New York () — The banking debacle that caused the recent collapse of Silicon Valley Bank and Signature Bank has increased the odds of a US recession, JPMorgan Chase CEO Jamie Dimon told ‘s Poppy Harlow in an exclusive interview on Thursday. .
In his first interview since the collapse of the SVB, Dimon said that while the banking system is strong and sound, the recent turmoil around the financial system is “another weight in the balance” towards recession.
“We’re seeing people reduce lending a little bit, cut back a little bit and retire a little bit.” Although banking chaos won’t “necessarily force a recession,” she said, “this is recessionary.”
Storms are coming for the economy, Dimon said. The Federal Reserve’s current tightening regime, plus longer lasting higher inflation and Russia’s war on Ukraine are the biggest risks he sees for the economy. However, Dimon was hopeful about the strength of human capital in the United States.
JPMorgan Chase CEO Jamie Dimon speaks during an interview with ‘s Poppy Harlow in Atlanta on April 6, 2023. Credit: Austin Steele/
“I’m a full-throated, free-market, free-enterprise capitalist,” he said. “I think we should applaud free enterprise and belt out the benefits while fixing the negatives, instead of denigrating the whole thing.”
Dimon sat down with Harlow after the opening of the Chase Community Branch in Atlanta. This is the 16th Chase branch built in collaboration with local communities, hosting free events, financial health workshops and training courses for the local population. Community branches also offer small business storefronts.
community banking
These branches, Dimon said, are not charity in any form. They are good for business. “We have to bring money to local communities,” he said. Part of it is as simple as opening a savings account.
“Many of us had fathers and mothers who led us to open our first accounts,” he explains. “And then you see your money go from $84.75 to $85.17. It was like magic, that interest.”
Dimon said that’s part of what he hopes to achieve with his community chapters.
“We don’t want people to be afraid to walk into a branch. Come as you are, bring your kids and learn,” he said.
As part of the initiative, Chase hired several community managers for the express purpose of encouraging those who are uncomfortable in a banking environment to come in and learn about their finances.
This role, he said, is essential and is often played by mid-size regional banks, which is why the recent collapse of SVB and Signature and the possibility of contagion was so distressing.
Collapse of the banking sector
Dimon said he’s not sure the US economy is over most of the banking meltdown yet.
“I hope it gets resolved, you know, shortly,” he said.
Dimon said he doesn’t know if more banks will fail this year, but he was quick to point out that this turmoil is nothing like the financial crisis of 2008. In that year, he said, “it was hundreds of institutions around the world with leverage excessive. We don’t have that.”
We also don’t have big problems in our mortgage markets, he added. “This is nothing like that. And the American public shouldn’t think that.”
Still, Dimon said, it’s okay to let some banks go under. “Failure is okay,” he said. “You just don’t want this domino effect.”
Dimon warned that regional banks, and US consumers, should “be prepared for rates [de interés] higher for longer. I don’t know if it’s going to happen, but be prepared for that tide.”
The chances are high, he said, that rates will stay higher for longer, and banks that invest in Treasuries need to be prepared for that possibility.
Debt ceiling concern
Lawmakers are increasingly reluctant to raise the debt ceiling, the self-imposed borrowing limit of $31.38 trillion they reached in January. Without new legislation, a US government default is likely in the summer or early September, according to various analyses.
But talks between House Republicans and the White House remain deadlocked.
Dimon, who has worked closely with the White House and Congress this year on various economic issues, told Harlow there would be no default under his tenure. “Not while I’m alive. We’re going to keep fighting,” he said.
Dimon believes that Congress will reach a resolution on the debt ceiling in the coming months. Credit: Austin Steele/
Dimon said he believes Congress will come to a resolution on the debt ceiling in the coming months, but there could be more economic pain before a deal is reached.
“You’ll feel the pain before it happens,” he said of the debt ceiling breach. As a possible default approaches, “you will see it in the markets and that will scare people away,” she said.
Still, “when I go to Washington, most people know how serious this is and want it resolved.”
Trump’s 2024 campaign
Dimon served on former President Donald Trump’s business council, and while he doesn’t think Trump’s impeachment and the criminal charges the former president faces this week will affect the economy, he does believe Trump has enacted some good economic policies.
“There are policies that he made that are good,” Dimon told Harlow. “I think tax reform put $1 trillion back into America. The black community had the lowest unemployment rate ever in its last year because it grew the economy.”
Dimon also commented on another possible 2024 Republican presidential candidate, Florida Gov. Ron DeSantis.
Last year, Florida passed a law to limit discussion of LGBTQ issues in Florida schools, a bill opponents have referred to as the “Don’t Say Gay” law. Disney opposed the law, and the state of Florida has since taken steps to strip Disney of some of the powers it had over the land that includes and surrounds Disney World.
Those moves led Disney CEO Bob Iger to call DeSantis’s actions, and the law, “anti-business.”
Dimon said Thursday that “we actively and aggressively support the LGBT community,” confirming that he will continue to do so despite DeSantis.
