US Outlook: You can pretty reliably measure how well the efforts to reform the banking system are going by listening to how annoyed Jamie Dimon is on a results conference call. The more complaining he does, the more content you should feel.
The chief executive of JPMorgan Chase had a couple of particular gripes yesterday, about regulation of retail banking here in the US and about the new capital requirements being set internationally. He harrumphed that the Basel III rules setting a de facto minimum of a 7 per cent capital cushion, relative to the size of their balance sheet, leave banks with more than enough to absorb any shocks.
The Bank for International Settlements, which runs the Basel process, is still examining whether to impose an even higher minimum on "systemically important" banks like JPMorgan, whose trading operations extend their tentacles across the world, through all kinds of inter-related financial markets. These are the "too big to fail" banks, whose collapse might pull down too many others.
Mr Dimon called for the US to go it alone, unilaterally decide new rules and "take a leadership position", by which he meant stop anything tougher. Happily, the US is doing no such thing, since its own Wall Street reform act, passed last year, commits the country to imposing additional capital obligations of its own on too-big-to-fail institutions.
When bankers declared they had more than enough capital last time out, subprime mortgage losses ate through the cushion at alarming speed. Mr Dimon is even trying to rewrite history by claiming "you can make the argument that some of the big companies were stabilisers in the storm" of 2007-08.
For many months after the collapse of Lehman Brothers, the only institution with stabilisers was the US government. In any case, there is an additional merit to adding extra capital requirements on systemically important firms, and that is to discourage them from becoming too big in the first place. The shareholders of these super-sized banks ought to baulk at the prospect of ponying up capital to protect other banks' shareholders.
As for Mr Dimon's harrumphing on new restrictions on his debit card business, it amounted to little more than blackmail. The Federal Reserve, under direction from the new Dodd-Frank Act, is limiting the amount of money banks can skim from retailers when customers use their cards.
Mr Dimon says the cost of these transactions will have to be borne directly by the cardholder instead. That's not the blackmail bit; that's as it should be. The banking system became twisted out of shape over the past decade by banks' reliance on hidden penalty fees, which they sprang on their weakest customers through unexpected overdraft fees, late fees, penalty interest rates, and on and on. For example, in 2009, US banks raised $20bn from fees on debit card customers who accidentally went into the red.
The consequence of the Fed's move (like the consequences of earlier legislation that stopped automatic overdrafts) is to shift the cost of banking on to the majority of customers and make it transparent. And when the fees (or lower interest rates on current accounts, or minimum balances, or whatever the banks choose) are borne by a majority of healthy customers, the result will be a lot more competition that will drive a better bargain for the customer.
Mr Dimon says that "ultimately", most of the lost penalty income will be recouped elsewhere, but analysts are not so sure and have been measuring the dents into their profit forecasts. In order to make the maths work, he says, around 5 per cent of Americans, mainly poorer Americans, will be "pushed out of the banking system" to join the lines of the unbanked.
Throwing people out of the banking system is a political non-starter, for all Mr Dimon's belligerence yesterday, and would only invite yet more regulation. Either way, at home as well as internationally, banks are heading for intensifying pressure on their margins. Good.