Global crisis: Jamie Dimon, the world’s most powerful banker: ‘Things can get much worse. We are facing very serious problems’ | Economy and Business

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“Do you are feeling that you’re a particular person with plenty of energy? “I really feel like I’ve a giant accountability. That’s an honor and a privilege, however on the identical time I really feel like I owe individuals one thing. Earlier than being chairman and CEO of JPMorgan Chase, I’m a patriot and I would like my nation, the US, to do properly. I spend plenty of time fascinated by how I can assist the Western world.”

Jamie Dimon, 66, is a legend on the planet of finance. He runs the most important financial institution on the planet (not counting the opaque Chinese language companies), a large with complete belongings of $3.74 trillion on the finish of final 12 months, $1 trillion in loans and $2.46 trillion in deposits. This privileged place makes his phrases reverberate with a particular echo in all of the facilities of energy. In early June he modified his financial forecast at a convention and the markets started to shake: Dimon’s climate report went from “cloudy” to warnings about an upcoming financial “hurricane.”

Query. What makes you so pessimistic concerning the financial future?

Reply. In my nation the state of affairs is comparatively good. The job market could be very robust and customers have cash to spend. Once I mentioned there have been darkish clouds on the horizon, I feel individuals underestimated my warning. They thought that these financial issues have been momentary, and this isn’t the case. Issues can get a lot worse. We’re dealing with very severe issues equivalent to excessive inflation, notably in power and meals costs, and will increase in rates of interest.

Q. Do you suppose the US might enter a recession earlier than the top of the 12 months?

A. I don’t wish to make predictions, however sure, it’s a risk. We don’t know but how a lot rates of interest will go up.

Q. Will inflation stay at present ranges for much longer?

A. I feel we’re nearing the highest after which costs might begin to drop. However once more I insist that it’s tough to make forecasts. Lately we’ve had the biggest financial and financial stimuli injections the world has seen in its complete historical past. It’s complicated to guess the short-term penalties of those insurance policies. What does appear to be clearer is that inflation is just not transitory. Wages are going up, home costs too…

Q. Do you suppose central banks have contributed to runaway inflation?

A. Sure, however not on function. I’ve at all times thought that zero rate of interest coverage was a nasty concept. It has many detrimental results. However, the acquisition of public debt has clear inflationary results, far more than a easy program of quantitative easing. In the US, the scope of the financial insurance policies of the Federal Reserve in simply two years equals 30% of GDP. That’s unprecedented. There may be some huge cash within the fingers of households and governments nonetheless unspent.

Q. Will the Fed and the European Central Financial institution (ECB) be capable to land the airplane?

A. I hope so, nevertheless it’s getting tougher and tougher. I acknowledge that in these two years they’ve achieved a fantastic job. When the pandemic hit, nobody thought the economic system would bounce again so rapidly. Nevertheless, I feel they’ve gone too far. Clearly, in hindsight, every thing is simpler to investigate, however there was extreme financial and financial stimulation.

Q. And what about governments? How can they stimulate development with out inflicting inflation?

A. Lowering laws that hinder good development. Assume, for instance, of infrastructure. Typically permits take too lengthy. Within the US, for instance, the federal government ought to permit extra immigration. That will quiet down the rise in wages a bit. Issues will also be achieved when it comes to power. The US needs to be extra bold in its oil and fuel manufacturing, notably to assist Europe throughout this time of power insecurity.

I’ve at all times thought that zero rates of interest have been a nasty concept. They’ve many detrimental results

The JPMorgan headquarters on Madrid’s Paseo de la Castellana was adorned with Spanish and American flags made with flowers on the day that Dimon visited, a bit over every week in the past. Contained in the constructing the place a few of the nation’s largest enterprise transactions are conceived, the environment was one reserved for nice events. Dimon obtained EL PAÍS within the first interview to a Spanish media outlet within the 16 years he has been on the helm of JP Morgan Chase. Like different enterprise leaders equivalent to Larry Fink, chairman of BlackRock, Dimon is extra snug speaking concerning the large points affecting the world than stability sheets and earnings statements.

Q. Threat premiums in southern Europe have risen once more. Do you worry that the top of financial stimulus will trigger a brand new debt disaster within the euro zone?

A. I don’t have a solution to that query. It’s potential, however I hope it doesn’t occur. I feel now we have all realized classes from what occurred then. Nevertheless, I insist that now we have by no means skilled such an injection of liquidity and, due to this fact, we’re not able to measuring its penalties. I perceive that central banks need to struggle inflation, decreasing development a bit, however not throwing the world right into a recession. Not like the earlier disaster, if we now had a recession, governments are far more indebted, and that may be a danger, however households and companies are in a greater place now than in 2008.

Q. Do you suppose that the North-South debate on fiscal and financial insurance policies can resurface in Europe?

A. That debate is over.

Q. Has the Russian invasion of Ukraine precipitated a brand new world financial order?

A. Battle is a chance to unite the Western world. We should defend democracy, struggle for freedom and free commerce. The world modified on February 24, when 3,000 Russian tanks invaded a European nation. Such a blow shatters the phantasm that each one is nice and peaceable. The conflict additionally places the highlight not simply on international safety, however on power and meals safety. I’m glad to see Western nations working collectively to fulfill these challenges.

Q. Will the power disaster decelerate the transition to renewable sources? Are you in favor of giving extra significance to safety of provide than to different environmental points?

A. The conflict has modified many issues, however even with out this distorting issue we should be extra rational when fascinated by this power transition. There is no such thing as a various to betting on renewable sources. There have been many individuals who thought that closing coal crops and nuclear energy crops would resolve the issue. Nevertheless, the world nonetheless consumes 100 million barrels of oil per day and an enormous quantity of fuel. The local weather menace is actual, it’s there, and now we have to work to fight it. However we want extra rational power insurance policies. One of the best transition is to interchange coal with fuel. However now we’re seeing what number of nations are turning to coal as a result of they can’t afford the excessive costs of hydrocarbons. It’s taking place in Germany, within the Netherlands, in India and in China.

Q. Talking of China, Beijing’s development mannequin has increasingly cracks, now aggravated by its zero-covid coverage. How do you see the economic system of the Asian large?

A. China can do one factor the remainder of us can’t: run a rustic’s economic system with a gaggle of individuals sitting round a desk. That provides them plenty of management, however it’s true that they must decrease their development forecasts. When an economic system grows because the Chinese language economic system has achieved and turns into extra subtle, that model of roundtable administration stops working. They’ll want a greater distribution of capital for the nation to proceed rising. However that type of change takes time.

Jamie Dimon poses before the interview at JPMorgan headquarters in Madrid
Jamie Dimon poses earlier than the interview at JPMorgan headquarters in MadridSamuel Sánchez

Q. Do you suppose the Biden Administration is doing issues proper?

A. I completely disagree with the choice to go away Afghanistan and the best way it was carried out. Nevertheless, I like that his model is civilized and that from the start he sought the complicity of his allies. As well as, his relationship with the enterprise world is especially good.

Q. Higher than Trump’s?

A. It is arduous to make comparisons.

P. Was Brexit a mistake?

A. The British individuals voted and their choice should be revered. Now, will Brexit have adverse financial penalties? Completely. A few of these results, which for a time have been masked by Covid, are starting to emerge. Many issues must be achieved to cowl up the injury that leaving the EU will trigger. For Europe it’s at all times higher to have the UK on their aspect.

Central banks have gone too far. There was extreme financial and financial stimulation

Dimon spent his childhood in Queens, New York. His grandfather was a Greek immigrant who got here to the US and not using a penny to his identify, as he recalled throughout his speech on the Espresso with The Greats podcast. Panos Papademetriou modified his identify to Panos Dimon and, after making an attempt his hand at varied trades, made a profession as a dealer at Shearson, Hammill & Co., the place the daddy of the present JPMorgan chairman additionally labored.

After graduating in psychology and economics from Tufts College and getting an MBA at Harvard, Dimon continued the household’s connection to the monetary world. His skilled godfather was the legendary banker Sandy Weill. Dimon went with him to Baltimore to work at Business Credit score. This entity, which finally turned Vacationers, merged in 1998 with Citicorp in a $70 billion mega-operation {dollars} that produced Citigroup. He was on the prime, however his mentor fired him on the finish of the identical 12 months, ending a 15-year skilled relationship. Weill confessed to The New York Occasions that Dimon was aiming for the CEO job, however he wasn’t able to retire simply but.

After a hiatus, Dimon turned Financial institution One’s chief government in 2000, a task he held till its merger with JPMorgan in 2004. He spent a 12 months as chief working officer of the ensuing entity and on January 1, 2006 was appointed CEO of JPMorgan.

Three years later, the monetary disaster brought on by subprime loans broke out. Dimon, after reluctantly accepting state help as a result of he argued he might operate and not using a ventilator, took benefit of the Nice Recession to push JPMorgan, then the nation’s third-largest financial institution, into the highest spot. The Federal Reserve wanted the solvent companies to take over the weaker ones, and Dimon jumped on the likelihood. Bear Stearns and Washington Mutual handed into his domains. They have been dangerous operations as a result of nobody knew on the time what was on the banks’ stability sheets, however they have been purchased at knockdown costs. Dimon is the one survivor of the technology of managers who headed the massive Wall Avenue banks when the monetary disaster hit.

Q. Do you see any similarities between the disaster the economic system is now dealing with and the state of affairs skilled after the chapter of Lehman Brothers?

A. The conditions are fully completely different. Within the monetary disaster, the world was massively over-indebted. Not solely the banks have been leveraged, but in addition the enterprise capital funds, the hedge funds… As well as, there have been many autos off the banks’ stability sheets, mortgages had grown dramatically whatever the state of affairs of who signed them… Now, however, the state of affairs is significantly better. Households have paid off most of their money owed and are in usually good monetary well being. The issue of leverage is, however, being felt by states.

Q. How’s JPMorgan doing?

A. Very robust. In truth, now we have at all times been robust. We’re one of the crucial steady banks you will see. We’ve an awfully robust stability sheet, which permits us to assist our shoppers all around the world.

Q. Are the most important banks, together with JPMorgan, too large to fail in a disaster?

A. Regulators all over the world have realized that nobody is simply too large to fail. Individuals must also know that the chapter of a financial institution finally ends up being paid by the remainder of the banks. One lesson that has remained is {that a} case like Lehman’s can’t occur once more. Right now, Lehman would have been significantly better capitalized and, in any case, its fall could be far more orderly, not like what occurred again then, when the cash fled and the system was about to break down. As well as, with the pandemic it has additionally turn out to be clear that there are a lot of firms, not simply banks, that underneath sure excessive circumstances want public assist to outlive.

P. What do you consider fintech? Are they rivals or allies?

A. Each. Twenty years in the past you needed to compete with rival banks wherever you opened enterprise. Now, along with these banks, it’s a must to struggle with the shadow banks, the fintech and even the technological giants. We’re companions with a few of them, however we compete in opposition to all of them. There may be going to be a really robust battle and never everybody will survive it. Lots of people will endure because the match heats up. JPMorgan will do properly, however not everybody will do as properly.

The USA ought to increase the minimal wage, one thing that has hardly been achieved within the final 20 years

All through his tenure, Dimon has turned JPMorgan right into a money-making machine. And he has additionally achieved this by diversifying the enterprise. With a presence in 60 nations and greater than 240,000 staff, its major exercise when it comes to income continues to be funding banking (mergers, acquisitions, IPOs…), nevertheless it additionally does company and retail industrial banking (within the US) , it’s a highly effective asset supervisor and final 12 months it launched its digital financial institution in Europe.

Within the final 16 years, the financial institution’s shares have elevated in worth by 265% and its capitalization now quantities to $323.7 billion. In 2021 the lender made $121,6 billion, together with a web revenue of $48,3 billion. Such a historical past of companies has had its corresponding compensation. Final 12 months alone, Dimon earned $34.5 million (most of it in financial institution inventory) and Forbes journal estimates his private fortune at $1.5 billion.

Jamie Dimon (right) with his professional mentor, Sandy Weill, who eventually fired him from Citigroup
Jamie Dimon (proper) together with his skilled mentor, Sandy Weill, who finally fired him from CitigroupCorbis

Q. One of many penalties of the pandemic has been the notable enhance in inequality on the planet. Are you apprehensive?

A. Sure. It’s not good to have such an unequal society. There are various issues that might be achieved to right this case. Within the US, for instance, the minimal wage needs to be raised, one thing that has barely been achieved in 20 years. As well as, colleges ought to give youngsters expertise for achievement on the office and better earnings. Training, a great well being system and good infrastructure are key to combating inequality.

Q. The inventory markets have sustained severe losses in current months. Have they hit the underside?

A. I don’t know, they may drop much more.

Q. Have been some valuations unhealthy, particularly within the tech sector?

A. Sure, however not in all instances. Clearly, there have been some shares that have been full bubbles.

Q. Due to the free cash?

A. Sure, due to zero charges and likewise due to easy hypothesis. All through my life I’ve at all times seen hypothesis. It’s in human nature. I’ve not visited a rustic the place there isn’t a hypothesis. In automotive races, in sports activities betting, within the on line casino… and on the inventory market. Nevertheless, in recent times that hypothesis has reached ranges which are too excessive. Individuals should be extra cautious and suppose twice. Many individuals enter the market with out actually figuring out what they’re shopping for.

Q. Talking of hypothesis, you could have at all times been very skeptical about crypto belongings. Why?

A. Effectively, I feel skeptical is simply too gentle a definition. I’d by no means spend money on crypto. On this matter, it’s essential to separate the know-how, the blockchain, from cryptocurrencies as a pure funding asset. We’re one of many largest customers of blockchain on the planet as a result of it permits us to course of hundreds of thousands of knowledge in actual time. Nevertheless, I’ve by no means understood the worth of cryptocurrencies as funding belongings. They’ve turn out to be modern, however deep down I feel they cover a system that might be similar to Ponzi schemes. That doesn’t imply that I don’t defend the proper of individuals to spend money on them. I additionally don’t suppose individuals ought to smoke, however I defend their proper to take action.

There is no such thing as a various to renewables, however extra rational power insurance policies are wanted

Dimon, married and a father of three, has had a number of skilled and well being scares. Among the many first, essentially the most severe incident occurred in 2012, when all inner controls failed and one of many financial institution’s merchants induced the financial institution losses of greater than $5 billion as a result of very high-risk operations with derivatives. That case turned often called the “London whale” and Dimon needed to apologize publicly. As for his well being, in 2014 he knowledgeable his staff and the market that he had been identified with throat most cancers. “I really feel good and I’ll inform you if my well being standing modifications,” he defined in a letter. After overcoming the most cancers, in 2020 he needed to bear emergency surgical procedure for a severe coronary heart drawback.

Q. Have you considered retiring?

A. I like my job, I like what I do. I feel I’ll be round for some time longer. Clearly, in the long run it’s the board that has the final phrase. I’m simply one other worker and if the board desires to interchange me tomorrow… In any case, now we have constructed a fantastic staff and have a strong succession plan.

Q. Have your well being issues made you alter in any manner?

A. From knowledgeable viewpoint, nothing has modified. There are individuals who suppose that when one thing like this occurs to you, you’ll cease and dedicate your self to smelling the flowers. However I like what I do, I like to assist individuals from my place. Clearly, I proceed to get pleasure from my household and hobbies equivalent to music, artwork and historical past. What is for certain is that if you overcome an sickness, you might be extra conscious that you’re mortal.

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