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J.P. Morgan Chase CEO Jamie Dimon told his employees that his takeovers of bankrupt banks and billions of dollars in loans during the 2008 financial crisis were aimed at supporting the country.
"Contrary to what most people think, many of the extreme actions we took were not aimed at making a profit, they were made to support our country and our financial system," said Dimon in a memo obtained exclusively by CNBC.
Dimon, 62, has re-examined the causes of the 2008 disaster and the measures taken by the bank as part of a 10-year note from the Lehman Brothers bankruptcy.
The purpose of his message was apparently to show that, while his shares had benefited J.P. Morgan – now the largest bank in the world by market capitalization – at the time, these were calculated risks.
J.P. Morgan acquired the investment bank Bear Stearns and the assets of the Washington Mutual retail bank during the turmoil of the crisis. These takeovers eventually led to billions of dollars in litigation costs related to mortgages, and Dimon said that in hindsight, he would not have entered into the Bear Stearns agreement for this reason.
In the decade that followed this seismic upheaval, once in a generation, Dimon promoted its advantages, gaining a superior market share in the areas of credit cards, bond trading and technology. Last year, the company posted a profit of $ 24.4 billion.
Message from Jamie Dimon
Dear colleagues,
A decade has passed since the collapse of Lehman Brothers, so it's time to think about the financial crisis raging ten years ago. Many things have been written – and there is still much to write about – about this crisis, but I would like to share with you some thoughts on this extraordinary time and all that you have all done at JPMorgan Chase to try to help you. .
The gathering storm hit with a vengeance
Although the collapse of Lehman in September 2008 was the epicenter of the crisis, it was much more complex than that – the roots go back to 2006. By the end of 2006, we had already seen problems in mortgage lending. risk, leveraged loans and quantitative investments. With the launch of Basel II, the leverage of investment banks (not commercial banks) has more than doubled, as has the parallel banking system (think of structured investment vehicles , secured debt securities, money market funds, etc.). These were often financed by unsecured and unreliable short-term wholesale borrowings. Then, the biggest problem of all came: it was not just about subprime mortgages, but all mortgages. This happened after the fact by bad underwriting, a government policy that fueled and encouraged inappropriate mortgages (higher and higher loans and values, less liquidity, lower income ratings and certification), unscrupulous brokers and riders investors. The banks, although they are not the worst players in mortgages, have also joined the party. When the world realized that $ 1 trillion would eventually be lost in mortgages, panic followed. There were several failures – Mortgage Brokers, Savings and Loans (S & Ls), including WaMu and Indy Mac, as well as Fannie Mae and Freddie Mac (which were the biggest financial bankruptcies of all time). by the extraordinary rescues of AIG and other major financial institutions.
JPMorgan Chase did everything to help during this time
On March 16, 2008, we announced the acquisition of Bear Stearns, a $ 300 billion asset company, which collapsed and had fatal problems (we were essentially buying a house … but it was a house in fire). And we did it at the request of the US government (thinking at the time that it could help avoid a terrible crisis). September 25, 2008, 10 days after The bankruptcy of Lehman Brothers, we bought the largest S & L, Washington Mutual, another company that had $ 300 billion of assets.
We have taken other extraordinary actions – often at calculated but important risks – for JPMorgan Chase – to support customers, including governments, and to support the markets in general. We lent $ 70 billion to the global interbank market when we needed it the most. With markets in crisis, we were the only bank to lend alone $ 4 billion to the state of California, $ 2 billion to the state of New Jersey and $ 1 billion to the state of New Jersey. State of Illinois. In addition – and frequently – we lent or increased for our clients $ 1.3 trillion at constant and equitable rates, in many cases much lower than the market would have demanded, and we provided more than $ 100 billion. dollars to local governments, municipalities, schools and hospitals. – for profits during the year 2009. Many other banks have done the same. You will probably be surprised to learn that we lent a huge amount to Lehman before the crisis – and even more After the crisis In fact, at the request of the Federal Reserve, we took extraordinary risks to lend more than $ 80 billion (on a guaranteed basis) to Lehman after its bankruptcy in order to facilitate asset sales in a similar way. as effective as possible. markets.
It was a traumatic historical period not only for the financial system, but for the whole world. We have experienced a unique economic, political and social storm, and thanks to you, we emerged 10 years after this crisis as a society of which we can all be proud.
Consequences and lessons learned
Many people are still asking me questions about TARP, a government program aimed at financing banks in crisis. JPMorgan Chase did not want or needed TARP money, but we recognized that if healthy banks did not take it, no one else could – for fear that the market does not trust them. And while this helped to create the false rallying cry that all banks needed support, the government, both the Federal Reserve and the Treasury, was trying everything they could in addition to the TARP. And they should be applauded for the extraordinary actions they have undertaken to avoid a much worse crisis. Looking back, it is easy to criticize any specific action, but in total, the government has managed to avoid a calamity.
Many lessons have been learned from the crisis: the need for sufficient capital and liquidity, adequate pricing and constantly refined, fair and appropriate regulations. In fact, regulators should take a victory turn because Lehman, Bear Stearns, AIG and several other failures could not happen effectively because of the new rules and requirements.
We entered the crisis with capital, liquidity, profits, diversity of activities, population and risk management culture, which allowed us to avoid most problems, but unfortunately not all. These forces have also enabled us to overcome the economic crisis and continue to play a central role in supporting our customers and communities and in rebuilding the US economy. Contrary to what most people think, most of the extreme actions we took were not for profit; they were made to support our country and the financial system.
What has most marked, is your character and your abilities, which makes JPMorgan Chase what it is today.
When the global financial crisis erupted in 2008, JPMorgan Chase employees understood the critical role our firm had to play and felt a deep responsibility to those who depend on us. It is this sense of responsibility that has enabled us to overcome the challenges we faced at the time and to focus on what really matters: caring for our customers, helping the communities in which we operate – while under extreme pressure. markets and the body politic – and protect our business.
The way we managed to weather the crisis demonstrates the collective strength of character and commitment on your part – our people. During these chaotic days through the crisis and its aftermath, many of our employees had to work 24 hours a day, seven days a week, for months. And they did it without complaint. The biggest lesson of the crisis: the quality, character, culture and capabilities of your partners are paramount.
Looking back and looking around, we are filled with fear and admiration. For JPMorgan Chase, the last ten years have been a difficult, but decisive decade. Today, JPMorgan Chase is a leader in most of our businesses. I can not tell you how proud I am to be your partner and witness your extraordinary performance. I can not thank our current and former employees for helping us through this difficult time and for our business.
Your friend and partner,
Jamie
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