JPMorgan opposes breakup proposal

NEW YORK-- JPMorgan Chase, the nation's largest bank, urged shareholders to reject a proposal asking it to reexamine its size at a time when calls for breaking up the banks are growing louder.

Both JPMorgan and Citigroup face shareholder proposals this year calling on them to review how shareholders might benefit from a sale of "all non-core banking business segments," such as investment banking and trading. The proposals, by Bartlett Naylor of non-profit advocacy group Public Citizen, ask that they set up special committees of independent directors to examine the issue.

"All of them suffer from a too big to manage problems," Naylor said in an interview, citing the billions in fines banks have had to pay out in recent years for allegations of wrongdoing in trading and sales. "As an American, I am also worried about blowing up the world economy," Naylor said, referring to the risks of large banks' trading operations.

In announcing its annual meeting Thursday, JPMorgan urged shareholders to reject Naylor's proposal, saying the bank actually benefits from its girth. "Clients and customers choose JPMorgan Chase because of the breadth and quality of the services we provide. It is what they want and what they need," the bank said.

Separating its businesses would "incur significant costs resulting from the need to duplicate corporate functions," such as the money it spends on cyber security the New York bank argued. Shareholders will vote on the proposal at JPMorgan's annual shareholder meeting on May 17th in New Orleans.

Citigroup, which is holding its shareholder meeting on April 26th in Miami, has also urged shareholders to reject the proposal, which echos complaints from the financial crisis that some banks had grown "too big to fail."

Calls for breaking up the banks have gained renewed steam in recent months, and not just from Democrat presidential candidate Bernie Sanders, who has made breaking up the banks one of the tenants of his election campaign.

The new head of the Federal Reserve Bank of Minneapolis, Neel Kashkari, shocked Wall Street earlier this year when he said policy makers should consider breaking up the biggest banks to avoid another government bailout. Kashkari, a Republican who lost his 2014 bid to be governor of California, comes from a Wall Street background, having worked at both Goldman Sachs and bond shop Pimco. He also oversaw the government's financial crisis bailout program, known as the Troubled Asset Relief Program.

Wall Street brokerage KBW also chimed in last month, saying Citigroup Citigroup, the nation's fourth largest bank, could boost shareholders' returns by more than 50% by breaking itself into pieces. That report followed one by Goldman Sachs last year saying JPMorgan could be worth more in pieces than the sum of its parts.

Naylor said he submitted a similar proposal this year at Bank of America, but it didn't make it on the ballot for technical reasons. Naylor, who specializes in corporate governance and shareholder rights, said Wells Fargo was spared from the proposal because it's investment banking activities are so small.

"They do not violate the issue of Glass-Steagall as violently as the other three," he said, referring to the Depression Era law that limited tradition banking activities to be mixed with riskier investment activities. The law was repealed in 1999.

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