Stock Groups

JPMorgan’s Jamie Dimon cautions a U.S. default would be ‘potentially catastrophic’


Jamie Dimon, CEO of JPMorgan Chase speaks to the Economic Club of New York in New York, January 16, 2019.

Reuters is now preparing for the United States to reach its debt limit. Chief Executive Jamie Dimon said Tuesday to Reuters that a U.S. default would be “potentially disastrous”.| Reuters

JPMorgan Chase 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, the country’s biggest lender, said that he has started scenario planning to see how an eventual U.S. credit default might affect its repo, money markets, clients contracts, capital ratios and how rating agencies will react.

Banner 3

Dimon said, “This is about the third time that we’ve been forced to do this. It is potentially catastrophic.”

Every time the issue comes up it is resolved, but this should not be allowed to happen. 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.

The Congressional Democrats are trying to figure out a way for the Treasury Department to increase the $28.4 trillion borrowing limit before it runs out of options to service America’s debt. Janet Yellen (Treasury Secretary) has indicated that Treasury will probably exhaust any extraordinary measures prior to Oct. 18. (Full Story)

Democrats had hoped to avoid a partial government shutdown and to suspend the federal debt ceiling with a single vote. Republicans opposed the move in the Senate, saying that they should deal with the issues separately.

Because of ongoing partisanpolarization in the U.S., fiscal brinkmanship is a common feature of American politics. Debt ceiling agreements came down to the wire between 2011 and 2017.

Dimon explained that as part its preparation, the bank went through all its client contracts. It is an intensive process.

To be able to forecast it, you have to look at the contracts. According to him, $100 million was spent on preparations for the event last time.

Racial equity

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.

This branch, which is now the eleventh in its type, was opened by JPMorgan since 2019 in major cities like New York City, Detroit, Los Angeles, and Chicago. In addition to traditional services, branches also offer support for local small-businesses by partnering with local organizations.

Dimon stated, “It’s not an ordinary bank branch. But we want it be welcoming and attractive.”

JPMorgan has pledged $30B over the next five years in response to nationwide protests calling for racial equality. This includes the origination of 40,000 mortgages, and 15,000 loans for small businesses to Black and Latino communities.

The investor’s investment highlights how corporations, regardless of their size and financial resources are increasingly taking on social, environment, governance (ESG) issues.

The administration of President Joe Biden has made addressing racial equality a top priority. He stated that bank branches “deserts”, which reduce credit access, perpetuate inequalities and increase inequality.

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 said that the law’s rules around the Community Reinvestment Act (where regulators rate banks on their ability to serve low-income communities) need to be updated regularly to reflect technological changes.

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.

It does it really capture all? There is no. Does it really exist? It is not. No. Yes.