Jamie Dimon Has Some Things On His Mind

Jamie Dimon is no stranger to storms. He’s been through large ones, in open seas, like the financial crisis, and small ones, in teapots, with whales.

One thing Dimon always does during storms is “stuff,” where that means JPMorgan doesn’t let the weather get in the way of running America’s largest bank. “We’ve always run the company consistently, doing stuff through storms,” Dimon said Thursday, on JPMorgan’s second quarter call.

He was responding to Mike Mayo, a man of comparatively modest means.

Dimon, for all his poise and swagger (and in part because of that poise and swagger), occasionally saddles himself with soundbites not easily shed. “Total tempest in a teapot,” “That’s why I’m richer than you” and “Bitcoin is a fraud” are three, but there are countless others. You could make a Rolodex. Or a tear-off calendar where each day is a slightly abrasive Dimon quotable.

Dimon’s most recent such remark wasn’t abrasive, and frankly it wasn’t all that remarkable either, but it was conducive to media coverage, and sometimes that’s all that counts. “Right now, it’s kinda sunny, things are doin’ fine,” he mused, at a conference sponsored by AllianceBernstein in late June. “Everyone thinks the Fed can handle this.” And then:

That hurricane is right out there, down the road, coming our way. We just don’t know if it’s a minor one or Superstorm Sandy. You’d better brace yourself. JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.

Fast forward six weeks and the bank delivered a set of results that disappointed analysts and weighed on the broader market at a time when traders were warily eying the July FOMC meeting for a possible 100bps rate hike following another scorching hot inflation report.

A few hours later, on the call, Mayo pressed Dimon. “Jamie, you said a hurricane is on the horizon. But today, you’re holding firm… acting like there’s sunny skies ahead,” he said. “You’re out buying kayaks, surfboards, wave runners just before the storm. So, is it tough times or not?”

One can only imagine what Dimon wanted to say. Mercifully, he restrained himself. “We don’t, like, pull in and pull out and go up and go down and go into markets, out of markets through storms,” he told Mayo. “We manage the company. We invest, we grow, we expand, we manage through the storm and stuff like that.”

One thing JPMorgan won’t be doing during the earliest days of this particular storm, though, is buying back shares. The bank halted buybacks on Thursday, citing higher capital requirements. Dimon wasn’t pleased about it, and he made his disdain quite clear during an exchange with Morgan Stanley’s Betsy Graseck. “We don’t agree with the stress test. It’s inconsistent. It’s not transparent. It’s too volatile. It’s basically capricious and arbitrary,” he said, before effectively suggesting that JPMorgan can’t lose money under any scenario at all. To wit:

There’s another very important point for shareholders. That number — the stress loss doesn’t even remotely represent what [would] happen under that kind of scenario. I would tell you, we’d make money under that scenario. We wouldn’t lose. I think they had us losing $44 billion. There’s almost no chance that that would be true. And I just — I feel bad for the shareholders because people look at that and say, ‘Well, what’s going to happen?’ And there’s good evidence. We didn’t lose money after Lehman. We didn’t lose money in the great — what just happened. We didn’t lose money.

“What just happened” was an apparent reference to the pandemic. He let CFO Jeremy Barnum speak briefly, before interjecting. “It’s not good for the United States economy. And the mortgage business in particular,” Dimon told Graseck, although at that point, he was really just talking to everybody, from analysts to politicians to (and I’m quoting him here) “lower-income” families, “minorities” and “stuff like that.”

It wasn’t the first time Dimon suggested regulatory hurdles may prevent the bank from providing credit and liquidity when it’s needed. He voiced conceptually similar concerns during 2019’s short-end funding squeeze, for example.

Asked by Graseck if the bank “may operate with less of a buffer,” Dimon said JPMorgan won’t “go below any regulatory minimum.” Instead, the bank will “drive down credit more” if it has to. “It’s a terrible way to run a financial system,” Dimon fumed. “We have so much excess capital.”

During the same exchange with Mayo, Dimon spoke briefly to the hurricane. “The future environment, which is not that far off, involves rates going up, maybe more than people think because of inflation, maybe stagflation,” he said. “There’s a range of potential outcomes from a soft landing to a hard landing and we’re simply pointing out [that] those things make the probabilities and possibilities of these events different.”

One thing that won’t be different, Dimon insisted, is how “we run the company.”