“Do you feel that you are a person with a lot of power? “I feel like I have a big responsibility. That’s an honor and a privilege, but at the same time I feel like I owe people something. Before being chairman and CEO of JPMorgan Chase, I am a patriot and I want my country, the United States, to do well. I spend a lot of time thinking about how I can help the Western world.”
Jamie Dimon, 66, is a legend in the world of finance. He runs the biggest bank in the world (not counting the opaque Chinese firms), a giant with total assets of $3.74 trillion at the end of last year, $1 trillion in loans and $2.46 trillion in deposits. This privileged position makes his words reverberate with a special echo in all the centers of power. In early June he changed his economic forecast at a conference and the markets began to shake: Dimon’s weather report went from “cloudy” to warnings about an upcoming economic “hurricane.”
Question. What makes you so pessimistic about the economic future?
Answer. In my country the situation is relatively good. The job market is very strong and consumers have money to spend. When I said there were dark clouds on the horizon, I think people underestimated my warning. They thought that these economic problems were temporary, and this is not the case. Things can get much worse. We are facing very serious problems such as high inflation, particularly in energy and food prices, and increases in interest rates.
Q. Do you think the US could enter a recession before the end of the year?
A. I don’t like to make predictions, but yes, it’s a possibility. We don’t know yet how much interest rates will go up.
Q. Will inflation remain at current levels much longer?
A. I think we are nearing the top and then prices could start to drop. But again I insist that it is difficult to make forecasts. In recent years we’ve had the largest monetary and fiscal stimuli injections the world has seen in its entire history. It is complex to guess the short-term consequences of these policies. What does seem to be clearer is that inflation is not transitory. Wages are going up, house prices too...
Q. Do you think central banks have contributed to runaway inflation?
A. Yes, but not on purpose. I have always thought that zero interest rate policy was a bad idea. It has many detrimental effects. On the other hand, the purchase of public debt has clear inflationary effects, much more than a simple program of quantitative easing. In the United States, the scope of the monetary policies of the Federal Reserve in just two years equals 30% of GDP. That is unprecedented. There is a lot of money in the hands of families and governments still unspent.
Q. Will the Fed and the European Central Bank (ECB) be able to land the plane?
A. I hope so, but it’s getting harder and harder. I recognize that in these two years they have done a great job. When the pandemic hit, no one thought the economy would bounce back so quickly. However, I think they have gone too far. Obviously, in hindsight, everything is easier to analyze, but there was excessive monetary and fiscal stimulation.
Q. And what about governments? How can they stimulate growth without causing inflation?
A. Reducing regulations that hinder good growth. Think, for example, of infrastructure. Sometimes permits take too long. In the US, for example, the government should allow more immigration. That would cool down the rise in wages a bit. Things can also be done in terms of energy. The US should be more ambitious in its oil and gas production, particularly to help Europe during this time of energy insecurity.
I've always thought that zero interest rates were a bad idea. They have many detrimental effects
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 little over a week ago. Inside the building where some of the country’s biggest business transactions are conceived, the atmosphere was one reserved for great occasions. Dimon received EL PAÍS in the first interview to a Spanish media outlet in the 16 years he has been at the helm of JP Morgan Chase. Like other business leaders such as Larry Fink, chairman of BlackRock, Dimon is more comfortable talking about the big issues affecting the world than balance sheets and income statements.
Q. Risk premiums in southern Europe have risen again. Do you fear that the end of monetary stimulus will cause a new debt crisis in the euro zone?
A. I don’t have an answer to that question. It’s possible, but I hope it doesn’t happen. I think we have all learned lessons from what happened then. However, I insist that we have never experienced such an injection of liquidity and, therefore, we are not capable of measuring its consequences. I understand that central banks want to fight inflation, reducing growth a bit, but not throwing the world into a recession. Unlike the previous crisis, if we now had a recession, governments are much more indebted, and that is a risk, but households and businesses are in a better position now than in 2008.
Q. Do you think that the North-South debate on fiscal and monetary policies can resurface in Europe?
A. That debate is over.
Q. Has the Russian invasion of Ukraine precipitated a new world economic order?
A. War is an opportunity to unite the Western world. We must defend democracy, fight for freedom and free trade. The world changed on February 24, when 3,000 Russian tanks invaded a European country. Such a blow shatters the illusion that all is good and peaceful. The war also puts the spotlight not just on global security, but on energy and food security. I am glad to see Western countries working together to meet these challenges.
Q. Will the energy crisis slow down the transition to renewable sources? Are you in favor of giving more importance to security of supply than to other environmental issues?
A. The war has changed many things, but even without this distorting factor we must be more rational when thinking about this energy transition. There is no alternative to betting on renewable sources. There were many people who thought that closing coal plants and nuclear power plants would solve the problem. However, the world still consumes 100 million barrels of oil per day and a huge amount of gas. The climate threat is real, it is there, and we have to work to combat it. But we need more rational energy policies. The best transition is to replace coal with gas. But now we are seeing how many countries are turning to coal because they cannot afford the high prices of hydrocarbons. It’s happening in Germany, in the Netherlands, in India and in China.
Q. Speaking of China, Beijing’s growth model has more and more cracks, now aggravated by its zero-covid policy. How do you see the economy of the Asian giant?
A. China can do one thing the rest of us can’t: run a country’s economy with a group of people sitting around a table. That gives them a lot of control, but it is true that they will have to lower their growth forecasts. When an economy grows as the Chinese economy has done and becomes more sophisticated, that style of roundtable management stops working. They are going to need a better distribution of capital for the country to continue growing. But that kind of change takes time.
Q. Do you think the Biden Administration is doing things right?
A. I totally disagree with the decision to leave Afghanistan and the way it was carried out. However, I like that his style is civilized and that from the beginning he sought the complicity of his allies. In addition, his relationship with the business world is particularly good.
Q. Better than Trump's?
A. It's hard to make comparisons.
P. Was Brexit a mistake?
A. The British people voted and their decision must be respected. Now, will Brexit have negative economic consequences? Absolutely. Some of these effects, which for a time were masked by Covid, are beginning to emerge. Many things will have to be done to cover up the damage that leaving the EU will cause. For Europe it is always better to have the UK on their side.
Central banks have gone too far. There has been excessive monetary and fiscal stimulation
Dimon spent his childhood in Queens, New York. His grandfather was a Greek immigrant who came to the United States without a penny to his name, as he recalled during his speech on the Coffee with The Greats podcast. Panos Papademetriou changed his name to Panos Dimon and, after trying his hand at various trades, made a career as a broker at Shearson, Hammill & Co., where the father of the current JPMorgan chairman also worked.
After graduating in psychology and economics from Tufts University and getting an MBA at Harvard, Dimon continued the family’s connection to the financial world. His professional godfather was the legendary banker Sandy Weill. Dimon went with him to Baltimore to work at Commercial Credit. This entity, which eventually became Travelers, merged in 1998 with Citicorp in a $70 billion mega-operation dollars that produced Citigroup. He was at the top, but his mentor fired him at the end of the same year, ending a 15-year professional relationship. Weill confessed to The New York Times that Dimon was aiming for the CEO job, but he wasn’t ready to retire just yet.
After a hiatus, Dimon became Bank One’s chief executive in 2000, a role he held until its merger with JPMorgan in 2004. He spent a year as chief operating officer of the resulting entity and on January 1, 2006 was appointed CEO of JPMorgan.
Three years later, the financial crisis caused by subprime loans broke out. Dimon, after reluctantly accepting state aid because he argued he could function without a ventilator, took advantage of the Great Recession to push JPMorgan, then the nation’s third-largest bank, into the top spot. The Federal Reserve needed the solvent firms to take over the weaker ones, and Dimon jumped at the chance. Bear Stearns and Washington Mutual passed into his domains. They were risky operations because no one knew at the time what was on the banks’ balance sheets, but they were bought at knockdown prices. Dimon is the only survivor of the generation of managers who headed the big Wall Street banks when the financial crisis hit.
Q. Do you see any similarities between the crisis the economy is now facing and the situation experienced after the bankruptcy of Lehman Brothers?
A. The situations are completely different. In the financial crisis, the world was massively over-indebted. Not only the banks were leveraged, but also the venture capital funds, the hedge funds... In addition, there were many vehicles off the banks’ balance sheets, mortgages had grown dramatically regardless of the situation of who signed them... Now, on the other hand, the situation is much better. Households have paid off most of their debts and are in generally good financial health. The problem of leverage is, on the other hand, being felt by states.
Q. How’s JPMorgan doing?
A. Very strong. In fact, we have always been strong. We are one of the most stable banks you will find. We have an extraordinarily strong balance sheet, which allows us to help our clients all over the world.
Q. Are the major banks, including JPMorgan, too big to fail in a crisis?
A. Regulators around the world have learned that no one is too big to fail. People should also know that the bankruptcy of a bank ends up being paid by the rest of the banks. One lesson that has remained is that a case like Lehman’s cannot happen again. At this time, Lehman would have been much better capitalized and, in any case, its fall would be much more orderly, not like what happened back then, when the money fled and the system was about to collapse. In addition, with the pandemic it has also become clear that there are many companies, not just banks, that under certain extreme circumstances need public help to survive.
P. What do you think about fintech? Are they rivals or allies?
A. Both. Twenty years ago you had to compete with rival banks wherever you opened business. Now, in addition to those banks, you have to fight with the shadow banks, the fintech and even the technological giants. We are partners with some of them, but we compete against all of them. There is going to be a very tough battle and not everyone will survive it. A lot of people will suffer as the match heats up. JPMorgan will do well, but not everyone will do as well.
The United States should raise the minimum wage, something that has hardly been done in the last 20 years
Throughout his tenure, Dimon has turned JPMorgan into a money-making machine. And he has also achieved this by diversifying the business. With a presence in 60 countries and more than 240,000 employees, its main activity in terms of revenue continues to be investment banking (mergers, acquisitions, IPOs...), but it also does corporate and retail commercial banking (in the US) , it is a powerful asset manager and last year it launched its digital bank in Europe.
In the last 16 years, the bank’s shares have increased in value by 265% and its capitalization now amounts to $323.7 billion. In 2021 the lender made $121,6 billion, including a net profit of $48,3 billion. Such a history of services has had its corresponding compensation. Last year alone, Dimon earned $34.5 million (most of it in bank stock) and Forbes magazine estimates his personal fortune at $1.5 billion.
Q. One of the consequences of the pandemic has been the notable increase in inequality in the world. Are you worried?
A. Yes. It’s not good to have such an unequal society. There are many things that could be done to correct this situation. In the US, for example, the minimum wage should be raised, something that has barely been done in 20 years. In addition, schools should give children skills for success at the workplace and higher earnings. Education, a good health system and good infrastructure are key to combating inequality.
Q. The stock markets have sustained serious losses in recent months. Have they hit the bottom?
A. I don’t know, they could drop even more.
Q. Were some valuations unhealthy, especially in the tech sector?
A. Yes, but not in all cases. Obviously, there were some stocks that were complete bubbles.
Q. Because of the free money?
A. Yes, because of zero rates and also because of simple speculation. Throughout my life I have always seen speculation. It is in human nature. I have not visited a country where there is no speculation. In car races, in sports betting, in the casino... and on the stock market. However, in recent years that speculation has reached levels that are too high. People need to be more careful and think twice. Many people enter the market without really knowing what they are buying.
Q. Speaking of speculation, you have always been very skeptical about crypto assets. Why?
A. Well, I think skeptical is too soft a definition. I would never invest in crypto. In this matter, it is necessary to separate the technology, the blockchain, from cryptocurrencies as a pure investment asset. We are one of the largest users of blockchain in the world because it allows us to process millions of data in real time. However, I have never understood the value of cryptocurrencies as investment assets. They have become fashionable, but deep down I think they hide a system that could be very similar to Ponzi schemes. That does not mean that I do not defend the right of people to invest in them. I also don’t think people should smoke, but I defend their right to do so.
There is no alternative to renewables, but more rational energy policies are needed
Dimon, married and a father of three, has had several professional and health scares. Among the first, the most serious incident took place in 2012, when all internal controls failed and one of the bank’s traders caused the bank losses of more than $5 billion due to very high-risk operations with derivatives. That case became known as the “London whale” and Dimon had to apologize publicly. As for his health, in 2014 he informed his employees and the market that he had been diagnosed with throat cancer. “I feel good and I will inform you if my health status changes,” he explained in a letter. After overcoming the cancer, in 2020 he had to undergo emergency surgery for a serious heart problem.
Q. Have you thought about retiring?
A. I love my job, I love what I do. I think I’ll be around for a while longer. Obviously, in the end it is the board that has the last word. I am just another employee and if the board wants to replace me tomorrow… In any case, we have built a great team and have a solid succession plan.
Q. Have your health problems made you change in any way?
A. From a professional point of view, nothing has changed. There are people who think that when something like this happens to you, you will stop and dedicate yourself to smelling the flowers. But I like what I do, I like to help people from my position. Obviously, I continue to enjoy my family and hobbies such as music, art and history. What is certain is that when you overcome an illness, you are more aware that you are mortal.