Day one of the Institute of International Finance (IIF) annual meeting, and once again we were treated – hopefully for the last time – to a tour of the world’s bookshelves. The IIF is doing a slick job online, but there’s no getting away from the disruption to normal service.
Dimon at the IIF
Virtual delivery spoiled other things, too. US bank CEOs have flitted in and out of previous instalments of the IIF, but one fixture has always been Jamie Dimon, chief executive and chairman of JPMorgan, sharing a stage with one or two of his frenemies, usually including James Gorman, his opposite number at Morgan Stanley.
This time around, with the one-on-one conversations taking place back-to-back and with no Gorman on the schedule, there was no opportunity for the usual bantz. Gorman tends to offer a mercifully laconic antidote to Dimon’s breathless barrage, so this year’s viewers had to cope with 25 minutes of undiluted Jamie. Nurse, another diazepam please!
At least the undercard had been the more sober John Dugan, chairman of Citi, sporting a heavyweight bookshelf in his backdrop, but also doing his bit to bring ornate radiator covers back into fashion. And following Jamie – not, perhaps, for the first time – would be Barclays chief executive Jes Staley.
Old favourites
Luxuriating in an open-necked casual shirt, Dimon wasn’t doing the bookshelves thing. In fact, it wasn’t apparent that he owned any furniture at all since he seemed to be dialling in from a tight corridor. They say that customers move more quickly through narrow supermarket aisles, and Dimon was certainly in his traditional hurry to get through everything he had to say.
He talks at more than one gigabit per second, so it was hardly surprising that his broadband couldn’t always keep up. It will surely be some time before technology can match his bandwidth with zero latency.
But the old favourites still came through loud and clear. The global economy? Great shape. Shortages amid supply chain disruption? “I should never make a forecast, but this will not be an issue next year at all.”
Dimon’s faith in people’s resilience remains unmatched: look at the strength of the consumer! So, what if they can’t buy cars? They are doing home improvements instead. “They will buy other stuff.” Problems with supply chains are confusing people when it comes to inventory, but it will all sort itself out. It’s just an adjustment.
Retail loan growth might be soft, but “loans are an outcome”. Usually when loans are down it’s because folk are cutting back, but that wasn’t what was happening here at all. “People are paying down loans because they have got so much money.” And anyway, mid-market corporate loans were up as a percentage of all revolvers.
And hadn’t banks done ever so well? Yes, they had been resilient, but even Dimon avoided the phrase of the day that earlier speakers had been less able to resist: part of the solution. “Banks are always prepared for bad stuff,” he said. “You just never know what the bad stuff is going to be.” One day it might be cyber: that’s the one Dimon thinks has the potential to shock the system in ways we don’t understand.
For anyone playing Dimon Buzzword Bingo, this was the moment…
Lessons? He had a few, and not too few to mention. Regulations, G-Sifi rules, SLR, LCR, “all these things” converged to make matters much worse in March 2020. The notion that all these things had been relaxed in the crisis – at least for the big banks – was just not true.
Except… didn’t the Fed at least exclude Treasuries and Fed deposits from SLR calculations in April 2020?
“This was an important step at the time; banks’ leverage exposure had been increasing rapidly as businesses and customers rushed into deposits and the FOMC [Federal Open Market Committee] had begun to rapidly increase the size of its balance sheet, causing a surge in bank reserves in the process. With the exemption in place, this lifted banks’ balance-sheets constraints, allowing them to continue to hold Treasuries and provide liquidity to the market.”
Well, that’s what one note said in March 2021. But that was from some outfit called JPMorgan Asset Management, and what do they know?
In any case, the broader problem, as Dimon has so patiently explained so many times, was regulatory constraints that seem to take effect without regard to risk. These things need to be recalibrated. Then a surprising shout out to “all the reporters on the line”: you should be finding out which measures worked, and which ones didn’t.
OK Jamie, we’ll get onto it.
Debt got the brush-off. “Debt is an issue, but it’s not today’s issue,” he said. “If you are a policymaker, growth, growth, growth, growth, growth is what matters the most.” That was why governments should focus on the growth agenda.
It would be good to fix the US’s debt-to-GDP ratio of 105% sooner rather than later, but right now the key thing was to get healthy growth. That would make it easier to deal with the debt problem “and stuff like that”.
After all, debt-to-GDP stood at 120% after the Second World War, noted Dimon, before dropping to 60% during Eisenhower’s presidency. All it takes is the proper policies.
For anyone playing Dimon Buzzword Bingo, this was the moment. What might those policies be?
There it was, top of the list: infrastructure. He’s as reliable as Old Faithful, is Jamie. He didn’t get stuck into shoddy airports this year, but he certainly doesn’t hold out any hope of the current administration building as many roads as Eisenhower, the father of the interstate. What else? Reforms to education, taxation (“we should be raising taxes on the wealthy, not on capital formation”), regulations (“crippling infrastructure and small business”), education again.
What needed to go were the “selfish” tax breaks that some bodies secure for themselves whenever they get involved with public policy. “All these private interest groups, they never ask what’s good for the country, just what’s good for their membership. That has become a disease… It’s sickening.
“I may write an oped about this soon.”
From China to coal to crypto
Even in 25 minutes, Dimon can roam mighty wide. China-US tension doesn’t especially worry him. War in Taiwan would be terrible for China, let alone Taiwan. There should be less fretting in the US about China, which is in a tough neighbourhood and has seen border skirmishes with three nations already. “We haven’t had a war with a neighbour since 1848.”
China’s GDP per person is still one quarter of the US’s, he said, and would still be half the US’s in 15 years. And the US has the energy it needs. “I think Americans should take a step back here. America is the shining city on the hill.”
And China and the US have common interests in areas such as nuclear proliferation and climate change. And on that subject, it’s not about hugging trees – it’s about thoughtful transition. People are prepared emotionally for it, in that they believe it is real. And when Dimon talks to industry folk, it’s clear that they are taking it seriously.
But it’s not about simply closing coal and nuclear plants. That’s what the do-gooders need to understand. Otherwise, companies will just sell their dirty assets to private equity.
Dimon’s not sure that will be understood any time soon. “My hopes aren’t unbelievably high.”
As is traditional, IIF president Tim Adams poked Dimon with the cryptocurrency stick, now that JPMorgan not only has its own digital currency but this year opened up access to crypto funds for its wealth clients. But Jamie is mellowing these days. He even sounds reasonable.
You have to separate the Jamie Dimon from the JPMorgan, he says. Blockchains and stablecoins are real, although anyone who doesn’t think that governments will regulate crypto for anti-money-laundering reasons is crazy.
But. “I personally think that bitcoin is worthless. I don’t think you should smoke cigarettes either. Our clients are adults, they disagree. So, if they want to have access, we can’t custody it, but we can give them clean access.”
Time’s up. He signs off with a wave.
“Keep the faith, folks.”
