Regulators force JPMorgan and Amex to raise equity

Posted Jun 6th 2009 2:10PM by Connie Madon
Filed under: Management, JPMorgan Chase (JPM), American Express (AXP), Federal Reserve

Well, now it seems that even the big boys have to play by the rules. What do I mean play by the rules? Apparently, if a bank wants to pay back the TARP monies, they must demonstrate that they can raise equity.

JPMorgan Chase & Co. (NYSE: JPM) and American Express Co. (NYSE: AXP) were the only two banks that did not raise equity.

So there was an exchange between regulators and Jamie Dimon, JPMorgan's chief executive, who said that he did not believe that ability to tap capital markets should have been relevant for his bank. He went on to say, "Any argument you can think of, you could assume we made with our regulators. And as you could also expect, they won.The primary reason was access to equity capital markets, and its hard for me to imagine that really applies in the JPMorgan case." So it seems that the exchange was spirited to say the least.

Nevertheless, on Tuesday JPMorgan sold $5 billion worth of shares and Amex raised $500 million. Regulators want to be sure that these banks can raise capital from private sources while continuing to lend to businesses and consumers. JPMorgan and Amex shareholders should be aware that their share value has been diluted by the issuance of this new stock offering.

Here's hats off to the regulators for holding to principle in this instance.

Do you believe that these banks should have been taken off the hook?

Tags: American Express, Amex, AXP, bank regulators, inthenews, Jamie Dimon, JPM, JPMorgan, TARP