Crisis worst since Great Depression

Chief of JP Morgan Jamie Dimon is a person who many have called the superhero of this global financial crisis. Jamie Dimon has ensured that J P Morgan is not only the biggest bank in America with a market cap of about $150 billion but is also one of the safest banks on planet today.

Dimon avoided JP Morgan taking on sub prime loans and all those derivatives. In fact, that is what makes it so much safer and different from all the other banks.

He has also acquired many major banks and firms recently to make J P Morgan the biggest bank in America. Jamie Dimon is also reported to be at the heart of negotiations with the US government and has been involved in many of the government's rescue plans. So there's no one else who knows about this crisis and what to do about it better than Dimon.

NDTV: Sir, thank you very much for joining us.

Jamie Dimon: It's a pleasure to be here.

NDTV: How bad do you rate the current crisis? The worst in 100 years, 80 years? How bad is it?

Jamie Dimon: Well you know as a student of history I think it's probably the worst since the Great Depression. We've had a lot of financial crisis. We have had them every 5 or 10 years. We have seen the internet bubble, the emerging markets, the Asian crisis of 1997..so I wouldn't take it as far as the Great Depression. I don't expect it to be that bad but that would be the worst.

NDTV: So worst in about 80 years. Now I'm not going to ask you when it's going to end. That's probably the most difficult thing to predict. But for investors, if you could tell us what key indicators, what signs should they look out for that indicate that the crisis is coming to an end and recovery is on its way. What are the key things one should look out for?

Jamie Dimon: I think one of the key things you have already seen and that is taking place is that the Central Banks and the governments in the world are taking very aggressive, bold and often creative never done before kind of actions. They are trying to mitigate the situation. So I think the fact that they can gauge the situation like that is a pretty positive sign. If you are optimistic, you could think that that will start to work over time and that you'll see lib rates come down. The real sign to look in markets will be that companies again will be able to borrow in the market place, they are going to pay more for money, people will demand less leverages in certain companies but they'll be able to raise finance in the balance sheets in the ordinary course of business.

NDTV: So for an average person, say one of our viewers, as an average investor what should he look out for? Is it difficult to know when companies start borrowing and lending again and the confidence comes back? What are the signs that an average person should look out for?

Jamie Dimon: I think the average person will look out for less value for markets. You'll stop reading about financial crisis in newspapers every single day. This will become less and less of an issue and you'll start to see normal functioning of rates and deposits and even the news will spend a lot less time on it.

NDTV: We are looking forward to that actually! Now we've seen this unprecedented package from the US government and many other governments. You've seen it in different varieties, in different parts of the world. Which policies do you think are actually going to have an impact and which ones are little less impactful than we had hoped?

Jamie Dimon: Guaranteeing deposits which a lot of companies have done is very impactful because it really means that any one who invests in a bank knows that they are going to get their money back. Recapitalizing the banks, we know is going to work somehow because if some banks had a cut back on lending, there is lesser need to do that and other banks who didn't need the money can use it for more aggressive purposes. So we do not know exactly how it's going to work because it's kind of unprecedented but I do think that will be helpful. Those two things will play the most important steps that they have done.

NDTV: The US government has given a lot of money to the nine top banks. J P Morgan is safe, it has got adequate capital, capital adequacy is absolutely fine. Why did you take the money if you didn't really need it? Did they force you?

Jamie Dimon: No they didn't force us. I would say that they had a strong opinion about it. What they wanted to do was to inject capital into 9 companies. So it wasn't the stigma to take the money so that a lot of other banks would take the money and it would allow more capital into the banks and reduce the burden on the balance sheet which will make them start to grow again. I actually believe that their argument is a fair argument, they enforced it upon you but they said that if any one bank doesn't do it then the other banks may not do it. We merely spoke to our board afterwards. We did not need the money, we probably needed it less than any one in the room. It's quite clear to me that this is of asymmetric benefit to companies, the weaker you are a company the more you benefit. On the other hand it was good for the system. It was good for J P Morgan but we didn't think that J P Morgan for self assure procure reasons should stand in the way of treasury to do something good for the system. We wanted to be supportive and we thought it was a pretty obvious thing to do.

NDTV: You know in a crisis like this US banks tend to look inwards, solve a lot of their own problems obviously introspective and kind of withdrawn from the emerging markets. Is that happening?

Jamie Dimon: Most likely not to happen with J P Morgan because we are devoted to growing our businesses overseas. I think you may see some banks do that, not because they want to do it but because they don't have the capital to do it at this point. It is possible that you see some banks put back a little bit.

NDTV: Watching all the rescue plans across the world, what do you think the Indian authorities should do for India ?

Jamie Dimon: Well India is doing far better than most of the countries. I think India may slow down a little bit but it is poised to have pretty good growth. So I don't think India should do anything that has been done elsewhere.

NDTV: Yes but say for emerging market countries, what should the authorities do?

Jamie Dimon: In general for emerging market countries I think they have to be prepared for the slowdown in the States, Europe and Japan. Three major economies in the world are on a slowdown and so it will have an effect on them. So if I was in an emerging market country, I would be prepared for some form of stimulus package that includes infrastructure and also make sure that orphanage institutions were sound and that they have the borrowing capability and also check in case they needed some help.

NDTV: J P Morgan came out of this whole terrible crisis relatively unscathed. Actually it is amazing that you didn't get caught in all that subprime stuff. How much of it was luck, how much did you see coming?

Jamie Dimon: If you make a whole long list of problems, then we were engaged in lot less of them. And the ones we were engaged in were in a smaller way. And a lot of that was the risk management of the company. We get very nervous by the subprime early on and cut way back on exposures. We minimized on our exposure levels and lending. We still make plenty of mistakes. We don't travel around and say that we were flawless we make plenty of mistakes. We have a lot to learn so we make sure that we become a stronger company.

NDTV: There is widespread anger or unhappiness among ordinary people on the streets on the amount of money, bonuses and perks that Wall Street and bankers get. Is that anger justified?

Jamie Dimon: I'm a believer that people have complaints; I was really trying to think through whether its right or wrong. There is no question that there was compensation paid in certain cases that wasn't due or shouldn't have been paid. We know that in hindsight. But it is wrong to blanket everyone and to say that everyone did it in exactly the same wrong way. I understand the anger but I think people should be very careful about what are the answers, about how to fix that and what should be done about that.

NDTV: So, what should be done ? Do you feel that if you cut back, you won't get the best talent. Let the market decide or should there be more checks and balances in the remuneration of the top management of banks?

Jamie Dimon: That's a good question. I do think there is a free market out there. Forget the CEO for a second, you have it in sports, you have it in arts, you have it in business where if you want to get the best talent you have to pay for it. If you restrict companies from doing that it will damage the future of the companies. Some CEOs may get what they deserve and some of them don't. I'm not against people paying more. In States there is a big debate about whether people who make a lot of money should pay more in taxes. I have been in complete support of that. People who make a lot of money have been beneficiaries of the country. It is fine for them to spread the wealth in the country. You see the Republicans in United States may help a lot of us to spread the wealth. We have had a progressive tax system since World War I and we should think about society in an equitable manner and taxes are a way of doing that. Boards should be a lot more conscious about how they pay executives. If they do pay executives pay them for the performance for an extended period of time and not based upon the year they won't pay them on excessive risk.

NDTV: You said we're distributing wealth. That's a kind of bad word in these elections and socialism in India is a terrific word. Rightly or wrongly in America it's an awful word. But what the government of America is doing is buying stocks in banks. Does that smack of socialism?

Jamie Dimon: I didn't use the word socialism. I never believed that we've had free markets since I have been in business so what we need are better regulations. When we talk about spreading the wealth then most countries have progressive tax system and that is what I mean. Buying stakes in banks is not really socialism as the US did it earlier also in 1932. It could become socialism if the state actually controls the company as opposed to assisting the company. So it really depends on who you are in the spectrum.

NDTV: Another media report which is probably a little truer. You are in the running for Treasury Secretary. Right?

Jamie Dimon: I honestly don't know. But it's not what I would expect to be.

NDTV: Would that position attract you?

Jamie Dimon: Honestly, I've never thought of myself suited for a government type of job. I love my job and my intent would be to make JPMorgan a great company. We've tried very hard to help our country and I think it's reasonable enough to ask people to help them. J P Morgan has been a fabulous corporate citizen in the United States, in fact wherever we do business.

NDTV: Your answer was not quite a no. If you were actually asked to be the Treasury Secretary, you may accept it the way you accepted $25 million even though you really don't need either.

Jamie Dimon: Well, I don't expect to be asked but if so, I'll consider it based on what they say to me.

NDTV: Why did you support Obama in these elections over McCain ?

Jamie Dimon: I'm not allowed to support or endorse any one and it is known that I'm a Democrat so there is an assumption that I'm a Obama supporter.

NDTV: We won't go down that road since you are under certain restrictions there. Just coming back to India, how is this crisis going to affect your plans for India?

Jamie Dimon: I don't think the crisis affects our plans at all. We are a major investment bank in India and we have expanded our cover to 160 banks now. We will be here and build investment banking, commercial banking and asset management. We are very optimistic about the future of India and I think the country is going to do well over a period of time. We are planning strategy to do things in a bigger and better way. I think when you invest in a country then you do it relentlessly and we want people in India to look at J P Morgan and say you have helped in every way you can.

NDTV: Indians are worried about outsourcing in America and there may be punitive measures for firms that outsource in America. Are you in favour of that?

Jamie Dimon: There is a lot of anti-trade sentiment around the world and it comes from both the left and the right. Personally I think the trade has been a great thing for the world. Most economies' estimate is lifting 2 billion people out of poverty. There are some negatives but for the most part America has been a major beneficiary of the trade. Indians buy a lot of stuff from America which in some effect means you outsource jobs to America. I think we should continue trade and make the world come closer. It is also important that the governments make sure that they have policies in place that will help anybody who is displaced by trade. We've got 12000 people here in the global service centre in addition to the 500 in investment banking, asset management and commercial banking. They do everything from call centre operations, complicated computer programming, risk management to research. It's been great for people here and for J P Morgan and we plan to do more of it and not less.

NDTV: How are you positioning yourself over the next two years?

Jamie Dimon: We've done two acquisitions and if there is a great opportunity well do more. Our troops are tired and you have to make sure you have the capability for it. There may be an opportunity to distract us from all other jobs and we may look at doing it. We want to do something big in Asia and hope to see that opportunity.

NDTV: Thank you Jamie Dimon for being so candid. Great to have you on the show. And congratulations for what you've done so far.

Jamie Dimon: Thank you for having me on the show.

Source: ndtvprofit