JP Morgan CEO Claims Banks Won’t Survive Next Crisis

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( — April 9, 2015)  New York, NY, — In his annual letter to stakeholders, Jamie Dimon, chief executive of JPMorgan Chase warns that the ability of JPMorgan and other banks to act as shock absorbers had been dramatically hindered by new capital and liquidity rules, Financial Times reported.

During the 2008 crisis JP Morgan managed to attract $100bn of deposits from those shifting from a weaker bank to more reliable one, thinking that would better protect their money. However, when another crisis occurs, there would be no significant deposits because “there may be a shortage of all forms of good collateral,” Mr. Dimon wrote in the shareholder letter.

He also said banks might be reluctant to underwrite stock offerings to help other banks to endure the crisis. Further on, Mr Dimon added that non-bank lenders, which have taken over parts of the market previously occupied by banks, would “not continue rolling over loans or extending new credit except at exorbitant prices that take advantage of the crisis situation,” FT reported.

He did note that “at some point”, hedge funds would “step in and buy assets”, as could the government. Mr. Dimon repeated his complaint that different agencies were ganging up on banks, which were “now frequently paying penalties to five or six different regulators (both domestic and international) on exactly the same issue”.

According to FT, JPMorgan faced numerous unpleasant encounters with regulators last year after mis-selling mortgage-backed securities, the “London whale” trading fiasco, and allegations of manipulating foreign exchange markets, which reflected on JPM stocks.

“Our stock performance has not been particularly good in the last five years,” Mr. Dimon wrote, blaming uncertainty over legal and regulatory costs.

“It is understandable that people would pay less for our earnings than they otherwise might pay,” Mr. Dimon said in a letter adding that “when Mr. Market gets very moody and depressed,” he think it might be a good time to buy back stock.

JPMorgan was “going to do a better job covering family and private offices”, Mr. Dimon said, referring to bank’s tapping into the investment dollars of the super wealthy. He also announced that JPM is going to be “very aggressive” in expanding its payments business.