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Interview - JPMorgan CEO Jamie Dimon on Regulation, Volcker Rule; Some of the Global Regulations Are “Un-American”

January 24, 2012 | About:
Holly LaFon

FOX Business

2 followers
FOX Business Network (FBN) Senior Correspondent Charlie Gasparino spoke exclusively with JPMorgan (JPM) CEO Jamie Dimon from the JPMorgan’s New York headquarters about the health of the company, financial regulation, and the United States economy. Dimon said he hopes to continue to run JPMorgan for “three, five years or more.” Dimon said he “was in favor of the Financial Services Oversight Committee” because prior to the establishment of that organization there has been “no one person in charge.” Dimon went on to say that “Financial Oversight Committee wasn't given enough teeth” and he is in favor of regulation because if “you want a recovery in the global economy, the regulatory policy and government policy have to work together.”

Excerpts from the report are below.

On how long he plans to run JPMorgan:

“Hopefully many years. I serve at the pleasure of the board who can fire me tomorrow, but my intent would be to be here for three, five years or more.”

On what he plans to do after JPMorgan:

“I've been running big companies for a long time. I'm not going to run another big company. So it will probably be a bunch of stuff between teaching and investing and doing deals with friends and getting involved in maybe some boards.”

On who is spearheading the financial regulatory overhaul:

“There's been no one in charge. There's no one person in charge. One of the regulations I was in favor of is the Financial Services Oversight Committee, because one of the problems that we had is that we didn't have one place, so we've got a lot of things unregulated or improperly regulated; gaps in the system. But the Financial Oversight Committee wasn't given enough teeth. So here I'm complaining that that particular role should be given more teeth, not less teeth. Put someone in charge and say, no, we're not going to do A, B and C, because that's bad for the system. We have 10 or 20 major regulators now. A lot of these regulations, all they're looking at is what protects their own entity. They're not looking across the whole system anymore.”

On his criticism of government regulation:

“I haven’t been that critical on regulation. I have agreed with a lot of it. If you want a recovery in the global economy, the regulatory policy and government policy have to work together. A lot of my comments about Basel III and Dodd Frank are not because they are going to damage JPMorgan, it’s because they are not rational policy, they are not coordinated, making things so complex it’s worse for the system. It will cause unintended consequences down the road. What I worry about is someone is going to write the book 20 years from now about all the things we did during the crisis to make it worse, not better.”

On why Treasury Secretary Timothy Geithner did not consider his opposition to regulation:

“I don't know. Tim knows exactly what I think. But if you speak to a lot of people, they don't necessarily disagree. There are people putting their favorite pet peeve in there that it just became very convoluted. Hopefully, some of this will be fixed. And again, I'm saying, JPMorgan will be fine. I think this action could hurt medium sized and smaller banks more, which I'm not in favor of.”

On his prediction for the GDP growth in 2012:

“It could be 3 or 4 [percent].”

On the validity of the Volcker Rule:

“Proprietary trading had very little to do with the financial crisis or the root cause, yet the Volcker Rule, if you interpret it, you can't even make markets for your clients. Part of the Volcker Rule I agreed with, which is no prop trading. But market making is an essential function. And the public should recognize that we have the widest, the deepest, the most transparent capital markets in the world. And part of that is because we have enormous market making. If the rules were written as they originally came out; I suspect they'll be changed, it would really make it hard to be a market maker in the United States.”

On his statement that some of the global regulations are “un-American”:

“Some of the rules in Basel III are directly aimed at just American banks. They don't have those kind of assets overseas. So that's number one. Number two, how they do risk rate assets, it's quite clear that in certain parts of the world, they're much more aggressive in that. So that is clearly against American banks. Some of the things that were done weren't done by European regulators, they were done by us. We can -- we don't -- we can't use preferred stock. That was taken out of the rules here for capital. They can use preferred stock overseas, which is a cheap form of capital. Volcker, when that was originally done, I remember Paul Volcker saying everyone is going to do it. Well, you know what? The rest of the world said no way. So that applies just to us. American companies, wherever they do business, have to do it under different requirements than overseas. Then that business will simply move to Deutsche Bank.”

On the overall health of the United States economy:

“I think America has a mild recovery, but it is broad-based and it could be strengthening as we speak. Once household formation goes up, which I think will follow jobs, we're going to have to start building more homes. We go back to building 1.3 million a year, which our economists think we're going to have to start building soon. It could be six months, nine months, 12 months, 18 months. That alone adds two or three million jobs. So that is what I would call the beginning of a self-sustaining recovery. More jobs, more incomes, more jobs, more homes, more people employed, more kids moving out of their parents' homes.”

On President Obama:

“It's fair to say that he entered probably one of the most complex economies ever. And for a while, I think people did a very good job. I'm not going to talk about President Obama. I think for the last 18 months, between Congress, Democrats, Republicans, regulators, overseas regulators, it hasn't been coordinated in a way that's going to lead to recovery. Now, you can blame that on the president. You can blame it on the Democrats. You can blame it on the Republicans. I personally don't care. This has got nothing to do with Democrats and Republicans to me. I believe there are policy solutions and we don't have all the people in the room working on what those solutions are. What we have is a lot of people just yelling at each other.”

On his access to President Obama and whether his relationship with the president has “cooled off” at all:

“First of all, whoever was in the White House, a Republican or a Democrat, I would work with them, take their calls and try to help. There has been no cooling on my part, maybe on his part, but you would have to ask them that. Number two is we'd like to be part of the solutions, if we're asked. I don't believe there's been a lot of collaboration. One of my complaints has been I think people should cooperate more, Democrats, Republicans and practitioners. That would be a beneficial thing. I don't blame that on just the president. I look at the whole picture. It takes two to compromise.”

On the Occupy Wall Street movement:

“There are parts I agree with and there are parts I don't. It is fair for the average American to say that the major institutions of America let me down. That's true. And it is fair, generically, to say, well, that's predominantly Wall Street and Washington. I think once you go beyond that and say all politicians, all banks, all bankers, that's terrible. I don't accept that. I know I'll never win this argument. But it's just not accurate. It's become a less equitable society. I don't think that's a good thing. It's becoming more equitable now because, you know, the income of the top 1 percent is coming down dramatically but I think we should have a conversation, what do you mean by how you're going to fix that? So we look for solutions. We've hired a lot of people. We're lending to small businesses, we're lending mortgages, we're lending to corporations. That's what we're trying to do to fix the problem. So I understand the generic arguments, but to me, I prefer to look for real solutions. I've disagreed right from the beginning that blanket blame of all banks, we're all bad guys or whatever. I don't like that. I think that's just a form of discrimination that should be stopped. It doesn't lead to productive conversation. Not everyone was equally bad. Not everyone was, in fact, bad. I think it denigrates America.”

On whether JPMorgan is one of Mitt Romney's largest campaign contributors:

“Not JPMorgan. JPMorgan employees. I was not at a Romney fundraiser. I had a cup of coffee with Mitt Romney. I would have a cup of coffee with any candidate. That's what I do. And someone wrote that was a fundraiser. I was not. We think it's OK for our people to be involved in the political process.”

On whether he will publically endorse someone for president:

“I don't. I'm on the New York Fed Board. I'm not allowed to endorse or fundraise. I've been a Democrat my whole life and now you see I'm barley a Democrat, because I think the left side of the party is really destructive. But I think the right side of the Republicans are equally destructive. So I'm more in the middle. I haven't decided who I'm going to vote for.”

On whether the fact that shares of JPMorgan fell 22 percent this year worries him:

“Surprisingly, not really. It kind of hurts a little bit to work this hard for so long and the stock has gone down and not up. On the other hand, we did have record earnings. But if you build a company, serve clients, open branches, hire banker assistants, people marketing, earn a fair profit, do great stuff for the communities you're in, the stock will eventually reflect that. So we keep our eye on the ball and we build the company.”

On whether he would leave JPMorgan next year if the stock price is $160:

“No. I would not leave or not leave because of the stock price.”



On whether he would ever like to be Treasury Secretary:
“Unlikely. I don’t think I'm suited for it.”

On executive pay:

“It's about the same as last year.”

On whether executive pay remaining the same is enough to “appease people”:

“I don't think the job of JPMorgan is to appease anybody. I'm not in the appeasement business. We should do the right thing for the right reason. When we did badly, my pay was zero. When we do better, the pay goes up. The pay is set by the board. It's not set by me. We've had very good policies here. Remember, JPMorgan never lost money. It didn't need TARP. It made $7 billion in the worst of all years. It never lost money in a quarter. We were asked to take TARP because it was in the interests of the United States of America. We were asked by the secretary of Treasury. I think he was right.”

On how taking TARP money gave the company “a black mark” but helped the country as a whole:

“I didn't anticipate that. I think Hank Paulson, with Tim Geithner and Ben Bernanke, saved the system. And I think they took some very bold and dramatic action that they had the guts and brains to take at the precise point in time. It was a tsunami of stuff. And they realized that they had to stop it from sinking. And, you know, Warren Buffet called it Pearl Harbor and they took the action. It had unintended consequences but I didn't realize that one of them would be complete vilification of all banks and complete vilification of all the people that took TARP. I do think it helped stave off a far worse situation. I think we have to end this too big to fail. We need bankruptcy for big companies. We need bankruptcy that you, the taxpayer, are absolutely convicted that you will never pay and that company could be dismembered.”

On whether Dodd-Frank has done enough to end “too big to fail”:

“No. I think it could be ended with some of the requirements in Dodd-Frank. The rules still have to be written a little bit. And we need to make sure that people understand how resolution takes place and bankruptcy and unwinding these firms. A lot of the regulators, not me, are saying we are not sure that we have a proper way to do the detailed dismembering of the firm in a way that it doesn't damage anybody.”

On the universal banking model and whether he would agree they are “not lending like they used to lend” as a result:

“No, we're not. Our small business loans are 50 percent this year and back to where it was three years ago. Fifty. Little market lending is up 18 percent, one of the biggest increases I've ever seen. I think community banks are wonderful. Regional banks are wonderful. But we do things that they can't. So they do some things we can't. So in our side of the business, huge economies of scale. And the public doesn't know this, either, by the way. We have the least consolidated banking system in the world. The problems had nothing to do with the size of banks relative to the economy.”

On Bank of America (BAC):

“I want Bank of America to become healthy and grow and do a great job for this country and the world. That's what I want. It doesn't help us at all if you see anyone struggling. And I think they've done a lot of work to get there, by the way.”

Detailed Transcript:


CHARLIE GASPARINO, HOST: Jamie, thanks for joining us.

We joked before that I knew you when you didn't have gray hair --

JAMIE DIMON, CEO, JPMORGAN CHASE: Right.

GASPARINO: -- and I didn't have gray hair.

DIMON: That's correct. Yes.

GASPARINO: So it's been a while. And thanks for doing this for Fox Business.

DIMON: Right.

GASPARINO: Let's get right to it. You're leaving for Davos tonight?

DIMON: Yes.

GASPARINO: You've been big, critical -- big and critical on regulation. You're going to have all the regulators in one place --

DIMON: Right.

GASPARINO: -- kind of one stop shopping.

DIMON: Right.

GASPARINO: Are you going to press your case there?

DIMON: A little bit. So, first of all, you go to Davos to meet a lot of clients and learn a little bit from people. And I'm not -- I haven't been that critical of regulation. I've agreed with a lot of it.

GASPARINO: Right.

DIMON: But I think that now it's working at cross purposes. So if you want a recovery in the global economy, I think that regulatory policy and government policy should work together. They are working at cross purposes, particularly in Europe today.

GASPARINO: So between Basel III and Dodd-Frank, which is worse for the American banks?

DIMON: Look, I -- JPMorgan is doing fine. A lot of my comments about Basel III and Dodd-Frank aren't because it's going to damage JPMorgan. It's because some of these things are not rational policy. They're not coordinated. The two con -- I think the -- they're making it so much more complex I think it's going to be worse to the system. I now think that, you know, the G-6 that I've complained about, not because I'm against high capital standards, it's too much.

GASPARINO: Right.

DIMON: And it's completely contrived.

GASPARINO: Right.

DIMON: And it will cause adverse consequences down -- unintended consequences down the road.

So with that -- what I'm worried about is that, you know, someone is going to write the book -- I say it's Ben Bernanke, Jr., 10 to 20 years from now about all the things we did in the crisis that actually made it worse, not better.

GASPARINO: Where --

DIMON: Ac -- accidentally. I'm not -- I don't think it was intended, but accidentally.

GASPARINO: Would you put the Volcker Rule?

It's kind of interesting, proprietary trading. It really had very little to do with the financial crisis or the root cause, yet the Volcker Rule, if you interpret it, you can't even make markets for your clients.

DIMON: Yes. So what happens -- so I -- part of the Volcker Rule I agreed with, which is no prop trading. We did very little. I have no problem.

GASPARINO: Right.

DIMON: But -- but market making is an essential function. And the public should recognize that we have the widest, the deepest, the most transparent capital markets in the world. And that -- part of that is because we have enormous market making.

The market making, it costs billions to run the systems, $500 million for your research. And the beneficiary of that is -- is the investor --

GASPARINO: Right.

DIMON: -- which represents pension plans, veterans, unions who buy and sell cheaper. Think of Cross Culp (ph).

It's a good thing, a value-added. And the -- some of the things which they have said they might do could really hurt that.

Now, I mean those were comments. We don't know the outcome of this. And there are a lot of people who think it will be OK and some think it could be a disaster. We just -- I don't know yet. And we've given our comments. And I think pa -- if the words were -- were written as some of those things they -- they said they might originally do, I mean those were adjusted for the comments, it would be pretty bad. It would move the best capital markets overseas.

GASPARINO: So we would -- you -- there is a chance that U.S. banks and -- and investment firms cannot do market making. That -- that is -- that is a legitimate chance?

DIMON: If -- if the rules were written as they originally came out -- I suspect they'll be changed -- it would really -- it would really make it hard to be a market maker in the United States.

GASPARINO: What did you mean by some of the global regulations being un-American?

Was that -- was that a quote or a misquote?

DIMON: No. It was -- what I said is some were anti-American. Some are anti-European, too. So -- so when I say this, I'm saying that --

GASPARINO: Right.

DIMON: -- so what I said is that Basel III, some of the rules in Basel III are directly aimed at just American banks. They don't have those kind of assets overseas. So that's number one.

Number two, how they do risk rate assets, it's quite clear that in certain parts of the world, they're much more aggressive in that. So that is clearly against American banks.

Some of the things that were done weren't done by European regulators, they were done by us. We can -- we don't -- we can't use preferred stock, OK. That was taken out of the rules here for capital. They can use preferred stock overseas, which is a cheap form of capital.

Volcker, when that was originally done, you know, I remember Paul Volcker saying everyone is going to do it.

Well, you know what?

The rest of the world said no way. So that applies just to us.

And some of the derivative rules -- I'm not against putting derivative -- standardized derivatives in clearinghouses --

GASPARINO: Right.

DIMON: -- what I've said is that what we do want to find out is that -- that American companies, wherever they do business, have to do it under different requirements than overseas.

GASPARINO: Right.

DIMON: Then that business will simply move to Deutsche Bank.

GASPARINO: Will you (INAUDIBLE) --

DIMON: And so that's -- that's -- I'm saying it's starting to add up. There's a cumulative effect of all that, so --

GASPARINO: You had access to the White House. You know Tim Geithner. You were on the Fed board. Tim Geithner used to be the president of -- of the New York Fed.

I mean why didn't he take these comments, your -- your critique -- because you're not against regulation --

DIMON: That's correct.

GASPARINO: Why didn't he take it seriously?

DIMON: I -- I -- Paul, I don't know. First of all, if you spoke -- I spoke -- Tim knows exactly what I think. But if you speak to a lot of people, they don't necessarily disagree. Like -- like Barney Frank would agree with some of the things you just said.

It's just, there are some people, you know, throwing things and putting what they -- you know, their favorite pet peeve in there that --

GASPARINO: Right.

DIMON: -- it -- it just became a very convoluted kind of thing.

So hopefully, some of this will be fixed. And -- and that, and again, I'm saying, JPMorgan will be fine. Look, I -- I think this action could hurt medium sized and smaller banks more, which I'm not in favor of.

GASPARINO: Right.

DIMON: I would be against that as an outcome. I think it's an unintended consequence.

GASPARINO: So you're basically saying, in terms of regulation, there is no adult in the room?

DIMON: There's been no one in charge. There's no one person in charge. So when we set up, one of the regulations I was in favor of is the Financial Services Oversight Committee, because one of the problems that we had is that we didn't have one place, so we've got a lot of things unregulated or improperly regulated, kind of gaps in the system.

But the Financial Oversight Committee wasn't given enough teeth.

So here I'm complaining that that particular reg -- reg role should be given more teeth, not less teeth.

GASPARINO: So --

DIMON: So -- so that would give -- put someone in charge and say, no, we're not going to do A, B and C, because that's bad for the system. But, you know, that -- but -- but, you know, that we have 10 or 20 major regulators now. So you know, remember, a lot of these regulations, all they're looking at is what protects their own entity. They're not looking across the whole system anymore.

GASPARINO: So when you go to Davos and you corner one of these regulators with a scotch in your hand or a glass of wine, whatever you prefer to drink --

DIMON: That was -- I think Davos is a wine kind of place.

GASPARINO: Wine. Well, what are you going to tell them?

DIMON: I'm going to tell them that I -- and I really do believe this -- that -- that if people got together and -- and I don't think it's Democrats or Republicans or Europe/US, and actually thought across the whole picture about policy, leverage, Basel III, Dodd-Frank, what works, what we need to fix, what we don't need to fix, I think you can actually have more consistent coherent policy --

GASPARINO: Right.

DIMON: -- and a better recovery.

GASPARINO: Right.

DIMON: I can't prove it. Like I said, it's going to be written 10 years from now about whether some of these things slowed down the recovery.

GASPARINO: Now, that's the interesting thing, you're not just saying this from a personal standpoint.

DIMON: No.

GASPARINO: JPMorgan's shareholders standpoint. You're saying that these regulations are hampering the recovery that's going on.

DIMON: Yes.

GASPARINO: (INAUDIBLE).

DIMON: And I'd say regulations broadly. I think there are policies -- some are government policies -- so I was just in Berlin. And quite clearly, the ECB and the leaders of Germany would love to see banks be more aggressive in making loans and buying sovereign debt --

GASPARINO: Right.

DIMON: -- and staying there. But it's quite obvious if you speak to the regulators over there, they want to see less sovereign debt. They want to have more stress tests and they want to see more capital. Those are working at counter-purposes.

GASPARINO: Right.

DIMON: I'm not saying that -- that some people should have more capital. I'm simply saying if you want it to work, you've got to stop doing things which are -- are at cross purposes.

GASPARINO: OK, kind of interesting, on the other hand, when you're critical of the regulations, you do believe -- I've seen some of your comments during the analysts' call -- there we are in the middle of a recovery that could pick up steam fairly significantly.

DIMON: That's correct. I think America has -- it's a mild recovery, but it is broad-based and it could be strengthening as we speak.

GASPARINO: Well, are we talking, in your view, Jamie Dimon economist, what percent of GDP this year?

DIMON: It could be 3 or 4.

GASPARINO: Really?

DIMON: Yes.

GASPARINO: Interesting.

DIMON: Yes.

GASPARINO: Now, will that translate into jobs?

Because that's the interesting thing here. We have -- we do have positive GDP growth and very little job creation.

Do you think that might translate into jobs?

DIMON: Well, we've had -- I -- I forgot a number, but maybe 1.8 million jobs in the last 12 months or so --

GASPARINO: And big enough, right?

DIMON: And housing, I think, is bottoming out. And I -- and supply and demand have come into bounds. So in the United States, we've got three million Americans a year. Household formation, which is normally 1.3 or 1.4 million homes a year, has been half that. Once household formation goes up, which I think will follow jobs, we're going to have to start building more homes.

GASPARINO: Really?

DIMON: Yes. We go back to building 1.3 million a year, which our economists think we're going to have to start building soon -- I'm not saying, you know, two months from now. It could be six months, nine months, 12 months, 18 months. That -- that alone adds two or three million jobs.

So that is what I would call -- it could be the beginning of a self-sustaining recovery --

GASPARINO: Um --

DIMON: -- more jobs, more incomes, more jobs, more homes, more people employed, more kids moving out of their parents' homes and --

GASPARINO: You've got kids, right?

DIMON: Yes.

GASPARINO: Are they moving out?

DIMON: Some have moved back in, yes.

(LAUGHTER)

DIMON: But -- but I actually love having them there but --

GASPARINO: OK. I got you.

While you're flying to Davos, the president is going to be giving his State of the Union speech.

DIMON: Yes. Well, technology now, you know, I can get it on the airplane.

GASPARINO: That's right.

DIMON: Yes.

GASPARINO: You're going to be watching it.

DIMON: Sure.

GASPARINO: How would you grade his handling -- grade his handling of the economy?

DIMON: You know, I think -- I -- I guess it's fair to say that he entered probably one of the most complex economies ever. And for a while, I think people did a very good job. So I'm not going to talk about President Obama, but after that.

So I think for the last 18 months, between Congress, Democrats, Republicans, regulators, overseas regulators, it's just been -- it hasn't been coordinated in a way that's going to lead to recovery.

Now, you can blame that on the president. You can blame it on the Democrats. You can blame it on the Republicans. I personally don't care. This has got nothing to do with Democrats and Republicans to me.

I believe there are policy solutions and we don't have all the people in the room working on what those solutions are.

What we have is a lot of people just yelling at each other.

GASPARINO: It was at least reported that you had very good access to the president. I've since been told that that was overdone.

DIMON: I think it was way overdone, yes.

GASPARINO: Way -- way overdone.

But, you know, there does seem to be a cooling of the relationship between you and the White House.

I guess I need to ask you this specifically about the president. And we can talk about Congress next.

Do you think he has been effective?

It seems, based on your rhetoric, you don't think has been effective on the economy.

DIMON: First of all, whoever was in the White House, a Republican or a Democrat, I would work with them, take their calls and try to help. There has been no cooling on my part, OK. Maybe on his part, but you would have to ask them that. So that's number one.

Number two is I think there are solutions. I'd like to -- we'd like to be part of the solutions, if we're asked. I don't believe there's been a lot of collaboration.

GASPARINO: Right.

DIMON: So, you know, one of my complaints has been, well, I think people should cooperate more, Democrats, Republicans and practitioners. That would be a beneficial thing.

I don't blame that on just the president. I -- I kind of look at the whole picture and I -- I blame them all.

So, you know, to me, it's hard for me to say that was the one person who didn't compromise. It takes two to compromise.

GASPARINO: But isn't it hard to compromise when he's calling you a fat cat?

I mean, listen, you handled yourself very well during the financial crisis. I think everybody would agree with that. Yet he has lumped bankers like you in with the bad guys.

DIMON: Look, sir -- look, I've disagreed right from the beginning that this, you know, blanket blame of all banks, we're all bad guys or whatever. I -- I don't like that. I think that's just a form of discrimination that should be stopped. It doesn't -- it doesn't lead to productive conversation. Not everyone was equally bad. Not everyone was, in fact, bad.

GASPARINO: (INAUDIBLE).

DIMON: So I think it denigrates America. So I -- I think it's a bad idea.

But that's -- you know, remember, politicians, they get elected and they say what they want to say and I can't control that.

GASPARINO: Did you ever tell the White House, your contact in the White House, that the class warfare rhetoric is counter-productive?

DIMON: Yes, not -- not in those words, but, yes, I did.

GASPARINO: OK.

DIMON: Sure.

GASPARINO: Speaking of class warfare, I guess I'll have to ask you this, what do you think about the Occupy Wall Street movement?

It got a lot of press attention. I think a lot less attention was going to some of the -- some of the message that they had, which was kind of at cross purposes --

DIMON: Right.

GASPARINO: -- of -- of what was going on.

What do you think about that?

DIMON: So I tried to -- I know it's hard for me to say this, but what are the parts I actually agreed with, OK?

GASPARINO: Don't try to be politically correct.

DIMON: No. No.

GASPARINO: (INAUDIBLE).

DIMON: But there are --

GASPARINO: (INAUDIBLE).

DIMON: -- there are parts I agree with and there are parts I don't. So I want to be very specific about it.

GASPARINO: OK.

DIMON: It is fair for the average American to say that the major institutions of America let me down. That's true. And it is fair, generically, to say, well, that's predominantly Wall Street and Washington.

GASPARINO: Right.

DIMON: I agree with that part.

I think once you go beyond that and say all politicians, all banks, all bankers, that's terrible. I don't accept that. I know I'll never win this argument. But it's -- it's just not accurate. Not all banks --

GASPARINO: (INAUDIBLE).

DIMON: -- not all bankers, not all poli -- not all media are bad. So once people --

GASPARINO: (INAUDIBLE).

DIMON: -- once people do the blanket.

GASPARINO: (INAUDIBLE).

DIMON: The second is, it's become a less equitable society. I don't think that's a good thing. Now, by -- it's becoming more equitable now because, you know, the income of the top 1 percent is coming down dramatically. But -- but I think we should have a conversation, what is it -- what do you mean by how you're going to fix that?

So we look for solutions. So we've hired a lot of people. We've hired 3,000 veterans. We've been a healthy company.

GASPARINO: Right.

DIMON: We've hired 17,000 people in the United States in the last like 18 months or so net. That's a -- so we're trying to -- we're lending to small businesses, we're lending mortgages, we're lending to corporations. That's what we're trying to do to fix the problem.

So I understand the generic arguments, but to me, I prefer to look for real solutions.

GASPARINO: I couldn't help but notice this. JPMorgan is one of Mitt Romney's largest contributors. You're not --

DIMON: Not -- not JPMorgan.

GASPARINO: (INAUDIBLE).

DIMON: JPMorgan employees.

GASPARINO: Executives at JPMorgan.

DIMON: Right. Yes.

GASPARINO: You were seen at a Romney fundraiser (INAUDIBLE) --

DIMON: I was not at a Romney fundraiser. I had a cup of coffee with Mitt Romney.

GASPARINO: OK.

DIMON: I would have a cup of coffee with any candidate. That's what I do. And someone wrote that was a fundraiser. I was not.

GASPARINO: OK. So just -- it's just -- it is -- it is somewhat odd, not odd, but interesting that you're -- that your employees are one of the big fundraisers, are giving a lot of money to Romney as opposed to the president.

Is that -- is -- it was a 180 from last time.

DIMON: So here's -- but here's what you tell the people here, OK?

I -- we think it's OK for our people to be involved in the political process. So we have a bunch of people who are supporting Romney. We have some people that are going to support Obama. At one point, we're going to ask if they want to come and talk to our people, you know, not as a fundraiser --

GASPARINO: OK.

DIMON: -- for -- for any -- whoever the candidates are, they will be invited here. I always tell the people, you know, listen to both sides.

So we want our people to be actively engaged in the political process. We don't tell them what to do. It just so happens that this year -- which, not surprisingly, a lot of people here are going to support a Romney and not a President Obama.

GASPARINO: And you have --

DIMON: But we will -- we will have people supporting President Obama, too, by the way.

GASPARINO: Yes, I'm sure you will.

DIMON: Right.

GASPARINO: You -- you generally don't take a side publicly.

DIMON: I don't. I'm on the New York Fed Board. I'm not allowed to endorse or fundraise.

GASPARINO: People who know you said you were -- you basically supported Obama (INAUDIBLE) --

DIMON: I -- look, I've been a Democrat my whole life and now you see I'm barley a Democrat, because I -- look, I think the left side of the party is really destructive. But I think the right side of the Republicans are good -- equally destructive. So I'm more kind of in the middle.

GASPARINO: So would you support Obama, the candidate?

DIMON: I haven't decided yet I'm -- who I'm going to vote for.

GASPARINO: Let's go back to JPMorgan for a minute. Your shares fell 22 percent this year.

Is that something that worries you?

Do you follow the stock price?

You came in -- you've done a great job managing risk. The share price has fallen from about -- wherever it was, 50, 53, from when you came in --

DIMON: Right.

GASPARINO: -- to where it is now.

DIMON: Right.

GASPARINO: Is that something that worries you?

DIMON: Not -- surprisingly, not really. So it kind of hurts a little bit to work this hard for so long and the stock has gone down and not up.

On the other hand, we did have record earnings.

GASPARINO: Right.

DIMON: But if you look at it, you know, I say, if you build a company, serve clients, open branches, hire banker assistants, people marketing, earn a fair profit, do great stuff for the communities you're in, the stock will eventually reflect that.

So I -- we keep our eye on the ball and we build the company.

But if you look at the banks today -- you know, I'm (INAUDIBLE) to see investors later today --

GASPARINO: Right.

DIMON: -- and they say, look, between litigation and mortgages and, you know, Basel and capital and anti-in -- you know, financial taxes and -- is, you know, that -- that advertisement on TV, the elephant sitting on the person?

GASPARINO: Right.

DIMON: They say --

GASPARINO: (INAUDIBLE).

DIMON: -- they say there's an elephant sitting on the bank stocks. You know, those things will eventually be resolved and lift. And they won't all be bad.

So to me, let's -- let's just keep working through them all and keep the eye on the ball, do a great job for the client and we'll be OK.

GASPARINO: A lot of people --

DIMON: You know.

GASPARINO: -- well, the people that know you -- I know people that know you -- they say Jamie, one of Jamie's goals before he leaves here -- because you're, I'm sure, you're going to do something else at the same time -- at this point -- is to get the stock above where it was where he came in.

Is that accurate?

DIMON: I'd say I'm a little more ambitious than that, yes.

(LAUGHTER)

GASPARINO: But it's not inaccurate?

DIMON: No, of course I wanted to get it up. Yes. I think the stock will do fine over time. I think we have a great company with great people. You know, we're all consolidated systems. We've got great clients around the world. We've been doing nothing but investing in this downturn. We've opened hundreds of branches and we've opened 20 offices overseas. We've hired a lot of bankers. We built better systems.

And so it will show. We have a wonderful company and --

GASPARINO: It's $160 next year, would you leave?

DIMON: No. I just -- I would not leave or not leave because of the stock price.

GASPARINO: OK.

DIMON: Yes.

GASPARINO: In terms of running JPMorgan, how long do you see yourself in this job?

DIMON: Hopefully many years.

GASPARINO: So you have --

DIMON: Remember, sir, that I -- I serve at the pleasure of the board --

GASPARINO: Right.

DIMON: -- who can fire me tomorrow.

GASPARINO: Right.

DIMON: But whole -- you know, I -- my intent would be to be here for three, five years or more.

GASPARINO: Three to five years?

DIMON: Yes.

GASPARINO: Interesting.

DIMON: Yes.

GASPARINO: What do you see yourself doing next?

DIMON: Well, I was with Jim (INAUDIBLE) once. And he said to me, you've got one more big (INAUDIBLE). I said Jim, you --

GASPARINO: The investment banker who works here.

DIMON: Yes, the investment banker. I said, Jimmy, I'm -- when I'm done running this, I've been running big companies for a long time. I'm not going to run another big company.

So it will probably be a bunch of stuff --

GASPARINO: (INAUDIBLE).

DIMON: -- unlikely. It will probably be a bunch of stuff between teaching and investing and, you know, doing deals with friends and getting involved in maybe some boards and --

GASPARINO: (INAUDIBLE) ever be in trade (INAUDIBLE) secretary?

DIMON: Unlikely.

GASPARINO: Really?

Is that something you'd like to see, your name on the (INAUDIBLE)?

DIMON: No.

GASPARINO: Why not?

DIMON: I've kind of had a great career here and I -- look, how well do you know me, Charlie?

GASPARINO: A long time.

DIMON: Do you think --

GASPARINO: (INAUDIBLE).

DIMON: -- do you think I'm suited --

GASPARINO: (INAUDIBLE).

DIMON: -- do you think I'm suited to be the secretary of the Treasury?

GASPARINO: I think the country would -- would benefit from you (INAUDIBLE) --

DIMON: Well, I --

GASPARINO: -- because of that.

DIMON: I appreciate that, but I do think I'm suited for it.

GASPARINO: So academia likely?

DIMON: I love to teach. I don't think I would be a full-time teacher, but I love going to schools and teaching classes and sitting in classes and -- so I could see -- like I said, it would be a bunch of stuff -- boards, teaching, investing --

GASPARINO: Professor Dimon, huh?

DIMON: Yes, exactly.

GASPARINO: I'm starting to get used to it as we speak.

DIMON: OK.

GASPARINO: Let's go to to executive pay. There's been a lot that's been in the news lately. You took a cut from last year.

Do you think it was enough given where the stock was?

DIMON: I think what the -- what the spokesman (INAUDIBLE) it's about the same as last year.

GASPARINO: Oh, it's about the same?

DIMON: It's about the same, yes. And remember, we had record results, so yes.

GASPARINO: Right.

Do you think it was enough to appease people?

DIMON: I don't think the job of -- of JPMorgan is to appease anybody. I'm not in the appeasement business. We -- we should do the right thing for the right reason. And what I would say about comp is sort of take JPMorgan comp for -- and I'm talking about for five or six years since I've been here, no special severance packages, no change of control, no parachutes and there was no multi-year deals. You know, so there's nothing special here.

When we did badly, my pay was zero. When we do better, the pay goes up. The pay is set by the board. It's not set by me. And so we've had very good policies here.

It's always been risk-adjusted, OK.

Remember, JPMorgan never lost money. It didn't need TARP. It made $7 billion in the worst of all years. It never lost money in a quarter.

GASPARINO: (INAUDIBLE).

DIMON: Even this year, 15 percent --

GASPARINO: But let's be clear, you took TARP --

DIMON: We were asked to take TARP --

GASPARINO: Right.

DIMON: -- because it was in the interests of the United States of America. We were asked by the secretary of Treasury. I agree with him, by the way. And I think he was right.

GASPARINO: (INAUDIBLE) right, then, to -- for you to take it. It kind of gave you a black mark with everybody else.

DIMON: I know. You know, I didn't anticipate that.

GASPARINO: And we say -- this is Hank Paulson, the former (INAUDIBLE).

DIMON: Hank Paulson. Look, I think Hank Paulson, with Tim Geithner and Ben Bernanke, saved the system. And I think they took some very bold and dramatic action that -- that they had the guts and brains to take at the precise point in time.

And it wasn't Lehman. You know, we had been -- we had had Lehman, WAMU, Fannie, Freddie, AIG --

GASPARINO: (INAUDIBLE).

DIMON: It was a huge --

GASPARINO: It was a tsunami.

DIMON: It was a tsunami of stuff. And they realized that they had to stop it from sinking. And, you know, Warren Buffet called it Pearl Harbor and they took the action.

It had unintended consequences. But I -- I (INAUDIBLE) tell me that unintended consequences, I didn't realize that one of them would be complete vilification of all banks and complete vilification of all the people that took TARP.

GASPARINO: What would you do if you knew that?

You would have walked out of the room?

DIMON: I think we would have to do it anyway, because if you -- if you said to, you know, whoever the CEO was of JPMorgan at that time that doing this will help save the American economy, when you're told it, you don't say, well, are you going to vilify me afterward, I won't do it, nah, nah, nah.

GASPARINO: Right.

DIMON: You would say, yes, sir. And you do what you can. So -- and that -- I do think it helped stave off a far worse situation.

GASPARINO: Some people say (INAUDIBLE) --

DIMON: I mean you're --

GASPARINO: -- moral hazard. You didn't take a risk, but Citigroup took the risk --

DIMON: It --

GASPARINO: -- and now they've been paid off for taking that risk.

DIMON: Yes. I -- right. I think we had to try. I think we have to end this too big to fail. We need bankruptcy for big companies. We need bankruptcy that you, the taxpayer, are absolutely convicted that you will never pay and that company could be dismembered.

GASPARINO: You're saying that --

DIMON: Right.

GASPARINO: -- Dodd-Frank did not end too big to fail?

DIMON: I -- no, I think Dodd-Frank -- I think it could be ended with some of the requirements in Dodd-Frank. The rules have to be written -- still have to be written a little bit.

GASPARINO: It's not explicitly ended.

DIMON: No. And we need to make sure that people understand how resolution takes place and bankruptcy and unwinding these firms. So a lot -- and a lot of people don't believe it. So I think it can be done, but a lot of people say --

GASPARINO: (INAUDIBLE).

DIMON: -- I don't believe it can be done.

GASPARINO: Barney Frank will say it's been -- it's been -- it's been resolved. But that's not true, you're saying.

DIMON: I think a lot of the regulators, not me, are saying we are not sure that we have a proper way to

Do the detailed dismembering of the firm in a way that it doesn't damage anybody.

GASPARINO: OK.

DIMON: OK. So I -- no, but I think that makes it incumbent upon us to explain. So, actually, we're going to come with a presentation that shows how we think a resolution can work so that you, the taxpayer, can say you know what, that would work and we would never pay?

GASPARINO: You haven't done that yet.

DIMON: But I also think that if -- if the taxpayer ever paid, it would be charged back to the big companies.

GASPARINO: Right.

DIMON: Like FDIC. I mean I don't know if you're -- if everyone on TV knows, but we pay FDIC.

GASPARINO: You pay a tax to the FDIC?

DIMON: We pay a tax to the FDIC. So they -- when they say they're going to lose $50 billion, no. We're 10 percent. We're going to lose $5 billion.

GASPARINO: It's completely underfunded. If -- right --

DIMON: Not anymore. Not anymore.

GASPARINO: OK.

DIMON: Right.

GASPARINO: All right, before we wrap this up, I've got to ask you this question regarding the -- the bank model that you somewhat embraced.

DIMON: Right.

GASPARINO: It's the bank model that JPMorgan has, that Citigroup has, universal banking where a big bank has both securities and a commercial bank. A lot of people -- Sheila Baer, myself -- have posited that maybe this model did not work, that you -- your banks are too big, you have to hold too much capital, that you can't lend, because while you are lending to small businesses, you would admit, you're not lending like you used to lend.

DIMON: No, we're not. No. Our small business loans are 50 percent this year -- and back --

GASPARINO: (INAUDIBLE).

DIMON: -- and back to where it was three years ago. Fifty.

GASPARINO: Oh, OK.

DIMON: Fifty percent. A little market --

GASPARINO: (INAUDIBLE) --

DIMON: Yes --

GASPARINO: -- before the crash?

DIMON: little market lending is up 18 percent, one of the biggest increases I've ever seen. And we've raised -- I forgot the number -- $1.7 billion for, I think we lent $55 billion to governments, not-for-profits, hospitals and schools.

GASPARINO: You might be the only one doing it, though.

DIMON: No. If you look at all the reports (INAUDIBLE) now, everybody -- a lot of the banks have growth in small business and middle market, etc. So the question you've got to ask is that forget -- (INAUDIBLE) what JPMorgan wants or what -- or what Charlie Gasparino wants, does the consumer get something better, faster, quicker or cheaper?

GASPARINO: And under this (INAUDIBLE) model?

DIMON: Yes. And they do, because, remember -- remember these -- because we do business with some of these companies in 40 countries. They call up and negotiate the best prices, bundled prices. They're -- they're smart people. When we -- when we market make for people --

GASPARINO: Right.

DIMON: -- we're dealing with some of the smartest investors in the world. They aren't going to give it to you because they like JPMorgan. They may like us. They say, hey, if you don't give me the best price, I'm going elsewhere.

So if they get the best price, who is that good for?

Their shareholder --

GASPARINO: You think --

DIMON: So.

GASPARINO: -- you think, you -- you want that (INAUDIBLE)?

DIMON: Right. Huge economies of scale. Remember, the banking ecosystems --

GASPARINO: Right.

DIMON: -- (INAUDIBLE) thing. So I think community banks are wonderful. Regional banks are wonderful. But we do things that they can't. So they do -- and they do some things we can't. So -- so in -- in our side of the business, huge economies of scale. Absolutely massive economies of scale. And the -- the public doesn't know this, either, by the way. We have the least consolidated banking system in the world.

GASPARINO: Interesting.

DIMON: And -- and -- and if you look at Canada, five banks; Japan, four banks; Australia, four or five banks; they didn't have these problems.

GASPARINO: So that --

DIMON: The problems had nothing to do with the size of banks relative to the economy.

GASPARINO: Is there any --

DIMON: You know --

GASPARINO: -- is there any talk in Washington about breaking up banks?

Do you see (INAUDIBLE)?

DIMON: People periodically come up with that.

GASPARINO: So it's not something that's --

DIMON: But if you -- if you did that, then you will see global banking, which we do -- like I said, we're a bank -- some companies around the world. We spent $600 million a year in research. We move $10 trillion a day. We do financing -- we deal with 16,000 investors around the world. And we raised $1.7 trillion for companies.

We can do an $8 billion or a $10 billion bridge loan to facilitate a transaction somewhere. That -- those are good things. You can't do that if you're small.

GASPARINO: Right.

DIMON: So if you -- if you broke up jumping into a lot of little pieces, that would simply be done by the Chinese banks then --

GASPARINO: Well --

DIMON: -- in 20 years.

GASPARINO: Well, you're talking about globally. You are expanding a lot at home. You're buying up a lot of branches.

DIMON: We're -- we're opening branches, yes.

GASPARINO: You're opening branches.

DIMON: Yes.

GASPARINO: Is this -- are you -- is this a competitive thing with Bank of America?

They're kind of retrenching.

Do you see an opening here?

DIMON: No. You know, the way we look at branches -- you know, that goes like to Citi now. So we look at a Citi and say where do we need branches?

And Citi is always morphing and growing.

So we're just adding. Some of those banks are adding and some are subtracting. Some have different issues. There are branches which are no longer profitable that may make sense to close. I don't know exactly what they're doing. But as long as --

GASPARINO: (INAUDIBLE).

DIMON: -- as long as we can do it profitable, we're going to continue to open branches.

GASPARINO: Speaking of Bank of America, they're like -- known as the problem child of the banking business right now.

Do you think -- is there a systemic problem, given what's going on in Europe?

I mean there is potential (INAUDIBLE) --

DIMON: Look, I'm --

GASPARINO: (INAUDIBLE).

DIMON: -- I want Bank of America to become healthy and grow and do a great job for this country and the world. That's what I want. It doesn't help us at all if you see anyone struggling. And I think they've done a lot of work to get there, by the way, if you look at their capital ratios and all of that. So --

GASPARINO: Are they going to be OK?

DIMON: But it -- but he's an important thing. The Fed is putting us all through a stress test. The stress test has, I forget, it's 19 banks or I forgot how many banks. Thirteen percent unemployment. Home prices down 20 percent. The stock market down 50 percent. Calamities in the trading markets. Calamities in Europe. GDP down 8 percent.

And you know what's going to show?

We've got tons of capital and capability.

GASPARINO: You or B of A?

DIMON: We do. And I think --

GASPARINO: But --

DIMON: -- I think most of the banks will.

GASPARINO: (INAUDIBLE).

DIMON: I -- I think almost every single American bank -- we've done these tests ourselves. We think almost every single bank will pass.

GASPARINO: So you think (INAUDIBLE) --

DIMON: And it shows --

GASPARINO: (INAUDIBLE).

DIMON: -- it shows how strong the system is and it shows we've got plenty of capital.

GASPARINO: How big of a threat is Europe?

DIMON: It's a big deal. They -- if that -- if you -- that's a -- there's a true big fat tale (INAUDIBLE) talk about, so it's not a hidden fat tale anymore. But if you had a -- this unraveling of the euro, that would be a disaster.

GASPARINO: Is it possible?

DIMON: I'd give it a very small chance. I think the more likely outcome is they'll muddle through. Greece will be restructured. All the -- the 17 nations will agree to much more strict fiscal rules with carrots and sticks. The ECB will help finance, you know, create liquidity for Spain and Italy, which they're doing today. I think this three year thing they did was a mass -- I think it took a major bank bankruptcy off the table, because the real crisis would have manifested itself by a bank not being able to get money.

This -- this gave them far more capability to have proper collateral and long-term funding through the ECB. And I think eventually, they should muddle through it, because it's the best thing for Europe.

The -- the other alternatives are really bad, you know, so.

GASPARINO: One of the things, before I close out with this, I've seen your career. Everybody thinks it just went up. There were ups and downs.

How much did you learn from the -- the time when you were kind of, you know, on the outs?

DIMON: Yes.

GASPARINO: You were working out of an office by yourself. You just --

DIMON: Yes.

GASPARINO: -- you were basically --

DIMON: You still talked to me back then.

GASPARINO: I called you all the time because I knew --

DIMON: Yes.

GASPARINO: -- you were smart, but -- and you knew what was going on. But, you know, you were -- you were barred from Citigroup. We're kind of --

DIMON: Yes.

GASPARINO: -- you know, in -- in --

(CROSSTALK)

GASPARINO: -- in purgatory, so to speak.

DIMON: Yes. Not really. You know, there was a series of surprising things. Like, first of all, everyone -- you know how they say you find out who your friends are?

Every one who I thought was my friends I still spoke to. Some said please don't tell Sandy (ph) --

GASPARINO: And Sandy was (INAUDIBLE) --

DIMON: -- but I'm coming over here to have --

GASPARINO: (INAUDIBLE).

DIMON: -- have a cup of coffee with you. But I saw them all. I had a great -- I did a lot of stuff. I traveled. I drove cross country by myself. I went to Europe to see my brother.

GASPARINO: (INAUDIBLE).

DIMON: I took up boxing, yes, which, as you know, is one tough sport. I wasn't probably nearly as good as you were. And, I mean I used to get beaten up pretty -- pretty regularly.

GASPARINO: The fact is you got (INAUDIBLE) --

DIMON: As a matter of fact, the (INAUDIBLE) Smith Barney guys called me and said, Jamie, had we known, we -- we would have sold tickets to watch you get beaten up in the ring. And -- but you -- but here's what I've learned, you know, it was my -- I felt fine. It was -- my self-esteem was never hurt. It was weird. Some people treated me like a leper and some treated me like Robin Hood.

But you know what I really missed?

The camaraderie, having (INAUDIBLE) fight for a bunch of people. And I loved issues and facts (INAUDIBLE) like that.

GASPARINO: But you -- but you learned from that, didn't you?

DIMON: You learned from that, yes.

GASPARINO: So you --

DIMON: So you -- and you really wanted to go back and run a company and -- and -- and --

GASPARINO: You (INAUDIBLE) -- you came back a different manager, I think.

DIMON: Yes, a little bit. Yes. Yes, listen, I've learned from everybody. You know, you remember Bob Lipp (ph) and Bill Harrison and there were good parts, you know, of Sandy. I learned things from Sandy --

GASPARINO: (INAUDIBLE).

DIMON: -- and then I learned some things not to do. But I learned a lot of things to do.

GASPARINO: Right.

DIMON: And you learn a little bit from everybody. Hopefully, it matters when you get better as you get older.

GASPARINO: Well, you kept your team.

DIMON: (INAUDIBLE).

GASPARINO: How did you keep your whole team all through this?

I mean I see guys that were with you back in the mid-1990s at Salomon.

DIMON: Yes, well, the first thing that's important is -- is that they're good people and they're good at what they do, not just at my goombahs and stuff like that.

GASPARINO: Right.

DIMON: But -- because otherwise, you're not building the right kind of company. And, you know, I remember at one point, Sandy was complaining to me all the people had left. And I called him up and said just -- and, by the way, I had a contract, which I stick to exactly --

GASPARINO: Well (INAUDIBLE).

DIMON: But they --

GASPARINO: (INAUDIBLE).

DIMON: -- oh, there were a couple of threats. But I said to them, I said, Sandy, look, we're leaving to go to a no name company for less money for smaller jobs.

GASPARINO: This was (INAUDIBLE)?

DIMON: You should be looking inside Bank One. You should be looking inside while they're leaving.

So --

GASPARINO: Well, within a few years it wasn't a no name company anymore and it became this company eventually.

DIMON: Right.

GASPARINO: And here you are. And I want to thank you.

DIMON: Hey, Claire, thank you.

I enjoyed it.

GASPARINO: OK.


END


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