Cybersecurity. It’s what keeps Jamie Dimon, the CEO of JPMorgan Chase, up at night.
“We are not prepared for cyber, and it's already a cyberwar,” he told Marketplace’s Kai Ryssdal. “Companies like JPMorgan and hundreds of thousands of others are attacked every day by state actors, criminals, and we don't have the authority in place to have the proper response and protection. The government knows this, by the way, but we still haven't fixed it.”
Dimon has been at the helm of JPMorgan Chase since 2005. As the largest bank in the United States, it manages nearly $3 trillion — more than the gross domestic product of several countries.
Up on the 48th floor, Dimon’s office overlooks midtown Manhattan. In it, you’ll find the usual CEO decor — a large conference table, couches, family photos — and some unique items, like a golden shovel from last year’s groundbreaking ceremony for the Chase Center, the new Golden State Warriors arena in San Francisco.
Ryssdal spoke with Dimon for about 30 minutes and covered a wide range of issues — including interest rates, wages and the financial crisis. “I don't just guess what the future is, I say, ‘What is the worst you could possibly be, and can we handle it?,’” he said. “And to me, handle it means I could still serve my client. It does not mean I have to run in panic. We saved a lot of companies in this crisis and a lot of things are to help facilitate orderly markets, etc. But you should always be asking that question, where's the next problem coming from? It will be different from the last problem.”
The following is an edited transcript of their conversation.
Kai Ryssdal: Jamie Dimon, welcome to the program.
Jamie Dimon: Happy to be here. Thank you for having me.
Ryssdal: So I was reading all this stuff on you before I came to sit down. And I was trying to figure out how a guy from Queens grew up to run the biggest banking company. And here's what I came up with, and I'd be interested in your take on this. And you're smiling now. I think it's because you're careful. I think it's because you're super cautious. What do you think?
Dimon: I am partially super cautious. Yes. And I always tell people at the bank we spend more time at risk mitigation than taking risk, trying to figure out how we can serve our clients and minimize the risk that that creates. But I do want to point out I came from Queens. My grandparents were immigrants.
Dimon: But my grandfather started at a bank, the Bank of Atlantic, which is partially owned by the Greek National Bank at the time. Eventually after World War II, became a stockbroker. My father became a stockbroker, and I read like Graham and Dodd in high school.
Ryssdal: So when you were a kid, you were in this.
Dimon: Yeah, I liked it. I have two brothers. I have a twin brother who became an educator and an older brother who became a physicist — a real physicist, Niels Bohr Institute, IBM Labs, etc. I was the only one who was interested in what my dad was doing.
Ryssdal: Do you think people understand banks in this economy like you understood banks when you were a kid?
Dimon: People understand banks as a consumer. So, you know, if you've taken a mortgage, you have a checking account, you have a business, you need a loan, if you're a large corporation, you have to sell equity and debt, that they understand. They don't necessarily understand the inner workings of a bank.
Ryssdal: Does it matter?
Dimon: Well, it does to me, but I don't think it should matter to the customer, no. What the customer wants is a good experience, and, you know, a good credit card and a good … yeah.
Ryssdal: Yeah, but does it matter whether American consumers understand the way the financial system works?
Dimon: I think it matters that they understand how business in general works. So if you don't have a financial system, you don't have an economy. So the financial system is just part of this great economy, and America has the widest, deepest, most transparent financial market the world's ever seen. In total. I'm including private equity, venture capital, the formation of business, the ability to raise money quickly, the transparency of our capital markets. And no other country in the world has it. It's not even close. It's kind of, it's kind of a part of the engine that makes us the most prosperous economy in the world.
Ryssdal: You come to that — we, I guess, come to that — not without some scars, right? And we'll get to the crisis a little bit later on. But what do you think the financial sector’s role in this society is? What is the bank's responsibility in this society?
Dimon: I think the most important thing is you help grow a prosperous economy that hopefully is shared by everybody, you know, and that that's what our economy’s been doing for years, even though I think it's kind of fallen a little recently. But, but that's what you need. Banks need to do their job to have a prosperous economy. A prosperous economy is what helps the most people and they create the wealth by which you can take care of your old, your sick, your poor. And so I think people should understand that you need a healthy banking system. And I get to travel the world. There are unhealthy banking systems in Venezuela, Argentina, Cuba, North Korea. And so people, you need it, but it has flaws. If you look at the banking system for hundreds of years, there have been tons of problems. And I think, by which, makes me cautious. I always knew, and I said at one point, my daughter asked me in the financial crisis, you know, what's a financial crisis? I said, “Well, it’s the kind of thing that happens every seven to 10 years.” I wasn't being facetious. I was looking at 1974, 1982, 1987, 1990, the Asia crisis in ‘97, the internet bubble of 2000. And one of the things that makes me cautious is knowing all that, I always, always, always wanted to run the bank that we could survive anything so that we're there in good times and bad times — and more importantly in bad times — for clients, consumers, companies and countries.
Ryssdal: Lots in there. We're going to get to the crisis in a second, as I said. I want to talk though for a second about corporate social responsibility, which you and this bank are a believer in.
Ryssdal: Talk about that a little bit.
Dimon: I've never believed that the only thing is to maximize shareholder value. In fact, I don't know any CEOs who are that way. I think these companies —
Ryssdal: Wait. Sorry. How come everybody thinks all companies just want to maximize shareholder value?
Dimon: It just becomes a narrative that gets repeated over and over. Companies have to do a very good job over an extended period of time to get customers back. Companies that take care, that take care of customers succeed, if they rip off customers they don't. And no community, like any community, wants its local businesses or the big companies there to be good corporate citizens, that you’re there in good times and bad times, you help. And we all help the local Little League, the local church or synagogue, the homeless person, the food. So all we are is a very big company. But at the end of the day, we are a banker in front of a client trying to do a good job. We operate in 2,000 communities around the world, and we try to be good citizen in every one of those. So to me, if you don't take care of your employees, you don't take care of your customers, you will not have financial success, OK? And so they're all related, and taking care of your customers and clients, they want you to be a good community citizen, which I think is reasonable. I mean, we operate on the laws of the land. I think JPMorgan Chase, Chemical, many who have a long history of both philanthropy — and try to do it really well — and other things, like affordable housing, educating people about finance, trying to get kids’ skills. For years we've been trying to do that. And I think we need to do a better job. I'll go a step further. If we don't, I think government and business have to work together to solve a lot of the problems of this country.
Ryssdal: OK, so you're investing $500 million in your AdvancingCities project, a bunch of cities around the country. You've been in Detroit and Chicago. When you meet with whatever fellow CEOs of ginormous companies that you meet with, what's the discussion like around corporate social responsibility?
Dimon: So I'm the chairman of the Business Roundtable, which is 200 of the largest companies in America. We just, we just published a thing about best, the best practices of all the things that we do in diversity, and we’re going to try to take that and find out which ones really work. We're all doing something on work skills. Actually, we're going to have like 10 cities that we're going to with CEOs, working with local mayors on helping develop in the cities jobs for kids. So I think all these companies do it in one way or another. You can go to the BRT website, see the extensive list of what these companies do. I think we can get better at it and more efficient and more effective accomplishing the goal: jobs, affordable housing, work skills, good-paying jobs, etc.
Ryssdal: Do you think big companies in this economy get a bad rap?
Dimon: Sometimes, but I'm not sure it's worse — If you look around society, everyone’s getting a bad rap. Press gets a bad rap. Politicians get a bad rap. Lawyers get a bad rap. Doctors sometimes get a bad rap. We've become a bad-rap country. I mean, I wish we were more positive than we used to be.
Ryssdal: You know, it's funny. There's a picture in one of your sitting rooms out there of the bank at night, lit up. Looks really good. And then there's a, there's a plate underneath with a quote from J. Pierpont Morgan. It says, “The first thing is character, before money and property and anything else.” It sounds like you don't think we're doing so well in that.
Dimon: No, no, I actually think there’s a lot of character the United States of America. I think we're just tearing at each other for some reasons I don't fully understand. But I think most people have pretty good character. But, “the first thing is character,” when J. Pierpont Morgan said that, he was also referring to — it's not about the models of credit. I always tell economists, you can have all the models you want, but character and culture isn't in a model. And we have to make those judgments, too. Like, one of the most important things we do is who we do business with. We need good common — we know some, we know some will have tough times. We want to work with them in tough times, but who we do business with is like the most important to protect this company. If I have crummy clients, I'm going to have a crummy bank.
Ryssdal: You spend a lot of time thinking about that?
Dimon: Oh, yeah. Not just me. We have risk, legal, credit, audit, compliance, all of our bankers. We have reputation committees.
Ryssdal: Those are the marching orders?
Dimon: Oh, absolutely.
Ryssdal: It occurred to me this morning, before we came over here, that you're the last person standing from the financial crisis.
Dimon: It's a scary place, scary place to be.
Ryssdal: All the politicians are gone, all the bankers are gone. Do you ever look around and go, “What am I even doing here now?”
Dimon: No, but it is a scary place to be. I love the company. I love what we do. I just got back from India and Mexico. You know, I've been all over the United States. We went to Philadelphia, we're opening new branches, more affordable housing. I love what I do. I'm very proud of our people. You know, we always know we can do a better job. I don't think anyone is perfect. So I enjoy it. I mean, I don't play golf. I'm not the kind of person who wants to retire. I've never played golf. Not even once.
Ryssdal: So you're 62 years old —
Dimon: I play mini golf.
Ryssdal: So you're 62 years old, right? Right? Do I have that right
Dimon: Yeah, I’m 62, yeah.
Ryssdal: So your letter to shareholders, this most recent one, said you're going to be here at least another five years. Then what are you going to do?
Dimon: Yeah. I don't know. I’ll do something.
Ryssdal: Maybe you should start thinking —
Dimon: I'm probably going to write a book one day, in detail. If you read my letters —
Ryssdal: I do read your letters.
Dimon: I get a lot of detail. I think there’s a lot of misinformation, about the crisis and the God-knows-what. I love to teach. So I'll do — I may do undergraduate, not even, you know, MBA. I'll do business with friends. I'm never going to be a fiduciary of a big company again, you know. I'd probably join one public company board — I don't do that now, where I like the company, I like the products — and one charity, charitable board. Not to raise money for them, they need my help. Like it’s a great charity, and I can actually get my hands into it and help them grow and expand and accomplish. It might be around work skills, my wife does a tremendous amount in the South Bronx for work skills. And so might be around something like that, getting kids educated in jobs and schools, helping them have the training they need to get a job and apprenticeships and all those things that create a successful first-time job person.
Ryssdal: To the crisis, now. Would JPMorgan be the bank it is today without us having had the crisis?
Dimon: I think probably, pretty much. Yeah
Ryssdal: No, come on. Wait. You bought Bear, you bought WaMu.
Dimon: No, I wouldn't, but I wouldn't buy Bear again, OK? We bought Bear —
Ryssdal: How come?
Dimon: Because the United States government asked us to. It was a tremendous amount of risk for us. We paid almost nothing. Now I'm not arguing that, but it cost us $15 to $20 billion to unwind it. OK, so we've got some good things out of it. We got some good people, and we took the major risk, and we bought $300 billion of assets. You know, the Federal Reserve financed a very small part of it, not for us, for themselves, because it was just a bridge too far for us. And they took the high-grade mortgages, we took the low-grade mortgages, and again, we took a lot more. So and then afterwards, we were sued by the government all that, about some of the bad mortgages that Bear Stearns did. It just was a bridge too far. And yes, it helped the company, but —
Ryssdal: Which funny, because it was the first bridge. Lehman came and then WaMu came.
Dimon: We thought at that time, at that time, Hank Paulson, me, a bunch of the people, Ben Bernanke, etc., Tim Geithner, all thought that that could be a hole in a dike that we got to stop. We were wrong, because as it turned out, there was a succession of failures after that and it didn't culminate in Lehman. Remember, the biggest financial failures of all time were Freddie and Fannie, which were government, government-designed vehicles, AIG —
Ryssdal: Which we’re still dealing with, by the way, Fannie and Freddie.
Dimon: Exactly. AIG, afterwards, hundreds of mortgage brokers went bankrupt. So there are a lot of things. So I'd say it was — I would've bought WaMu, because even though we paid an extra price that we didn't think we should have paid, it put us into so many places. Think of Washington state, California, Florida. We got, I’ve forgotten the number of how many branches we got. But in those days —
Ryssdal: You got the one down the street from my house where I bank, I mean …
Dimon: Right, and you're in California. So we've gone from 700 branches to 1,000. We've also added a lot of small business, which they didn't do, a lot of private banks, which they didn't do, a lot of middle markets, they didn't do, and a lot more investment bankers they didn't do. So I think it was a fabulous platform for JPMorgan to grow for, for 100 years. So I still would've done that one.
Ryssdal: Are you satisfied that we have the protections in place now to avoid something like that happening again?
Dimon: You should never be satisfied. I mean, I want to explain that a little bit. Lehman wouldn't, the problems, the regulation. I would say they really should be happy and take a victory lap. I give you, just do Lehman redux. It wouldn't happen. They would have had not 20 billion in capital but 50.
Ryssdal: But because of the regulations that have been put in place —
Dimon: They would have had a lot more liquidity, a lot more transparency, and at the time that Lehman went bankrupt, the United States government didn't have the legal authority to take them over like they could take over WaMu. That's called receivership. And now they do. And they have the knowledge to manage it, so it would never have gone bankrupt. If it did go bankrupt, at the moment of bankruptcy, it would have created another $100 billion of equity. It would have been the most overcapitalized firm in the world. The government can run it and do whatever they want with it, but think of it as an orderly unwind. What happened with Lehman was a disorderly unwind where assets were thrown, people couldn't get their cash. Markets were going to collapse because they had to sell assets. So that was all fixed. So the capital liquidity, the banking system is stronger. But with the way you should look at risk is, and I always look at all the possible fat tails. So one of the reasons that JPMorgan does well, I don't just guess what the future is, I say, “What is the worst you could possibly be, and can we handle it?” And to me, handle it means I could still serve my client. It does not mean I have to run in panic. We saved a lot of companies in this crisis and a lot of things are to help facilitate orderly markets, etc. But you should always be asking that question, where's the next problem coming from? It will be different from the last problem. There are always issues away from banks that can cause banks’ problems. Think of cyberattacks and other institutions, clearinghouses. And I'm not worried about shadow banking, but there are always going to be issues with shadow banking. So if you're a regulator, you should be really cautious about what's happening away from banks.
Ryssdal: Are you worried about, you know, given all that, cyber and all of that, are you worried about the Fed and its actions, and are you worried about politicians and them stepping up?
Dimon: Well, I'm not worried about both, but we plan for both not being exactly the way we expected. So I think the Fed is doing the right thing in raising rates. The economy is quite strong, and the thing which is normalizing it, it will be really good to get back to normal. And as long as they're normalizing it, rates are going up, in a healthy economy with really low unemployment, strong growth, good capital expenditures, that's good. I mean, the “why” is more important than the “what.” The why is we have a healthy economy. That dwarfs all other things. But, you know, is it possible that down the road something happens, there’s too much inflation, the Fed's going to move quicker, the reversal of QE isn't this as good? That's possible. So I'm not predicting it, and my company could easily handle it, which is what I think about. But it is possible, just like the tariffs can cause problems that you don't anticipate today. Just like cyber can cause problems, just like Brexit can cause problems. I mean, you always got to be looking to figure out, make sure you can handle bad outcomes.
Ryssdal: You keep jumping ahead of my list of questions because I want to get to tariffs in a second. But let me back you up for a minute on the healthy economy and I'm not going to argue that the headline facts: jobs, GDP, all of that good stuff. But as you sit here on the 40-whatever-it-is floor of this building looking out literally at the American economy, there's income inequality. There is wage stagnation, which has just recently started to pick up. I mean there are some not small problems.
Dimon: So the American public should understand that this is the most prosperous economy the world's ever seen.
Ryssdal: Yeah, but if they can’t —
Dimon: I want to talk about the good and the bad. So the good is we have wonderful neighbors in Canada and Mexico. We've got all of the food, water and energy we need. We've got to compare it. OK, China — I’m not saying this disrespectfully — has, their neighbors are North Korea, South Korea, Japan, Philippines, Indonesia, Vietnam, Afghanistan, Pakistan, India and Russia. OK. It's a complex part of the world, and they don't have enough food, water and energy.
And we have what the Founding Fathers gave us: freedom of religion and freedom of speech and freedom of enterprise, the best universities, the widest, deepest capital markets, the most innovative society, small, medium and large. The most capital expenditures. It’s still exceptional. And yes, I made a list and I did it in my chairmen's letter, I don't know if you read that.
There are these things. Income inequality is a real issue, and we studied it, and there are fixes to it. The economy has been growing anemically. We've had multiple wars for 15 years now. Our kids aren't getting proper education in inner city schools. It took eight years to put a man on the moon, and now it takes 12 years to get the permits to build a bridge.
I think that's terrible, and it's slowing down America. Immigration is tearing us apart, and immigration reform and infrastructure reform would actually have the economy grow half a percent more a year.
And the other thing you should understand is our recovery, it's been 10 years — that's long — but 20 percent. That's half of normal.
Ryssdal: Twenty percent of GDP growth, right? GDP should be bigger is what you're saying.
Dimon: It should be 40 percent. It was 20 percent.
Ryssdal: See, I did read your letter. That was a graph in that letter.
Dimon: You got it. But I think that's because of the reason I gave you, and it was driving low-wage growth, less small business formation and all these other things that we need to fix.
Ryssdal: OK, but look —
Dimon: And there are fixes. The American public should know that everything we talk about, there are fixes for if we put our minds to it and kind of dropped this Democratic/Republican view of it all.
Ryssdal: I appreciate the positivity. Truly I do. But there is some reality here, right? And just to get you back to the Mexico and Canada, and we've got peace with our neighbors. We do, except the president of the United States is well on his way to a trade war with our closest and largest single trading partner. Right? We have serious problems with many other countries in this global economy. We are pulling back from the international arena. The president said at the U.N. across town a couple of days ago it is America first. Right. So how do you reconcile that with what you call for in your letter, which is intelligent, thoughtful, analytical and comprehensive policy? Do we have that?
Dimon: Yeah. We're slipping a bit. Let me go back. We have not had war with Canada or Mexico since 1848. And Mexico's actually done quite well, and we should treat them very respectfully. It seems to me the president and his group of advisers want to do NAFTA, and they're doing it — they're not doing the way I would have done it. They did do Korea. They're going back to Europe. They're going back to Japan. And it looks like they're trying to do NAFTA. I hope they get it done.
But you're absolutely correct this trade issue, I'm going to call a skirmish. What people are afraid about is that it will get worse into what we call a trade war.
Ryssdal: So what do you see that's going to make it not get worse from a skirmish? Because it sure doesn't look like anybody's backing down.
Dimon: Look we have advised the president that —
Ryssdal: We who? We you?
Dimon: Yeah, we have. I've done it personally. The [Business Roundtable] has done it, and I know lots of CEOs have done it. And what I'm about to say is I think most of us said, that we understand the issue of China, and he's right. Non-tariff barriers, tariff barriers —
Ryssdal: Intellectual property and all that.
Dimon: Intellectual property, state-owned enterprises, subsidies, etc. But the method by which he’s trying to fix it is risky and probably wrong. Now I want him to succeed. We would like to have a trade deal with China that fixes those problems. We thought the way to do it was to get your allies together and as a union go see the Chinese. Again, not against them, but tell the Chinese these are the new terms of trade, they're proper for the world. And you can join them. We want you to join it but not — the problem with tariffs is they, they hit the wrong people. Customers are going to pay. It's quite predictable. Our competitors are going to do tit-for-tat. So it doesn't actually solve the problem. Now it may bring them to the table. So I'm hoping that at the end of the day, the president succeeds in what he wants to do and I say, “Hey, you know, your method worked.” I'm just worried that the method can cause more problems.
Ryssdal: What keeps you up at night?
Dimon: Well, I worry about a little bit of everything. But, you know, if you ask me, the thing that we really have to do it better is we've got to fix these issues. I think these issues are holding us back and tearing us apart: jobs, skills, wages, all those various things. But if you ask me about a risk? Cyber. We are not prepared for cyber, and it's already a cyberwar. Companies like JPMorgan and hundreds of thousands of others are attacked every day by state actors, criminals, and we don't have the authority in place to have the proper response and protection. The government knows this, by the way, but we still haven't fixed it. And that's information sharing, the ability for not us but for the American government to take offensive actions. It needs to be made a part of trade. People have to know there's a huge price for cyber. Cyber could take down an airplane. It can close down electrical grids. It could be a disaster. And I think if we don't move really really quick, we're making a mistake.
Ryssdal: So put on your most objective Jamie Dimon self here for a second and answer this question: Is it possible that you have too much power in this economy? You.
Dimon: I don't think so. I mean there —
Ryssdal: You are pulling a lot of levers.
Dimon: There are 28 million companies in America. But there is a huge global economy. America is worth $150 trillion. You know, we are one actor of many in this economy. And there are a lot of other big banks, still a lot of them. I'm going to be competing one day with the Chinese banks, folks. I don't say that lightly. They are already — they have a bigger home market, they make more money — we're worth more in market value. But some of these Chinese banks make more money than we do. They have aspirations, and they should. They're going overseas, and they should. They're fine. They're Chinese companies overseas, and they should. And they will be competing with us on a lot of things. We also probably will have to compete one day with Alipay and WeChat and Tencent. And so I look at the world, I'm not saying this is great. I'm saying, no, we're gonna have competitors. Not just the ones we've always had here but a global set, and I want to compete. I want JPMorgan Chase to be the best bank in the world. And I want it to be an American bank. I think it would be a mistake for America if the best banks in the world and the biggest banks in the world were Chinese banks.
Ryssdal: Well, so here's actually a good follow-on question: Do we, as an economy, get the benefit of your size that makes it worth the risk of you being so big?
Dimon: Yes. Because remember, a scale economy — it's true for banks, it's true for auto companies, it's true for a lot of industries — the beneficiary of scale of economics is the client. It's not the company, because capitalism forces the return of the company lower. And, you know, JPMorgan — and also our size and diversity. It's why we had no issues through the storm. It's why we were able to help so many people — and others did, too, by the way — because of our size.
Ryssdal: Well, and you got out of the messy stuff earlier, right? That's part of it.
Dimon: Yeah, that's part of it. We had plenty of capital, liquidity, capital where we never lost money in a quarter. Which I think when you're a financial company and you lose money, people question your strength and stuff like that.
Ryssdal: You're in favor of the president's tax cuts and his deregulatory moves.
Dimon: I was in favor of the president's business tax cuts. So separate business because it's very important. If America wants the best economy it could possibly have, it should have a competitive business tax rate. That is a sine qua non. The notion that you could have the best economy in the world with a super high tax rate compared to your competitors was driving capital and companies and brains overseas. That was a mistake. On the individual side, you know, I didn't ask for personal tax cuts. I didn't need one. So that was not our drive. The business community was like we need a competitive tax system to be competitive. And then, you know, do what you have to do on the other side to help pay for all this, all the things that we need to take care of America.
Ryssdal: Which, as you say in your letter, we're not doing, right? We're not taking care of health care. We're not taking care of infrastructure. We're not taking care of entitlements to get the debt and the deficit down.
Dimon: We have to roll up our sleeves and figure out solutions to those problems, which is doable.
Ryssdal: You keep saying that.
Dimon: Yeah. Because America's always done that. We put a man on the moon in eight years, for God's sakes. We won two world wars. We're the most innovative society in the world. But now it's 20 percent of our GDP is health care. There is a good part to that if you live longer, save lives. But there's a bad part — we don't know the best outcomes. We have too much disease, because people aren't taking care of themselves, like obesity drives a big part of cancer, heart disease, depression, diabetes, stroke. Look, society has always had things it should fix. Like I said, America is the most prosperous nation the world's ever seen. And yes, we have these issues we have to fix. And we have to fix income inequality. And honestly, you know, I don't know if your readership knows, there's a thing called the earned income tax credit. So if you're a single woman with two children making $14,000 a year, the government will give you $6,000. I would double that. I think people who have jobs earn dignity. That first job leads to a second job. You'll have better social outcomes. So I want to make sure that people who start unskilled have a living wage, and I think society can afford it. And if they have to tax me for that, so be it.
And then skills — like we used to be the best at kids graduating high school with skills. We used to call them vocational schools. Community colleges, high schools, colleges should make sure that when kids come out, that they've learned the skills that give them a job. There are a lot of jobs out there that high school kids can do that would earn $50,000 a year. And you see some schools quite successful at this and some countries are quite successful at it. And it's through apprenticeships and it's through partnering with people in coding or medical, nursing or bank tellers, you know. And so like our bank tellers here in New York City, $35,000 a year and $12,000 worth of medical and pension benefits. And they're 18 years old. And that's just the beginning for their career. They can end up having my job one day if they're really good.
Ryssdal: If they hustle. On the business tax cuts, help me understand how regular people see that benefit, right? What's the benefit to society?
Dimon: Well, there's several benefits, OK? But if you have a healthy economy, you will have more jobs and more wages. And that's all directly related.
Ryssdal: Yeah, how we doing on wages so far? Come on.
Dimon: Yeah, not so good, but part of the reason is ’cause we have anemic growth. And when the tax bill first went through, companies did raise wages, they did —
Ryssdal: No, they gave bonuses, right? That's mostly what they did.
Dimon: No, they did both. Some did bonuses, some did cap expenditures, some did wages. We changed — we reduced the deductible of medical care for people.
Ryssdal: And you guys, to be fair, you're investing 20 something billion dollars, I get that.
Dimon: We announced a huge amount of LMI — mortgages for lower and middle income households. The real benefit is cumulative over time, as capital is retained and reinvested in the United States. Capital drives productivity, productivity drives growth, productivity drives wages. It's a cumulative effect over time. The damage was cumulative in the past. You didn't see it all at once. It's just one of the reasons we were at 2 percent growth and not 3 percent growth. And so we need to have a competitive tax system to have a competitive economy.
Ryssdal: Do you think these 3 percent growth numbers that have been out in the last couple of quarters, do you think they're going to stick?
Dimon: I think it could, yeah. The economy appears to be quite strong, yeah. I mean, you know, we can do things — things can offset, that but it appears to be quite strong. Capital expenditures are going up, wages are going up, more people are employed. We may hit the lowest post-war unemployment ever. And that's true for minorities, it's true for all age groups and etc., so, yeah. And that's one thing you do. The other thing is like I said, like you know, the earned income tax credit, getting kids better skills and stuff like that. You get wages up. The other thing, someone did a study the other day, that average wages didn't go up, but then they adjusted for the fact that so many baby boomers like me are retiring, and the person in the workforce, their wages are going up. The average is not going up because the higher-paid baby boomers retire. Until you've got to really study these numbers to get them exactly right sometimes, understand them.
Ryssdal: You spend a lot of time studying numbers?
Dimon: Yes. Facts and numbers and analysis, yeah.
Ryssdal: So what's the next crisis going to be?
Dimon: You know, someone asked me a question, you know, will there be the next recession? Of course.
Ryssdal: Yeah, there will be, but the question is what's going to do it?
Dimon: Obviously when there's a recession, yeah, it'll filter through the financial system and credit goes up and loss. So people will always be prepared for that.
I don't know what triggers it. I've never seen really people predict that. People don't usually predict the inflection point economy very well. In fact, I've almost never seen it. But things grow. So, you know, I'm going to put geopolitics and cyber aside, but you know, leverage continues to grow a little bit. Banks are in quite sound shape, but CLOs [collateralized loan obligations] are growing a little bit. Some people worry about the ETFs [exchange-traded funds] and you know these passive things. They will liquidate assets when the time comes, and the market can’t handle that very well. You know, the Fed, if inflation rears its ugly head — which it could; there's no law that says there won’t be little more inflation — then the Fed will have to raise rates faster than you think and higher than you think. And that is kind of what I call a traditional recession. The raising rates to slow down growth, hoping for a soft landing. So it slows down the economy, reduces inflation and hopefully you don't go into a recession. But that's almost never happened, it almost always goes in a recession. So you got to be just very cautious when you think about the future.
Ryssdal: With the caveat that the next crisis is going to be different, whatever it is, right, it's not to be housing-induced. Do you think we have the capacity now, politically and economically, to deal with the crisis?
Dimon: Yeah. I think that the regulators have a lot of new tools and a lot of knowledge. The system has a lot of capital, a lot more liquidity in it. But I know that Hank Paulson and Ben Bernanke, Tim Geithner speak a little about some of the tools they lost.
Dimon: There is some truth to that. But they also have the ability to take over all these financial companies, to manage these financial companies, to keep all these financial contracts in place while they're doing that. These companies have a lot more wherewithal and capital and creation of capital throughout. They have the ability to force companies to raise capital before — so if you've seen Lehman, when it happened, they didn't have the legal right to tell them, “You're going to raise capital.” And now they do. So they have so many tools to stop it from happening, and if it ever does happen, to manage if it happens.
But that doesn't mean — the next thing will be different. And one of the great things about America, you know Warren Buffett talks about the unbelievable resiliency, if even our democracy — we come out and create.
So Hank Paulson, Bernanke, Geithner, they were trying to solve a problem. They did a lot of different things. They put a lot of medicine in, the shots in the arm. Some worked, some didn't, and in hindsight you may have done it differently. But the American can-do, let's get it fixed — we saw that when TARP [the Troubled Asset Relief Program] first went and the stock market went down, they quickly reversed and said we should get this done.
Ryssdal: So as I said, I read a couple of your shareholder letters. This most recent one from 2018, it's 47 pages long. The last like 25 pages are all public policy. And you got in some trouble recently dabbling in the whole idea of you being president and that whole stuff. Where is, what is your role in public policy?
Dimon: So I took on the job as chairman of the BRT —
Ryssdal: Business Roundtable.
Dimon: — because I think that we have to, in a non-parochial way, help — working with government and civic society, so not on our own — help form great public policies around innovation, education, taxation, health care, retirement, corporate governance, that are great for the United States of America. And companies have a huge amount of resource capability, and I think it's just really important. So I'm trying to isolate all these issues about how you can work. A lot of CEOs work on health care task force, task force for presidents, around the world, for other prime ministers.
I just think it's important that business and government work together to find solutions for society. That's with the AdvancingCities was, because a lot of those solutions are in the city. They're not federal solutions, they're in the city. I need welders. Can you train welders? I will hire them if you train them for me. And then you work with them.
So it could be schools, affordable housing, they’re in the cities. And a lot of mayors are doing a great job at it. So think of them as kind of the petri dish to come up new solutions that work for society. This author Jim Fallows, who wrote for “The Atlantic” talked about all the rebirth of the cities, and a lot of it was about mayors who really care about helping the city, and citizens both civic or business saying: "You know what, I'll take care of that park. You know what, let's bring a company into fill that empty building. You know what, let's get the high school to create these jobs. Let's bring a company in." Like a couple these cities have done well because they’ve brought one company that became the foundation and could help give a lot of people jobs and lift up a community.
Ryssdal: You're amazingly optimistic, honestly, I'll tell you.
Dimon: America has the brightest future the world's ever seen. The millennials, I hear they're depressed because things won't be as good. Even at 2 percent GDP growth for 30 years, OK, the GDP per person is going to go from $65,000 to $130,000. My kids’ kids will probably live until they’re 100 years old. Medicine will probably be a lot less painful than it was for some of us growing up. I could go on and on and on.
There are fears. I mean, you know, nuclear war, that, to me, can disrupt all of mankind.
Ryssdal: You tried to set aside it before, but geopolitics, that's real.
Dimon: Well, nuclear war. That’s the one that —
Ryssdal: Let’s stop short of nuclear war with geopolitics. There's plenty of geopolitics out there to worry.
Dimon: And there are a lot of books out there that I read called "Factfulness" and "The Better Angels of Our Nature" that show how much better mankind's gotten over the years, because of technology and even institutions, even people who taught, churches who taught morality. You know, there wasn't necessarily morality 50,000 years ago. So these things — mankind has got better and better and better, and less and less war, less and less killing, longer and longer lives. That's going to continue. And you know, we do have to face war and obviously, I think climate change we should face. Again, we know some of the things we can do that can ameliorate climate change the right way, and we haven't done them. People say they want it, but you know what, it's going to be a carbon tax. But, of course, the American public doesn't want a carbon tax. George Shultz and some other former secretaries of state said, carbon tax, they don't want a carbon tax, they don't want to send more money to the government, where the government just uses it.
But a carbon tax with a carbon dividend: You pay for carbon, but you're going to get a dividend from the government based on everyone else, the collected carbon — so it doesn't change your income, but you might spend it differently. You might buy a new car or that new refrigerator, put in those new windows. Over time, those things actually work, and we are going have to get at it, because the sooner we fix some of these problems, the better.
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