JPM’s Jamie Dimon warns of market panic as US near default

Jamie Dimon, President and CEO of JPMorgan Chase and Company, speaks before a Senate hearing on banking, housing and city affairs on “Annual Oversight of the Nation’s Largest Banks” on Capitol Hill on September 22, 2022 in Washington, United States, out of.

Elizabeth Franz | Reuters

JPMorgan Chase CEO Jamie Dimon said Thursday that markets are gripping in panic as the US nears a possible default on its sovereign debt.

An actual default would be “potentially catastrophic” for the country, Dimon told Bloomberg in a television interview. But Dimon said he expects the worst-case scenario to be avoided as lawmakers will be forced to respond to growing concerns.

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“The closer you get to that, the more panic comes in the form of stock market volatility and government bond turmoil,” he said.

Dimon joined a string of business and government officials who made dire predictions about what would happen if the US debt ceiling were not raised or suspended and the world’s largest economy defaulted on its bonds. Treasury Secretary Janet Yellen said the idea of ​​the country defaulting was “unthinkable” and would lead to economic disaster.

“When there’s panic, people have to react, we’ve seen that before,” Dimon said.

But “that’s a really bad idea because panic becomes something that’s not good,” he added. “It could have implications for other markets around the world.”

war room

JPMorgan, the largest US bank with around $3.7 trillion in assets, has been preparing for the risk of an American default, Dimon said.

Such an event would repercuss the financial world, impacting “contracts, collateral, clearinghouses and definitely customers around the world,” he said.

The bank’s so-called war room met once a week, a cadence that will shift to daily meetings around May 21 and three daily meetings thereafter, he said.

He urged politicians from both major US parties to compromise and avoid a ruinous outcome.

“Please negotiate a deal,” Dimon said.

other banks

In the lengthy interview, Dimon said he speaks daily with regional bank executives amid concerns sparked by the collapse of Silicon Valley Bank in March. Last week, JPMorgan emerged as the winner of the government-brokered auction for First Republic.

Regional banks are “pretty strong” and reporting good financial results, but managers are concerned about the bank runs that have bankrupted three companies, he said.

“I think we have to assume that the regional banking crisis will get a little bigger,” he said.