JPMorgan Chase CEO Jamie Dimon has proposed a plan to end the turmoil in the banking industry, one that would involve government intervention. Still, the banker expressed concerns that policymakers will take away the wrong lessons from the current upheaval.
Dimon said he believes that banks should have been encouraged to look more broadly at potential pitfalls rather than focusing on one annual stress test that ran hundreds of thousands of pages.
At the same time, four regional firms have collapsed amid steep Federal Reserve interest rate hikes and deposit outflows, leading to investor concern about the strength of the industry. Despite JPMorgan’s purchase of First Republic and Dimon’s declaration that “this part of the crisis is over,” the CEO acknowledged that the regional-bank sector is still facing challenges.
“It may take a few banks down; that’s normal stuff. ... That isn’t abnormal,” he said.
Dimon nonetheless believes that the industry is “quite strong” and that “we’re getting near the tail end” of the problem.
US Debt Crisis and the Chinese Economy
In the wide-ranging interview, Dimon also discussed JPMorgan’s preparations for a potential U.S. default and his assessment of the state of U.S.–China relations. He warned that losses on commercial real estate loans would likely lead to more regional bank failures and urged U.S. leaders to avoid measures that would limit trade with China.“America and China have a lot of common interests—climate, nuclear proliferation, anti-terrorism, global stability,” the CEO said. “And we have differences. We’re capitalists; they’re not. It’s OK. We can sort it out.'’
Dimon has long advocated for eliminating the U.S. debt ceiling and said JPMorgan has convened a weekly war room to plan how the bank, the country’s largest lender, would react to a potential default. He said he anticipates that if the standoff persists, the meetings will occur more frequently, potentially multiple times per day.
Despite the ongoing turmoil in the banking industry, JPMorgan’s shares have been largely immune to the pressures plaguing its smaller rivals. The bank reported an unexpected jump in deposits in the first quarter in a flight to safety. It outbid other lenders for First Republic after the San Francisco-based firm became the second-biggest bank failure in U.S. history. Dimon said he sees an opportunity to expand JPMorgan’s wealth-management offerings by leveraging First Republic’s relationships with wealthy clients.
