 billion gambling with depositors’ money in derivatives in London; despite five felony counts to which it admitted guilt; despite over $40 billion in fines and restitution for looting the public and rigging trading; despite years of providing banking services to two of the most notorious criminals of this century – Bernie Madoff and Jeffrey Epstein – and despite endless bailouts from the Federal Reserve to prop it up.

According to media reports, this past January the Bank Policy Institute hired Eugene Scalia of the Big Law firm Gibson, Dunn & Crutcher to push back against the Fed’s plan for higher capital levels at the megabanks. JPMorgan Chase, in particular, was slated for a large capital increase and Jamie Dimon was not at all happy about that.

Dimon is most likely opposed to the rule change because higher capital requirements could restrict the bank’s ability to prop up its share price with multi-billion-dollar stock buybacks each year, increase its dividend to appease its shareholders that this multi-felon bank is on the right course and to lavish multi-million dollar bonuses on Dimon.

Scalia is the son of the late Supreme Court Justice Antonin Scalia, who didn’t see anything wrong with accepting lots of free vacations from private interests while he sat on the high court. Eugene Scalia is also the lawyer who previously wielded a hatchet to gut key elements of the Dodd-Frank financial reform legislation of 2010. That legislation was intended to rein in the reckless risk-taking of the Wall Street megabanks that had produced the worst economic collapse in 2008 since the Great Depression of the 1930s. Mother Jones News Editor, Patrick Caldwell, wrote the following about Eugene Scalia in 2014:

“Ambrose Bierce once quipped that a lawyer is one skilled in the circumvention of the law. By that definition, Eugene Scalia is a lawyer of extraordinary skill. In less than five years, the 50-year-old son of Supreme Court Justice Antonin Scalia has become a one-man scourge to the reformers who won a hard-fought battle to pass the 2010 Dodd-Frank Act to rein in the out-of-control financial sector. So far, he’s prevailed in three of the six suits he’s filed against the law, single-handedly slowing its rollout to a snail’s pace. As of May, a little more than half of the nearly four-year-old law’s rules had been finalized and another 25 percent hadn’t even been drafted. Much of that breathing room for Wall Street is thanks to Scalia, who has deployed a hyperliteral, almost absurdist series of procedural challenges to unnerve the bureaucrats charged with giving the legislation teeth.

“Scalia has ‘created this sense that we’re paralyzed, because if we write a rule we’re just going to be reversed,’ says Lisa Donner, executive director of the watchdog group Americans for Financial Reform. The threat of more suits, she says, has ‘cast a real chill’ over Wall Street regulators, particularly at the Securities and Exchange Commission (SEC).”

The battle between Dimon and the Fed officially began on July 27, 2023 when the Federal Reserve, FDIC and Office of the Comptroller of the Currency (OCC) – JPMorgan Chase’s bank regulators — released a proposal to require higher capital levels at banks with $100 billion or more in assets. The proposed capital rule is formally known as the Basel III (or Basel Endgame) rule.

The three federal bank regulators provided a very generous public comment period of 120 days on the proposal. The large banks had to only begin transitioning to the new rules on July 1, 2025, with full compliance not due for a ridiculously long five years – on July 1, 2028.

Whatever Scalia was doing behind the scenes appears to have worked out well for Dimon. We know that federal banking regulators had originally planned to increase JPMorgan Chase’s capital requirement by 25 percent because Dimon stated that fact in his April letter to shareholders, writing that if the capital rules proposed by the FDIC, Office of the Comptroller of the Currency and the Federal Reserve are implemented, they “would increase our firm’s required capital by 25%.”

But instead of 25 percent, when the Fed released its new capital requirements for the megabanks on August 28, the Fed raised JPMorgan Chase’s capital requirement by just 7.89 percent from the 2023 level, taking it from a total capital requirement of 11.4 in 2023 to just 12.3 in 2024. Had the 25 percent increase been imposed, JPMorgan Chase’s capital requirement would have totaled 14.25.

The U.S. Treasury’s Office of Financial Research, which was created under the Dodd-Frank financial reform legislation of 2010 to provide federal regulators with up-to-date research on threats to financial stability, has created a “Bank Systemic Risk Monitor” that provides an overall score to show the systemic risk a particular bank represents to U.S. financial stability. JPMorgan Chase’s score for last year was 857, which is 23 percent higher than the next riskiest bank on the list, Citigroup, which has a systemic risk score of 697. (Citigroup is the bank that blew itself up in the financial crash of 2008 and received over $2.5 trillion in secret revolving loans from the Fed from December 2007 through July of 2010 according to the eventual audit released by the Government Accountability Office.)

Equally noteworthy, JPMorgan Chase’s score is twice that of Deutsche Bank USA (DB USA), which has a systemic risk score of 422. And yet, when the Fed released its capital increases on August 28, it raised Deutsche Bank USA’s capital requirement from 13.8 in 2023 to 18.4 currently – an increase of a whopping 33 percent versus an increase of 7.89 percent for JPMorgan Chase.

So if Dimon got everything he wanted with the help of Scalia, why is the Bank Policy Institute, of which Dimon serves as Chairman, moving ahead with a lawsuit against the Fed?

According to Senator Elizabeth Warren at a Senate Banking hearing on March 7 with Fed Chairman Jerome Powell, it was Powell that led the efforts inside the Fed to weaken the capital rule after getting pressure from the megabanks. Warren told Powell this:

“You are the leader of the Fed and when the heat was on last year, you talked a lot about getting tougher on the banks. But now the giant banks are unhappy about that and you’ve gone weak-kneed on this. The American people need a leader at the Fed who has the courage to stand up to these banks and protect our financial system.”

Dimon’s and Scalia’s strategy may be to send a permanent message to the other federal banking regulators and any future Fed Chair that you might find your agency hauled into federal court by a Big Law firm if you don’t do the bidding of the Wall Street megabanks. Scalia is one of the lawyers representing multiple plaintiffs in the newly filed lawsuit.

What is particularly outrageous about all this is that a similar bank front group called the Clearing House Association had the audacity to battle in court – all the way to the U.S. Supreme Court (which declined to hear the case) — to prevent the Fed from releasing the names of the megabanks and the trillions of dollars in emergency revolving loans these banks had received from the Fed for two and a half years following the banks blowing up Wall Street and the U.S. economy from 2008 to 2010. The megabanks were “owners” of the Clearing House Association according to its legal filing and it brazenly demanded secrecy from the courts on this unprecedented money spigot from the Fed to the banks. It failed in that effort.

Now these same banks want us to believe that their mission in filing this lawsuit is to force “transparency” from the Fed to enhance the public interest.

The new court filing by the Bank Policy Institute states that “The Clearing House Association [is] one of the Bank Policy Institute’s predecessors….”