Jamie Dimon says US default could be ‘potentially catastrophic’

JPMorgan Chase has begun making ready for the potential of the US hitting its debt restrict, Chief Government Jamie Dimon advised Reuters on Tuesday, including he nonetheless anticipated policymakers to discover a resolution to keep away from that “potentially catastrophic” occasion.

The nation’s largest lender has begun scenario-planning for a way a possible US credit score default would have an effect on the repo and cash markets, shopper contracts, its capital ratios, and the way rankings businesses would react, Dimon stated in an interview.

“This is like the third time we’ve had to do this — it is a potentially catastrophic event,” he stated.

“Every single time this comes up, it gets fixed, but we should never even get this close. I just think this whole thing is mistaken and one day we should just have a bipartisan bill and get rid of the debt ceiling. It’s all politics,” he added.

Congressional Democrats are scrambling to discover a strategy to elevate the federal government’s $28.4-trillion borrowing cap earlier than the Treasury Division runs out of the way to service the nation’s debt. Treasury Secretary Janet Yellen has stated the Treasury will possible exhaust extraordinary measures by Oct. 18.

Democrats had hoped to keep away from a partial authorities shutdown and to droop the federal debt ceiling with a single vote. However they have been blocked on Monday within the Senate by Republicans, who stated the 2 issues ought to be handled individually.

JPMorgan sign on bank building
JPMorgan is the nation’s largest lender.
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Fiscal brinkmanship has turn into an everyday characteristic of US politics over the previous decade because of ongoing partisan polarization, with debt ceiling offers coming all the way down to the wire in 2011 and 2017.

Dimon stated as a part of its preparation the financial institution was combing by its shopper contracts, a resource-intensive course of.

“You’ve got to check the contracts to try to predict it out … If I remember correctly, the last time we got prepared for this, it cost us $100 million,” he stated.

Dimon was chatting with Reuters earlier than a ribbon-cutting ceremony on the financial institution’s new department in southeast Washington, a part of JPMorgan’s effort to promote racial equity by boosting its presence in underserved communities


The department is the eleventh of its type JPMorgan has opened in cities together with New York, Detroit, Los Angeles and Chicago, since 2019. In addition to offering conventional companies, the branches work with local people teams to offer free abilities coaching and different small-business help.

“It’s not a traditional bank branch, we want it to be very welcoming, we want it to be attractive,” stated Dimon.

Jamie Dimon speaks at a microphone
Involved about native communities in addition to the nationwide image, Dimon has opened banks that present free native job-skills coaching.
The Washington Put up through Getty Im

Following nationwide “Black Lives Matter” protests final 12 months, JPMorgan pledged $30 billion over 5 years to advance racial fairness. That features originating 40,000 new mortgages and 15,000 small enterprise loans to Black and Latino communities.

The funding underscores how giant companies are more and more embracing social, environmental and governance or ESG issues amid strain from traders.

Addressing racial fairness can also be a precedence for President Joe Biden’s administration which has stated financial institution department “deserts” perpetuate inequality by decreasing entry to credit score.

Biden’s appearing Comptroller of the Forex Michael Hsu this month stated he would scrap contentious adjustments to honest lending legal guidelines led by his Trump-appointed predecessor and begin a recent evaluation with different banking regulators.

Guidelines across the Community Reinvestment Act, the place regulators rating banks on how nicely they serve poor communities, must be frequently modernized to account for technology-driven adjustments in banking, stated Dimon, who stated the general regulation is nice for the nation.

“It is very complicated, very slow, very late, very hard to measure,” he stated, including CRA assessments must also be carried out in actual time, versus a retrospective evaluation each few years.

“Does it actually capture everything? No. Is it real time? No. Is it politicized? Absolutely.” 

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