The banking crisis caused by the collapse of Silicon Valley Bank and Signature Bank is “another weight on the scale” towards a recession in the U.S., JPMorgan Chase Chairman and CEO Jamie Dimon tells CNN.
Fears over a domino effect from the bank runs at SVB and Signature have made consumers warier, Dimon said.
“We are seeing people reduce lending a bit, cut back a little bit and pull back a little bit,” Dimon said. The government’s salvaging of the two banks won’t “necessarily force a recession” but is yet another “recessionary” factor.
Storm clouds Dimon sees ahead for the U.S. economy are three-fold: 1.) The Federal Reserve’s continuing quantitative tightening; 2.) Elevated inflation that persists; and 3.) the Ukraine war.
Speaking with CNN after the opening of Chase’s newest Atlanta branch, Dimon also emphasized he is optimistic about the strength of the economy and American ingenuity.
‘Full-Throated Capitalist’
“I’m a red-blooded, full-throated, free-market, free-enterprise capitalist,” Dimon said. “I think we should applaud free enterprise, and we should sing from the hills the benefits while we fix the negatives, as opposed to denigrate the whole thing.”
The JPMorgan Chase CEO said depositors’ faith in local bank branches, like Chase’s Atlanta community branch, is imperative to banking and the economy. The newest bank for Chase, the 16th that it has built in partnership with local communities, will hold free personal finance and skills training workshops, and provide storefront space for small business pop-ups.
“We need to get money into local communities,” Dimon said. “We don’t want people to be afraid to walk into a branch here. Come as you are, bring your kids and learn.”
Dimon could not predict whether any more banks will fail but emphasized that the upsets this year are nothing like the subprime mortgage credit crisis of 2008 that impacted “hundreds of institutions around the world with far too much leverage.”
He does believe, nonetheless, that it would be alright to permit some banks to collapse: “Failure is OK. You just don’t want this domino effect.”
Higher Interest Rates
Dimon said American consumers and regional banks should be prepared for interest rates to remain high, which means that banks holding Treasuries need to manage those investments wisely.
Dimon, who the Biden administration and Congress has called on for his economic insight on various challenges this year, said he will not tolerate the U.S. defaulting on its $31.38 trillion debt limit, which the government reached in January.
There will be no default “as long as I’m alive,” Dimon said. “Boy, we’re going to keep fighting this one.”
However, Dimon does not foresee a resolution on the debt ceiling for a few months. As a potential default draws near, “you’ll see it in the markets, and that will scare people,” Dimon warned.
Trump’s 2024 Campaign
Dimon served on former President Donald Trump’s business council and believes Trump enacted a number of good economic policies.
Trump’s “tax reform brought a trillion dollars back to America,” Dimon said. “The Black community had the lowest unemployment rate ever in his last year because it grew the economy.”
Without endorsing Trump for the 2024 election, Dimon said, he feels it is important to point out these major accomplishments and impact on the U.S. economy.
“That’s not supporting him,” Dimon said. “That’s just saying that’s true.”