DAVOS, Switzerland (Reuters) - French President Nicolas Sarkozy clashed with the head of U.S. bank JP Morgan Chase (JPM.N) at the Davos forum on Thursday, telling him bankers had done things which defied common sense.
Jamie Dimon, credited with having steered JP Morgan through financial turmoil in 2007-08, had earlier in the day lashed out at persistent bank bashing nearly three years after the global credit crisis began, saying it was "unproductive and unfair."
But when he rose at a later session of the World Economic Forum to ask Sarkozy to get the G20 to avoid overregulation of banks, the French president launched into a broadside accusing financiers of behavior that he said had caused the crisis.
"The world has paid with tens of millions of unemployed, who were in no way to blame and who paid for everything," Sarkozy said to Dimon. "It caused a lot of anger."
The French leader also renewed his call for a financial transaction tax to fund development but acknowledged that many G20 countries opposed such a levy. He suggested a small pioneer group of states might go ahead with a tiny levy or some other form of innovative financing to lead the way.
Dimon praised governments for intervening to save the financial system in 2008. But he said the G20 group of major economies, which Sarkozy chairs this year, should take a deep breath before imposing more regulation.
"Too much is too much," he said.
The outspoken Dimon had earlier told a separate panel not all lenders made the same mistakes in the run-up to the crisis.
"Not all banks are the same and I just think that this constant refrain 'bankers, bankers, bankers' is just unproductive and unfair. People should just stop doing that."
He echoed comments by Barclays (BARC.L) CEO Bob Diamond, who told a UK parliamentary committee this month that "the period of remorse and apologies for banks" needed to be over.
MARKET OR MADHOUSE?
Sarkozy was having none of it.
"The world was stupefied to see one of five biggest U.S. banks collapse like a house of cards," he told a plenary session of the Davos Forum.
"We saw that for the last 10 years, major institutions in which we thought we could trust had done things which had nothing to do with simple common sense. That's what happened."
The United States government spent hundred of billions of dollars of public money to bail out financial institutions, after the dramatic failure of Lehman Brothers in 2008, through the controversial Troubled Asset Relief Program (TARP).
"Not all banks needed that TARP. Not all banks would have failed," Dimon said at the earlier session. "A lot of banks were stabilizing the problem -- JP Morgan bought Bear Stearns because the U.S. asked us to."
However, Federal Reserve Chairman Ben Bernanke told a U.S. investigative panel last year that the credit crisis surpassed the Great Depression of the 1930s in severity and put 12 of the 13 most important U.S. financial firms at risk of failure.
"If you look at the firms that came under pressure in that period ... only one ... was not at serious risk of failure," he said in comments disclosed earlier on Thursday.
"Even Goldman Sachs (GS.N), we thought there was a real chance that they would go under," he said.
Dimon said his biggest current concern was that "bad policy" could make things worse as the banking industry was on the mend.
Sarkozy said bankers were wrong to resist tough rules. "There is an ocean between flexibility and the scandal we saw," he said. "So if people present me as obsessed with regulation, it's because there is a need for regulation.
"I don't contest the principle of securitization, but when one offshore country guaranteed 700 times its GDP, are we in the market economy or in a madhouse?"
Finally, the French president took aim at bank bonuses.
"Bonuses don't bother me, provided there are also ... draw-downs when there are losses. When things don't work, you can never find anyone responsible. Those who got bumper bonuses for seven years should have made losses in 2008 when things collapsed."
(Reporting by Paul Taylor and Lisa Jucca, writing by Michael Stott, editing by Mike Peacock)