JPMorgan Chase and company chairman and CEO Jamie Dimon testify before the Senate Banking, Housing and Urban Affairs hearing on the “Annual Oversight of the Nation’s Largest Banks” at the U.S. Capitol in Washington, U.S., September 22, 2022.
Elizabeth Frantz | Reuters
JPMorgan Chase Chief Executive Jamie Dimon said on Thursday markets would panic as the US moves closer to a possible sovereign debt default.
An actual default could be “potentially catastrophic” for the country, Dimon told Bloomberg in a television interview. Dimon said he expects the worst-case scenario to be avoided, nonetheless, as lawmakers might be forced to answer growing concerns.
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“The closer you get to it, the panic you get” in the form of volatility in the stock market and shocks in Treasury bonds, he said.
Dimon joined the ranks of business and government officials making ominous predictions about the consequences of failing to lift or suspending the US debt ceiling and allowing the world’s largest economy to default on its bonds. Treasury Secretary Janet Yellen said the idea of a rustic default needs to be “unthinkable” and would result in economic disaster.
“If it involves a panic point, people should react, we have seen that before,” Dimon said.
But “that is a extremely bad idea because panic becomes something that is not good,” he added. “It could affect other markets around the world.”
War room
JPMorgan, the largest US bank with approx $3.7 trillion in assets, he was preparing for the risk of America going bankrupt, Dimon said.
Such an event would sweep across the financial world, affecting “contracts, collateral, clearinghouses and would definitely impact customers around the world,” he said.
He said the bank’s so-called war room meets once every week, and the meeting frequency will change to day by day meetings around May 21, after which three meetings a day.
He urged politicians from each major American parties to compromise and avoid a ruinous consequence.
“Please negotiate a deal,” Dimon said.
Other banks
In an intensive interview, Dimon said he talks to regional bank executives day by day over concerns raised by the Silicon Valley Bank collapse in March. Last week, JPMorgan won the government-organized First Republic auction.
He said regional banks were “fairly strong” and would perform well, but executives were apprehensive a few bank run that had led to the collapse of three corporations.
“I feel we’ve to assume there might be a bit more of a regional banking crisis,” he said.