By Pete Schroeder
WASHINGTON (Reuters) – JPMorgan Chase & Co (NYSE:) has begun preparing for the possibility of the United States hitting its debt limit, Chief Executive Jamie Dimon told Reuters on Tuesday, adding he nevertheless expected policymakers to find a solution to avoid that “potentially catastrophic” event.
Dimon stated that the nation’s largest lender had begun planning for the effects of a U.S. default on its repo, money markets, clients contracts, capital ratios and how agencies might react.
Dimon said, “This is about the third time that we’ve been forced to do this. It is potentially catastrophic.”
It is fixed every time it comes up. But we shouldn’t even come close to fixing this problem. It is all wrong. One day, we will have a bipartisan bill that would eliminate the debt ceiling. He said that it was all politics.
Democrats in Congress are scrambling for a solution to the $28.4 billion borrowing cap. This is before the Treasury Department has exhausted all options to pay the country’s debt. Janet Yellen, Treasury Secretary has stated that the Treasury would likely exhaust all extraordinary measures before Oct. 18.
Democrats had intended to prevent a shutdown of the government and suspend the federal debt limit with one vote. Republicans blocked them Monday in Senate. They said that the two issues should be handled separately.
Because of ongoing partisanpolarization in the U.S., fiscal brinkmanship is a common feature of American politics. In 2011, and 2017, debt ceiling agreements were at the final straw.
Dimon explained that as part its preparation, the bank went through all its client contracts. It is an intensive process.
You have to review the contracts in order to be able predict what it will look like. According to him, $100 million was spent on preparations for the event last year.
Dimon was speaking to Reuters before a ribbon-cutting ceremony at the bank’s new branch in southeast Washington, part of JPMorgan’s effort to promote racial equity by boosting its presence in underserved communities.
Since 2019, this branch marks the 11th opening of JPMorgan branches in New York, Detroit and Los Angeles. In addition to traditional services, branches also offer support for local small businesses by partnering with local organizations.
Dimon stated, “It’s different from a typical bank branch. But we want the place to feel welcoming and attractive.”
JPMorgan committed $30 billion to racial equity over five-years in response the nationwide Black Lives Matter protests. JPMorgan has financed 40,000 loans and 15,000 small-business loans in Black and Latino communities.
This investment demonstrates how big corporations are becoming more aware of social, environmental, and governance issues. Investors pressure them to do so.
Biden’s administration has stated that banks branch “deserts,” which are unable to access credit, continue to perpetuate racism.
Biden’s acting Comptroller, Michael Hsu, stated this month that he would remove contentious amendments to fair lending laws made under Trump’s leadership and conduct a review of other regulators.
Dimon stated that rules surrounding the Community Reinvestment Act are needed to keep pace with technologically driven changes in banking.
He said that the CRA is complex, slow, late and difficult to measure. CRA assessments must be done in real-time, not a retro review once every few years.
Is everything captured? There is no. It is real time. It is not. No. It is.