Thursday, August 27, 2009

Q&A with Jamie Dimon

Q-What is going to have the worst second half of the year: mortgage loans, credit-card debt or commercial real estate?
A-Mortgage and credit card are very bad, but possibly not going to get worse. Commercial real estate we're fairly sure is in an early cycle. Were fairly sure it is going to get worse.

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Q-Were your recent profits "obscene," as some have said?
A- We don't think they were strong. They were actually weak, but they were positive. They should have been far higher. We have several businesses losing money. We're a huge company. We do business all around the world. Our profits were not exceptional. We're not making money in the credit card business, not making money in mortgages. If people think we unfairly made money, we did not. What we're very happy about is that we've continued to grow our businesses.
Q-What is going to have the worst second half of the year: mortgage loans, credit-card debt or commercial real estate?
A-Mortgage and credit card are very bad, but possibly not going to get worse. Commercial real estate we're fairly sure is in an early cycle. Were fairly sure it is going to get worse.
Q-Will commercial real estate sink a lot of smaller community banks?
A - You're starting to see every week a few go under. We're going to be fine.
Q-Is the recession over?
A-I don't know. The difference is we had a financial crisis and a major recession, which makes it worse than just a major recession. In my opinion the financial crisis is over and there's been stability in all the numbers.
Q-Are you spending more time in Washington D.C.?
A-It gets written about more than is actual. The only difference now [when I travel there] is that I tend to go visit some senators and congressmen and the Fed.
Q-You've modified hundreds of thousands of mortgages. Is the push for mortgage modification a bad deal for banks?
A-No. You'll lose less money. If you sell at foreclosure, you're going to lose a lot of money. We've had to hire 5,000 people to manage the complexity, the system. It is working on a large scale, but some of the stuff is early on. A lot of people have short-term cash flow issues. It really is for people who live in their homes and want to stay there.
Q-Is Main Street angry about banks being bailed out through federal assistance?
A- Do you think we were bailed out? Absolutely, positively not. What assistance? Bear, Stearns? They didn't assist us. We assisted them. WaMu? They didn't assist us. I think we saved the government a lot of money in both cases. In the stress test, we had 60 percent more capital. Not six. Sixty. We were never in jeopardy as a company. TARP cost us several billion dollars. We didn't need it.
Q-So the government didn't help you?
A- I think what they did to help the economy helped everybody. It helped us too. I think Bernanke, Paulson and Geithner did bold, brave stuff that helped a lot of people. I want to thank them for it. Not a lot of people stopped to get the facts.
Q-Are you President Obama's favorite banker?
A-I'm not sure he has favorities. I have barely been in Washington for two months. 
Q-Good relationship?
A- I don't know him as well as the press indicates. I knew him before he was president. He has a big tough job in a difficult time. We have tried to do everything we can to help. We thought paying back the TARP was good.
Q-How about former Treasury Secretary Henry Paulson?
A-He had to break some eggs. Thank God for having Hank Paulson in that job at that time. It could have been far worse.
Q-Did he favor Goldman Sachs?
A- Maybe, but I don't know. Personally do I think so? No. I think he properly saw just how bad it would get. After Lehman, the financial system went into cardiac arrest. He took a needle full of adrenaline and stuck it into the heart. It may very well have saved the patient. You can argue the needle was too long.
Q-How does Tim Geithner's performance compare to Paulson's?
A- A lot of things changed. The heart started beating. It became very political. A lot needed to be done, like the fiscal stimulus. I do think the world of Tim Geithner. 
Q-Is it a big advantage to have Lehman, Bear Stearns and other competitors out of the way?
A- Not really. When certain firms struggled it made it easier for the ones who survived. But while Lehman is gone, Barclays picked up a lot of Lehman business and became tougher. So is Nomura. There is very tough competition. Today, people are hiring left and right. They're competing.
Q-Is the heat off the banking industry?
A- Some people think health care is taking up so much time and attention and anger and rancor, that will get so much attention.
Q-Were bankers to blame for the financial crisis?
A- I don't think it's right when people lump anyone of any class together. When it's aimed at you it gets a little offensive. There were people who did unethical things. Not all. There were some people who made business mistakes.
Q- Wasn't there a massive fraud?
A- No. There was a bubble. There was fraud involved in the bubble. There were bad practices on the part of several different players. Some investment banks did terrible underwriting. In some cases, the consumer committed the fraud. There's a lot of blame to go around.
Q-In that case, we need more regulation, right?
A-I don't think you should talk about "more" or "less." What would be "good?" I think companies should not be too big to fail. We don't want to be subsidized.
Q-Is the effort dead for a single, unified regulator overseeing the banking industry?
A-It looks that way. I wish there had been a chance to simplify, streamline and strengthen regulation, not to just add. It really hasn't turned out that way. It may not be over.