J.P. Morgan had the cash and willingness to calm short-term funding markets when they went haywire in mid-September, but the banking giant said regulations held it back.
The firm has what CEO Jamie Dimon on Tuesday called a checking account at the Federal Reserve. When rates on repurchase agreements spiked to around 10% a month ago — roughly four times more than what J.P. Morgan earns at the Fed — the bank could’ve profited by shifting the money into repo.
It didn’t. The bank, Dimon told analysts following the third-quarter earnings release, needed to keep that money put so it could fulfill its liquidity requirements mandated by regulators. “We could not redeploy it into the repo market. We’d have been happy to do it,” Dimon said Tuesday. “It’s up to the regulators to decide if they want to recalibrate the kind of liquidity they expect us to keep in that account.”