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The State of the Global Economy

Speaker: Jamie Dimon, Chairman and Chief Executive Officer, JPMorgan Chase and Company
Presider: Richard N. Haass, President, Council on Foreign Relations
October 10, 2012
Council on Foreign Relations

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RICHARD HAASS: Well, good afternoon. I'm Richard Haass, and I want to welcome all of you to the Council on Foreign Relations and to today's CEO Speaker Series meeting. This is part of the Council on Foreign Relations corporate program, which is supposed to increase the connections and links between the business community and the foreign policy community, which to some extent are one and the same. I also want to thank -- rather, welcome CFR members, not simply those of you in the room but those around the country and the world who are participating in this meeting through the wonders of modern technology.

Speaking of modern technology, if people would just take a second to turn off their cell phones and the like, that would be most welcome. This meeting is on the record. As we say, anything you say, sir, can and will, I'm sure, be used against you. In this day and age, probably some things you haven't said will be used against you.

JAMIE DIMON: There's no such thing as privileged and confidential anymore.

HAASS: No. Generally, the phrase someone "needs no introduction" is often used; it's hackneyed. In this case, it actually applies. Jamie Dimon is not simply the head of one of the principal financial institutions in this country, JPMorgan Chase, but I believe has emerged as one of the most important and influential spokesmen for the worlds of finance and business in the United States.

The way it's going to work today is he and I are going to have this conversation for a few minutes, and then we will open it up to you all for your -- for your questions.

Let me just get one or two conflicts of interests on the table and out of the way. I should say that JPMorgan Chase is a corporate member of the Council on Foreign Relations, one of around 175 corporate members. And I am a shareholder in the company. Unfortunately, I am a distinct minority shareholder -- (laughter) -- and I wish it were enough to present a conflict of interest, but alas, it's not. But there you go.

Mr. Dimon, as I expect many of you may know, is of Greek heritage, and so let's -- in the last 24 hours, the chancellor of Germany has been visiting the country of your ancestors -- of your forbears. How worried are you about the prospects for Greece and what it might mean, not just for Greece and not just for Europe but, because of globalization and economic linkages, for the United States and, indirectly, for your own institution?

DIMON: Right. So thank you for the introduction. My ancestors left Greece like 1915, so you can't blame me for what's going on there.

But as a side note, I remember my grandfather coming home years ago and Greeks on both sides were yelling and screaming about the then-prime minister, who is the grandfather of the guy who was the prime minister a little bit -- a while back, arguing almost the same points -- communism, socialism, capitalism, same basic argument, and you know who won.

So Greece -- you know, the issue -- obviously we all want Greece to succeed and survive and -- but from an economic standpoint, Greece is not the issue. You know, Greece has a couple hundred billion dollars of debt. A default of Greece or exit of Greece on its own isn't the catastrophe.

The catastrophe is that if you have a default of Greece before you have a firewall for Italy and Spain, you have a very good likelihood you're going to have a run on the banks in Italy and Spain. Italy and Spain don't have the wherewithal to stop the run on the banks. They need the money -- they can't print euro. They don't have -- they have things called central banks, but they can't print euro, which is -- puts them in a very difficult position. And that's why you read about it that you need a banking union and an FDIC deposit scheme. Seven hundred billions dollars already -- has already left Italy and Spain. It mostly went to Germany. The German banks deposited the Bundesbank, and the Bundesbank, by law, under a thing called TARGET2, had to lend it back to the Italian and Spanish central banks. So the problem's already been widely socialized inside Europe, counter what most people think.

So to solve Europe, you need three things. You need to stop the banking crisis in Italy and Spain. You need a real fiscal union. They have one that doesn't work. You know, a lot of people years ago said it wouldn't work, but it was really a minority. And they've got to do it soon because they're -- it's bleeding slowly.

I do want to remind people -- it's really important -- there are really good reasons for the union. One was political. You know, this is a continent that, for hundreds, thousands of years had multiple wars, hundreds of millions of people died. So you could really say, that's a -- that's a good objective. Let's have a political union, and then we don't kill you -- or each other.

The second was an economic union, the common market. And they would look at the United States and say, you know, if we had a common market, i.e. same (railroads ?), same regulations, same rules, regulations, stuff like that, that it would be a huge boost to the economy of Europe. Those two reasons still exist.

So I personally think they're still going to muddle through because the alternative to mulling through is potentially so bad, and I think the policymakers know that. Now, I could be wrong, but that's -- I still think -- but it'll be a rollercoaster. You're going to see good news, bad news, good news, bad news. You're going to feel like it's going to work, it's not going to work. But they've got to do all those things. They can't do them all at one. They have the will, you know, because they -- all the politicians say there is no plan B. The way is really complicated.

HAASS: I expect we'll return to that, but let's just keep globe-trotting for a second. You've got the international financial meetings in Japan. And one of the things obviously coming out is the IMF predictions for slowdown in global economic growth. Alcoa announced this morning the dropping off of global demand for aluminum, which is something of a(n) indicator.

Are you seeing the same thing in your business operations? Are you -- is it -- (inaudible) -- business around the world because, you know, you're a truly international institution. Are you seeing signs of a slowdown?

DIMON: No, not quite like that. So Europe is in mild recession. You -- I mean, you all see it. So you could argue it's surprise it's not worse. But the governments there do spend 50 percent of the money. So they -- (because ?) that 50 percent will not go down. But -- and Asia is slower, but it's nothing mythical or different than you read about the newspapers.

And the United States, which we'll talk a little bit, is fundamentally stronger than people think, in my opinion. And I'll give you the reasons for that a little bit later. Latin -- and Latin America, you know, some are better and some are slower, but obviously, it's slowed down quite a bit.

HAASS: Asia seems (dangling ?) about -- what about, I mean, India clearly slowing, China clearly slowing?:

DIMON: Here's what -- here's how I put China. China in -- is -- again, I -- opinion, I think they're going to meet their objectives at, like, 7 (percent) or 8 percent growth. Remember, it used to be a lot higher. They need the 7 (percent) or 8 percent to employ the 8 million people to avoid the social unrest and to build all the infrastructure.

I think they're going to meet that because I think they're actually quite right. There's a change of leadership coming. We think the change of leadership will be smooth and will continue the former policies of the government. But they have the wherewithal to do it. So they've got, you know, $3 trillion reserves and a lot of capability to maintain growth at 7 percent. They move very quickly. So you may remember, the United States did a stimulus package after the crisis, and I think it was, you know, like, seven months after the crisis. They did it that month, literally. So they have the ability to move quickly. They know what they want to accomplish.

But I don't believe that China can do that 10 years from now. I think that now they have an economy they can micromanage and infrastructure building still works. They're still not building a lot of bridges to nowhere. I think down the road that doesn't work. I think it'll work in the immediate -- you know, for the next couple years.

HAASS: (Inaudible) -- a lot of other people about Africa these days and Latin America. You're seeing the signs of pretty robust economic growth (there ?)?

DIMON: Africa is you got to go country by country. So we're opening offices in -- you know, we do business with a lot countries there, but -- on the ground, in a big way in South Africa, but in sub-Sahara -- (inaudible) -- this year in Ghana and Kenya. And, you know, we -- remember, we go there for the multinationals. So you ask me who are your clients, they're multinational clients. And when they go, we go. So it isn't a mystical type of thing. So yes, optimistic, but it's country by country, and you really got to think of it that way.

And same with -- same with Latin America. So we -- you know, we're in Colombia and Peru and Chile is doing fine. And, you know, Brazil clearly has slowed down but will be making consistent investments in all of those countries. And Mexico also we think is actually doing quite well. So, you know, our neighbors to the south have done a better job with the fiscal deficit, a better job with monetary policy, a better job creating jobs down there. But, you know, we should -- and we should help them as much we can on the -- on the drug problem they have been having.

HAASS: Well, implicit in a lot of this is, we're not doing --

DIMON: (Inaudible) -- is our drug problem too. So --

HAASS: Implicit in a lot of what you're saying is, we're not doing -- we, the United States -- as well as we should. So let's then turn -- let's turn inward. How worried are you and how much are you planning for the fiscal cliff?

DIMON: Right. So the -- you know, that's the -- that's the big deal, is that when people like -- when the eurozone crisis happens or the debt ceiling crisis, it -- we spent, I'm going to say, $50 (million) to $100 million getting prepared for the debt ceiling crisis, because of the complexity that would happen in global financial markets if you had a real failure.

The fiscal cliff isn't quite that because it's more predictable, you know, what some of these outcomes will be. But you know, we have -- we're forming now a fiscal cliff war room, command center and all that kind of stuff, you know, going through to make sure we understand all of it. And we'll be prepared. I mean, JPMorgan will survive a fiscal cliff. And I just think it's terrible policy to allow it to get close.

And the -- there -- and the reason I think it's bad is because I read in the paper this morning someone said it isn't that bad; it's just so much GDP. There are all these potential outcomes, and I would defy any one of you to really know what they are. Therefore, it's irresponsible policy just to say, well, we'll -- just let's see.

Let's not see. I mean, I think, as a risk manager, you say -- (laughter) -- look, let's not -- let's try to avoid that.

And it'll happen -- it won't happen midnight, December 31st. It's going to happen now in -- you know, right at the election, when people sort of say, this is bad, and they just start to make decisions at the margin -- don't hire, don't build, don't buy, let's just wait and see -- well, that is a recession, just people pulling back a little bit, and let's not do that to ourselves.

HAASS: Do you agree with people who say it's actually better to describe it less as a cliff than as a slope, almost for the reasons you're saying, then move --

DIMON: It'll be a slope going into December 30 -- 30th, yeah.

HAASS: And then after that --

DIMON: Yeah, probably. Yeah.

HAASS: What about the more fundamental thing? Imagine we get through the fiscal cliff less because we concoct an omnibus deal but rather because Congress finds a way to kick the proverbial can down the road. How worried are you at some point -- if the United States can't do something on the order of a Simpson-Bowles $4 trillion over a decade kind of comprehensive deal, how worried are you that one day you wake up and suddenly your BlackBerry or iPhone is red hot because the bond markets essentially move against the United States?

DIMON: It's virtually assured. I mean, it's assured. The question is when and how. And so you know, I can't honestly tell you I know -- this could be two years or five years -- but it will happen. It is a matter of time. You know, the United States can't borrow indefinitely, and you've seen it by -- if you don't believe me, look at, you know, over the hundred years, bankruptcies of country after country after country who just thought they could get away with it because of their reserve currency and the military power of the world. So the -- you know, again, it's a -- why would you take the choice let's wait and see?

So we are going to have fiscal discipline. It is imposed upon us or we do the right thing, we do it to ourselves right way and the -- and a way in fact, I think, could enhance growth and jobs. You know, so if we did something like a Simpson-Bowles -- I believe had that been done, you know, when it was a year ago, whatever, I think this economy would have been booming, booming. But we -- and not just because it -- it would have shown that we have the ability -- I would say America knows the way. We don't have the will -- in Europe I said it has the will but doesn't know the way -- and the more efficient tax system -- it would have created much more certainty among a whole bunch of policy things. I think we would have been booming. I still think it's doable. I just -- you know, we need the -- we need the leaders to say we are going to do it.

HAASS: And when you think of the outlines of something on the -- if you want to call it Simpson-Bowles for shorthand -- is it your sense that it does have to include, you know, the basic elements -- something with entitlement reform, something with spending controls, something with tax increases?

DIMON: Yeah. Yeah, I mean, most business people are not partisan, not parochial. I mean, you know, folks, we can't spend -- you know, we could all sit here and decide we'll spend 20 percent of the government, 21 (percent) -- I think Simpson-Bowles was 21 percent -- and then obviously you have taxes due -- let's have an efficient tax system. So Simpson-Bowles is a far more efficient tax system. So it gets this huge waste and churn I call friction costs in our society from a bad tax system; a polluted, you know, legal system; uncertainty around things -- so yeah, I think you would have had better growth. And Simpson-Bowles, I think, was 4-for-1 or whatever it was, but close enough would have been good enough. I mean, it doesn't have to be exactly right. If it gets growth going again -- you know, remember growth will pay for a lot, once we have growth starting again. So --

HAASS: Let's talk about growth, because there's -- the United States is -- has been now for several years growing at roughly half what you might call the modern historical rate of economic growth. Instead of growing in the mid-3s, we're growing in the -- you know, just below 2 (percent), give or take.

If you were advising the next president, be it Mr. Obama or Mr. Romney, if you were in a position to more broadly make the case publicly, here's the couple of things that we ought to do in order to generate double our rate of economic growth, say to 3 1/2 percent -- one would obviously be some kind of a comprehensive budget deal, like you just mentioned. What else would be on Jamie Dimon's list?

DIMON: OK, I'll -- so I'll -- let me give you the big picture about America -- this great country of ours, OK -- the president, whoever he is next year, recognizes one thing for certain: They go into that office with a royal straight flush.

I think this attitude somehow, how woe is me, how terrible, that America is lost, it's just not true, folks. I mean, and those of you who travel around the world, we have the best military on the planet and we will for years.

We have the widest, deepest, most transparent capital market. In spite of what happened, they're still the best -- I'm talking about in all of its glory -- asset management, venture capital, private equity, you know, the actual markets, municipal bond markets. We have the -- among the best businesses on the planet, small, medium and large. We're the -- one of the most innovative entrepreneurial country around. And I'm not talking about Steve Jobs, I'm talking about all up and down the factory line -- Steve Jobs, you name it.

We invest more in capital equipment, we have good rule of law; it's no longer the best because I think we have a slight polluted tort system at this point. We still have a very -- the Protestant work ethic is still there, OK. This is still the best economy in the world. If you could invest one place on this planet, it would be here. So we've got to get beyond that, you know, somehow, this is a terrible --

Now, we don't have a divine right to success, we've got to get immigration right, fiscal policy right, otherwise, we'll -- oh, right, we've just been given another gift called shale oil. I mean, my god, the most profligate energy nation on the planet -- I mean, God looked down upon us and said I know you wasted all that energy (policy ?), we're going to give you one more shot. (Laughter.) Let's hope we do this one right.

So we have a problem. We should diagnose the problem. And, you know, if you look at America today, corporations are in great shape. Middle market companies are in good shape, small business in better shape, consumers not in bad shape. But how is it returning? Why are we growing at 2 percent? And this one, I can't prove, and -- but I believe that the -- (inaudible) -- OK, Europe isn't going to sink us -- we might sink them -- but there's a huge wet blanket out here, OK?

And the wet blanket, to me, is the uncertainty around -- or you could say -- real uncertainty around taxes, policies, fiscal cliff. We had the debt ceiling fiasco, we have this constant anti-business not just sentiment but regulatory, AGs.

So we're -- I travel all around America. Wherever I go, I ask businesspeople what do you -- how do describe the regulatory environment, they all say it's terrible. So it's not just banks, we've done it to ourselves, folks. We're shooting ourselves in the foot and we're doing it every day. Get rid of that wet blanket and this thing will take off.

And there was a great article that was written -- someone reprinted it in the Wall Street Journal and it was -- I remember George Schultz and Milton Friedman who gave President-elect Ronald Reagan some advice. And it was basically that consistent taxes, consistent regulatory -- you know, tell the same positive story over and over and over and it will turn. And you've got to believe in it, so --

You know, America usually, as Winston Churchill said, will do the right thing after it's exhausted all other possibilities, and I'm hoping we do. But I -- what I -- the important part to me also is in Washington, OK. Hey, if you think that Washington and business can go to war with each other and it's going to be good, terrible error.

I mean, collaboration is what should happen. We should have had collaboration. We should -- we were in a crisis. Every business I know wanted to help and get things done, you know, and would've pulled together, worked around the clock. But it became a war, and now, we're relitigating parts of those wars -- you know, Dodd-Frank and health care and -- you know, so we're going to relitigate it. So it's another addition -- in addition to the wet blanket, you know, the better thing is to get it right -- get it right the first time and move on. But we didn't.

HAASS: Let's transition to that. To the extent there has been a marked absence of collaboration or significant friction between the worlds of politics and the worlds of business, but you -- you would -- you would put the lion's share of the responsibility on the political side?

DIMON: I would -- I would put more on the political side than the business side because the BRT, the business CEOs, everyone I know was coming down and saying, what could we do to help. They -- you know, they were counseled, there were meetings -- matter of fact, the BRT even wanted for the first time -- which surprised me when somebody had asked the question -- these are 120 CEOs of affiliated big companies -- do you want universal health care for American citizens? Eighty percent said yes, but they wanted it done right, a certain way. There was a lot of them that didn't agree with the way it was done. But yeah, there was a huge effort -- let's pull together as Americans and make this work, whatever it took. And it didn't happen.

I don't know -- you know politics far better than I do, but it didn't happen. It still could happen, by the way, so my attitude is, you know, let's do it again. Let's try again. Let's -- you know, we owe it to ourselves to do the best we can.

HAASS: One area that you clearly know better than I do is regulation and regulatory policy, so let me put that out there. You know, historically, you know, one often talks of pendulum swings, and I think there's something of conventional wisdom that, pre-2008, the pendulum had swung too far in the -- in the direction of under-regulation. And then the danger is obviously after 2008, at least one school of thought is that it's gone too far, another school of thought I'll come to in a second, still hasn't gone far enough. Where do you come out on that?

DIMON: You know, first, a lot -- I mean, I read a lot of people who have deep opinions and little knowledge, and then a lot of them use whatever fact they find to justify what they already thought, which is not the way you're going to come up with a good policy.

So -- first off, let's be clear. We need good regulation in America. Good regulation is a good thing. Good doesn't mean necessarily more or less. It just means good. Highways post 65 miles per hour. You can't drink when you drive. You can't -- those are good things done properly.

In some of these areas, we created such confusion -- (inaudible) -- for what? Overlapping jurisdictions, no way to adjudicate disputes. You know, when there are -- when people do commit, you know, not fraud, but, you know, they make mistakes, you're attacked by 17 different agencies as opposed to, you know, in the old days, it would be the one who's responsible for it.

So good -- we need good policy, clarity, simplicity. So a lot of those people arguing on the financial side they need more, what they're saying is more, they mean more capital, more -- well, OK, fine. What's the level of capital that makes sense? Let's have the debate and look at the facts. And, you know, I've always been supportive of a lot of capital, lot of liquidity. I think at one point it's going to go too far, and maybe it is that point.

I think a lot of -- you know, some of these laws, by the way, are laws written in Basel. They're not written here, so not written for America. They're written for other people for other purposes, and, you know, of course the regulators say we -- you know, we have to have a common -- you know, we want to do it right and make it fair for everybody. I agree with that concept except if it's bad for America, because if America doesn't want to do it, the rest of the world can't make us. And I'm not -- I'm not -- I'm not being overly -- (inaudible) -- but if you look to some of these rules, you'd say that those didn't make sense for this country, so --

HAASS: What about -- and the -- sort of and the poster child or poster issue of proprietary trading and the Volcker rule and all that? What's the -- where do you come out on that --

DIMON: So the Volcker -- so after Dodd-Frank was mostly done and after the blueprint and the white paper and after everyone threw their two cents in it, then the Volcker rule was thrown on top. So I would argue it was completely unnecessary, totally unnecessary. It -- by -- it wasn't the problem.

So if you look at a lot of things in Dodd-Frank, I'm not -- we supported a lot of Dodd-Frank, and we support good reform. The Democrats always make it -- I'm still barely one -- binary. You're either for or against it. There are, like, 2,000 things in Dodd-Frank. And, you know, I'm for some and I'm against some, and I can tell you exactly why and what makes sense. A lot of them had nothing to do with the crisis.

The -- Volcker had nothing to do with the crisis, just something that Paul felt deeply about. If you asked me the intent of the Volcker law, keep trading safe for big financial companies, I agree with that. And we've got to get rid of too big to fail. We'll start -- talk about that in a second too.

So I agree with the intent, and -- so prop trading, we don't do any prop trading. What I've said, and which is important, is we have the widest, deepest, best, most transparent capital markets in the world. You -- I didn't bring my -- (inaudible) -- if you could price almost anything on my little BlackBerry within pennies and pips, let's not throw the baby out the bathwater.

So the struggle is trying to find how you restrict market-making to Volcker. And you almost can't, because of what -- the law almost leaves it so vague that it's hard to determine what's proprietary, what's market-making. So I just hope we write it in a way that we end up with the widest, deepest and best -- and most -- capital markets in the world.

HAASS: But you --

DIMON: That's what I hope. And, you know, we -- what happened was, you know, the regulators came out with their -- there's, like, 180 things in there. They've gotten 18,000 comment letters from around the world, not just from American investment banks, but from around the world: asset managers, central banks, governments.

Let's just get it right. And at one point it's got to be a dialogue, not just, you know, people going up to a dark room and deciding what the answer is to it.

HAASS: But in general, -- (audio break) -- want there to be -- so should most regulation come, if you will, from the outside, or should firms essentially have a large role in self-policing so long as it's transparent?

DIMON: I think that you should have -- regulations should be formed and designed with practitioners too. And, you know, (writing ?) this crisis because banks were blamed for everything is keeping them out of the process. And, you know, that's kind of a mistake, because that's like if you're designing a hospital, keep the doctors out, you know?

Now, of course, banks made mistakes. Bad banks should be punished. But, you know, you really -- it would have been better to sit down and have the conversation of design, improvements to the system, than we ended up doing, which is, you know people just dumping 2,000, 5,000 pages of rules, trying to figure what they mean.

And some of these rules, by the way -- and, you know, here I'm a big bank -- there is in our great economic ecosystem place for all different types of entities, small banks, medium-sized banks, big banks. You know, we bank certain companies in 50 countries, you know? That's why we're here. We do a lot of things other people can't do.

Some of these rules are going to be terrible for small banks. Now, I'm saying that because I support them. (Inaudible) -- I don't want them coming up to me -- (inaudible) -- small banks also playing the big banks, but who's the biggest bank of the banks?

HAASS: JPMorgan. Well, let's talk about that. You mentioned too big to fail. There are -- there is talk that you ought to be broken up, that simply if you ever did get into serious financial distress that you would be system-threatening, if you will. It goes way beyond the institution.

How does one -- how does one deal with that? I mean, how do you -- other than people have tremendous faith in you and one day your successors, how do we deal with the problem that if JPMorgan ever made an institution, you know, threatening mistake that it would -- if the ramifications would be far larger?

DIMON: So, you know, people talk about Glass-Steagall and -- (inaudible). So this crisis had nothing to do with Glass-Steagall. OK, you may remember hedge funds had problems early on. Mortgage brokers -- or savings and loans went bankrupt -- IndyMac, PennyMac, WaMu, which we ended up buying; monoline investment banks, which wasn't Glass Steagall; Lehman and Bear Stearns, AIG, a life insurance company, and then the biggest financial catastrophes of all time called Fannie Mae and Freddie Mac. That all happened way before it hit a bank. So it wasn't a Glass-Steagall foundation. That's number one.

Number two is we have to get rid of "too big to fail." So I would -- if I was sitting in the -- in any other (CEO ?) than my own I'd say, you know what? You should never pay if JP Morgan fails. You need a way to bankrupt -- and I prefer bankruptcy. It should be called minimally damaging bankruptcy for big dumb banks. (Laughter.) As opposed to this vague concept of orderly liquidation or resolution -- kind of sounds like you're, you know, you're resolving us but we may still be around. I think it should be called bankruptcy. As a matter of fact, I think Kevin Morse (ph) recommended Chapter 14. It needs specialized stuff, because just like in a hospital, when it goes bankrupt you can't turn the lights off because it may be operating. In a financial company, all you need is the money keeps running through the system, so it doesn't get locked up.

It could be done. In fact, it was done quite successfully by the FDIC for a long period of time. And so I do think there are ways that you want to structure us legally and stuff so that regulators, the regulators say, if JP Morgan starts to fail and they file Chapter 14, here's what happens: The money keeps on moving. The equity holders and the unsecured holders pay everything. If there's any money lost -- there won't -- you know, JP Morgan has $400 billion of equity in unsecured debt. OK? And there's no way we're going to lose all that. But if it did, it would be charged back to the big banks, just like FDIC is today, so the citizens never pay.

And also, I think, when that failure happens, all clawbacks are invoked, all managers fired, all directors are fired, and the name is buried forever. And -- so that we don't -- we remember why, you know, it shouldn't happen. So it shouldn't hurt the economy and stuff like that, and I agree with that. So those are -- we should be doing, fixing that particular problem.

You know, like I said, if JP Morgan -- the reason -- presumably the reason companies get bigger and stuff like that is we offer things to clients. You know, like better, faster, cheaper. That is capitalism. Productivity, growth, enhancements, and you buy it from us or whoever you buy it from because you like it. You go to Walmart because you like the price, just like when you go to a trading desk, you come to a trading desk because you like the price. Nothing wrong with that. Not immoral. Perfectly reasonable.

I tell people, we didn't have productivity -- if we didn't have productivity, we'd all be living in a tent and hunting buffalo. That is what created this great economy of ours. There's some negatives to it; sometimes industries lose and some things don't survive. But look what's happened over hundreds of years. It's a wonderful, beautiful thing. So you got to get rid of "too big to fail," create it like a Chapter 14, which I think they're very close on that one, by the way. This one, I do think Dodd-Frank has the elements of that embedded in Dodd-Frank. And let companies compete in the marketplace.

HAASS: Implicit or even explicit in what you just said is that you're not going to get to that point. Obviously, you know, several months ago you had the derivatives experience -- subject in part of the New York Times Sunday Magazine this week, the profile of Ina Drew and all that. What is different about risk management now? What, if you will, are the lessons learned and changes implemented --

DIMON: OK, so -- (laughs) -- this company, JP Morgan and Chase -- (inaudible) -- went through '06, '07, '08, '09, 2010, 2011, 2012, never lost money in a quarter, didn't need TARP and was there for a lot of people when others weren't. California, New Jersey, Illinois, hospitals, schools, businesses. And we bought Bear Stearns at the request of the United States government; we bought WaMu for ourselves, we were able -- that probably saved 15 (thousand) to 20,000 jobs, and a tremendous cost on the FDIC, which would have been passed back to other banks.

So, you know, we made a stupid error. I mean, we're pretty disciplined risk people, you know, but we made an error. We had a -- we had a gap in the line. And you know, we didn't have this gap elsewhere. We have other flaws elsewhere, but we didn't -- you know, we had a gap. We screwed up, you know? And we -- by the way, that quarter we made $5 billion. So yeah, it was a stupid error. But I'm not going to say I could never -- and it was really intensely stupid. If I actually took you through it, it's kind of embarrassing personally, too, I should have caught it also. I didn't. You know? And -- but it isn't going to sink our ship. We have $150 billion of capital, and we earned 5 billion (dollars) that quarter. Analysts have us at a record year this year, third year in a row.

That's our job. You know, companies make mistakes, as I -- (laughs) -- I mean, if an airplane crashes, should we stop flying all airplanes? They're pretty complex -- ever looked inside an airplane? If a drug doesn't work, should we stop all drug manufacturing?

I mean, so we better be really careful when we say, OK, well, JP Morgan has this mistake, and then draw conclusions which are really not proper. And you know, punish us for our mistake -- which is really a shareholder mistake; it didn't cost anyone else any money -- and the board do its own independent review. And I -- and I could tell you that that gap doesn't exist most other places.

There are some lessons learned which we're embedding across the whole company. Businesses make mistakes, they learn from it, and they get better for it. That is what business is.

You know, when -- only when I come to Washington do people act like, you know, making a mistake is -- should never happen. And of course it happens. Only in academics and politicians, you know, somehow is it not allowed. (Laughter.)

HAASS: I won't take that last comment personally. (Laughter.) Why don't I open it up at this point. I might have one or two at the end I want to -- I want to close with, but let me open up -- wait for a microphone, let us know your name and your affiliation.

I see a gentlemen there about -- right next to the microphone. Yes, sir.

QUESTIONER: Father Andrew from the Vatopedi Monastery on Mount Athos. In August The Economist reported that the Roman Catholic Church spent approximately $171.6 billion in 2010. About 18 billion (dollars) of that was financed through municipal -- tax-free municipal bond purchases.

What is JPMorgan doing to help faith-based organizations borrow to meet our capital needs over the long term? I mean, right now is a good climate for us. For example, my monastery is 1,600 years old. We want to borrow now and pay it over time. (Laughter.)

DIMON: How much do you want to borrow? (Laughter.) What rate? (Laughter.)

We -- you know, you asked a great question because we have -- we bank governments, not-for-profits, hospitals. I know we bank churches, and I just don't know the actual numbers. I'd be happy to share them with you want to send me an email and give you a bank or we could tell you what we can and can't do.

And that's -- you know, part of what we do is we advise people what is reasonable and what is not reasonable. You know, in the lending business, you've got to be very careful. A bank, unlike other institutions, often has to say no to a client. If you walk into Wal-Mart, they want to sell you whatever you have cash for. A bank shouldn't because if we give you money you shouldn't borrow, you know, we're going to get blamed for that too. So, you know, somebody will say to you no, we're not going to do it and it's not good for you either. It's like selling, you know, too much liquor to someone or let them have that fifth drink at the bar or whatever.

And so -- but I'll -- well, I'll give you all the help -- I mean, send me an email; I'll give you all the information you need and --

HAASS: Why not take a slightly broader answer to that question. Take one minute, talk about your definition -- here you are, this large organization. You have enormous profits. What is your sense of corporate social responsibility? What sort of program -- what does JPMorgan define for itself as the things it should be doing?

DIMON: Yeah, so this is -- I've never had a conflict over this. You know, I see all the value. I -- my job is to build a healthy, vibrant company, and I want in every community we operate in, including Greece, Italy, Spain, in every hamlet -- we're in 2,000 hamlets around the world -- for you to think we're a good corporate citizen, no different -- and I really do mean this -- than that corner store. That corner store participates in the community. They help the Little League or the local church. They participate. They give people summer jobs. They have a little bit of philanthropy sometimes.

And we do that everywhere. We do it through a foundation. We'd be the seventh-largest foundation in America. We do almost $200 million a year -- corporate social responsibility around environmental. We have programs for Global Cities Initiative is which my friend Peter Scheer (sp) started here, which we -- we're going to lots of cities and -- to help them grow economically and create jobs and, you know, healthy environments.

We do a tremendous amount for education and veterans. You know, we -- we've hired -- and if you're a veteran in this room, thank you very much for your service to the country -- we've hired 4,800 veterans this year or in the last 18 months or so. There's this thing called the hundred thousand jobs thing, which we helped start. There are now 78 companies. They've hired 28,000 veterans, and we've done 4,500 ourselves.

So while a lot of people are talking, we're doing. And if you go to football games, you're going to see us giving homes away to wounded veterans. We've done 200 homes and we're going to do, before this program's over, like a thousand.

So we try to participate. And to me, it's all the same thing -- healthy, vibrant company makes it all possible. A sick, dying company -- none of it's possible. And that's why I try to remind people all the time -- and I'll put in that same thing, by the way -- people will say as an employee, the shareholder, if I don't make customers happy, there is no anything else. If we don't make employees do a good job -- so they're all important to me. I've never separated them. You just run a good business, try to earn a fair profit, always invest in the future, take care of your own people and your clients.

And in that, you'll be making mistakes, and let me go back to this mistake issue one more time. So here's a question for you all. Make believe you're my board of directors. We have something like $15 billion of exposure, net of derivatives and hedging and all the stuff like that, and it bounces around. But make believe it's 15 (billion dollars) of -- in Italy and Spain. You can easily tell me, get it down. I can get it down. I'd have to do some derivatives to get it down but -- (scattered laughter) -- but I can get it down.

On the other hand, we've been in Italy and Spain for over a hundred years. J.P. Morgan himself died in Rome, loved Italy, you know? And if you were Italy, how would you feel if JPMorgan cuts and runs? So what you want is, you said, OK, well, JPMorgan, you know, we -- don't be a fair weather friend, be here good times and bad times for me, which is what we're doing. We bank the government, the Central Bank, huge corporations. And I know -- and I've told my board -- that we could lose five (billion dollars) , $6 billion just like that if things go bad.

Now, I -- if I'm sitting up here, I'm sure I'll be dragged down to Congress again. Everyone knew the deal in Spain would go bad. How could you not have known? What kind of risk manager did you have? We made a decision. It may be the wrong -- I don't think -- I mean -- one, we made a stupid error. This is not due -- this is a deliberate, we're going to stay, and we hope to be doing business there in 50 years. And we know the risk we're bearing right now, and we try to moderate them, but we need to be a good corporate citizen.

So if you go around the world -- by the way, and I'm lucky, you know, I simply stand on the shoulders of those who came before -- the reputation and the knowledge that JPMorgan has, and the relationships inside these countries, they go back a hundred years. And so we can't cut and run. And we're not going to. We're going to try to manage the exposures, but we're being long-term investors.

HAASS: I'll try to -- I'll try to get as many people as I can. (Oda?) Aberdeen, in the front row here.

QUESTIONER: (Oda?) Aberdeen, the Capital Trust Group.

Mr. Dimon, when you look at JPMorgan of Lou Preston, and JPMorgan of today, what's the difference?

And I'd like you to comment on the issue of oversight. I listened to you, you made a persuasive argument. But I haven't heard you use the word oversight.

DIMON: Yeah, when you say oversight, I mean, we have boards and regulators and -- (chuckles) -- I have more oversight than you can possibly imagine.

The -- when you say "difference," we are in a different world, but we do the same thing for consumers and businesses. We lend them money, some big (corporate?), we raise money in equity, we raise it in the markets for them, we don't lend it directly, but it's almost the same. So if you come to us, say, (you all ?), I want to borrow money for this project, we may say, well, your cheapest route is a bank loan, or it be going to public markets, and around that, all these new products and services called derivatives but -- 99 percent of all corporations today use them, and most of them are interest rates and foreign exchange, stuff that people have been doing for a long time to manage their exposures.

Consumers, same thing, OK? So we -- and oh, the other thing for corporations, we run your checking accounts. We move something like five (trillion dollars) to $10 trillion a day for corporations around the world. So it's all electronic, it's all systems, but that's your checking account. We move it to different currencies, to different countries, to pay your vendors for -- again, these are for the -- you know -- 6,000 huge corporations and governments around the world. And for consumer too: We give you advice. When you have savings accounts, checking accounts, investment accounts, mortgages, order loans, that's what we do.

Those fundamental things aren't going to change a hundred years from now. You're still going to need financial advice and help as an individual and as a corporation. And we'll still be doing it. The products may change, the services may change.

The oversight: We have a board, which is very strong and very tough, and is doing its own independent review of this whole fiasco we just had. We have regulators and, you know, in Europe, you know, the OCC, the FDIC, the Fed, inside JPMorgan Chase, we've got -- every business has a risk committee, we have I'm going to say 2,000 people in risk, 1,000 lawyers, 1,500 compliance officers, 1,000 credit officers -- I mean, it's huge oversight inside the company to try to manage this as a deal. But at the end of the day, it's one client. What are we doing for them that they want or don't want, in a way they want?

And then the market-making one, which confuses most people: We make markets in (many ?) countries. We buy and sell a couple trillion dollars a day. But think of it as, you can go to us in Hong Kong, London and New York and buy bonds. They could be the Colombia republic bonds, or they could be GM bonds. What do you want from us? Great research, great -- (inaudible) -- and great price. We're the store. We sell you that, like -- I -- you might have a Costco or Walmart, we -- it's a little riskier than that, because you know it's a little more volatile business, but that -- that's how we get your business. We do a great job for you. And you say, no, you guys give me great price, you always give me great service and great ideas, that's why you get my business. And we'll hopefully continue to do that.

That market-making, by the way, is intregal (ph), intregal (ph), to the fact the IBM can call us up right now and raise $5 billion in the bond market in hours. They're directly related, because we make markets from those bonds. We have -- we know who the investors are. We do research. We have the capability to do it. That's how they can do it. You go to countries that don't have that kind of market-making, they can't issue bonds like that. So they're related like this.

HAASS: Yeah, right there, in the fifth row.

And scurry about with microphones, that would be good.

QUESTIONER: Thank you. I'm David Apgar; I'm a risk and performance manager. Here's a way of getting at the question of what makes for good regulation. Why didn't FDICIA live up to the hope that it would keep banks from getting in trouble, operating between the mortgage markets and the securitization markets? That was the hope when it was passed after the thrift crisis.

And it's probably a good test case because it's a -- it was a combination of things, as I recall. There was a lot of microregulation that drove everyone nuts, and at least one kind of novel idea that a number of bankers thought was interesting, which was let the supervisors come in before equity's entirely gone so that the managers aren't tempted to take big risks. So why didn't that help forestall the latest financial crisis?

DIMON: You know, if you had a look at the latest financial crisis, OK, like -- you know, financial crisis is a little more complex than one thing. And we had too much leverage in the system. The mortgage market was polluted. There was -- there was too much leverage everywhere. There's far more leverage in Europe than the United States. And I'm -- and I'm not -- that's not an accusation of Europe. That's what they -- the regime they operated under, both regulatory and political, for 30 years: more wholesale unsecured funding, much more leverage. Much more stuff was done through banks than the capital market.

So -- but like I said, the mortgage business -- Fannie Mae and Freddie Mac were a huge disaster. I have yet to see -- I -- (inaudible) -- they're dragging you down, but I'd love to see someone go through what happened there. How can -- and that's going to cost you $200 billion, by the way. JP Mortgage is not going to cost you anything. So you know, we should be asking questions like that.

So I think you should go through all those things and ask what we can do better. So we wanted an oversight committee called FSOC to adjudicate and also assign responsibility to problems and the -- and the people responsible for it. You know, we thought there should be a better bankruptcy failure resolution mechanism for big banks. We've always believed in more capital liquidity.

I'm generally a believer in transparency. We thought a lot of derivatives should go to clearinghouses. But again, you know, there are -- there are -- the devil's in the detail, folks. A clearinghouse does not eliminate risk. It concentrates it and standardizes it. But if you don't set up that clearinghouse right, you will have a problem down the road. So those things need to be structured properly too. And --

HAASS: Yes, ma'am, all the way in the back.

QUESTIONER: Hi, I'm Justine Underhill from RT. So you mentioned that companies make mistakes. And now that there's a civil lawsuit for Bear Sterns related to -- related to fraud, do you regret participating with the Federal Reserve to buy Bear Sterns in 2008? (Oohs, scattered laughter.) And --

DIMON: We didn't participate with the Federal Reserve, OK?

QUESTIONER: And do you -- what -- did you miss something when you told investors that Bear Sterns -- the acquisition would not be material?

DIMON: Well, I'm not sure I ever said that. So here's -- so Bear Sterns -- (chuckles) -- we were asked to buy Bear Sterns. (Inaudible) -- said the Fed did us a favor to finance some of it, stuff like that. No, no, no, we did them a favor. I mean, let's get this one exactly right. We were asked to do it; we did it at great risk to ourselves; and we had the capability and capital and people to do extensive due diligence. The one thing I was terrified about was, you know, had they gone bankrupt, all these lawsuits would be no money. There'd be no lawsuits. There'd be no stock-drop lawsuits, there'd be no class-action lawsuits, there'd be no mortgage lawsuits because there'd be no money.

But we bought it. And the second we bought it, we knew we had some -- you know, we were buying something -- (inaudible) -- as some reporters pointed out. I've written extensively about would I have done Bear Sterns again, knowing what I know today? It's real close. It's really close. I will not -- but what I know today -- if they call me again to do something again like that, that I couldn't do it. My board wouldn't allow me, because you take on these obligations. I did get a letter from one of the senior regulators late on Sunday night, before we signed it, that said: Please take in consideration, when you want to come after us down the road for something that Bear Sterns did, that JP Morgan was asked to do this by the federal government.

And we've been very honest with our shareholders about the -- about the economic and financial structure of Bear Sterns. We've got some great things at Bear Sterns -- you know, it's some businesses and their building and some great people -- and some terrible things. And I forgot the exact number, but I'm going to say we've lost -- (inaudible) -- 5 (billion dollars) to $10 billion on various things related to Bear Sterns now. And yes, I'd put it in the unfair category. Hey, I'm a big boy; I'll survive. We were very honest with our shareholders. But I think the government should think twice before they punish businesses every single time something goes wrong.

HAASS: You say -- when you said you lost 5 (billion dollars) or 10 (billion dollars) -- (inaudible) -- you mean, out of --

DIMON: (Inaudible.) Litigation, certain write-downs. You know, and the -- and the one -- the financing the Fed did, you know, was $30 billion in mortgages. We kept the noninvestment-grade mortgages. I asked them to take the investment-grade mortgages. I told them, if you -- that for us it just -- we had to borrow more. We borrowed more leverage. I didn't want to create another teetering giant in the marketplace. I also thought, if you hold these things -- since you guys borrow at zero percent -- you'll get all your money back, which they said, ah, we won't. I said, you'll get all your money back. Well, they've gotten all their money back and they've been making multi-billion dollar profit, OK? Multi-billion.

HAASS: You talked about borrowing at zero percent --

DIMON: I should have negotiated -- (inaudible) -- billions, or they've got to give it back to me to pay for the litigation costs. (Laughter.)

HAASS: Should of, could of --

DIMON: Next time I will. (Laughter.)

HAASS: Talking about borrowing at zero percent and low interest rates, are you worried that in the course of your career, inflation's going to become issue number one for you?

DIMON: Well, you know, there's always another -- you talk about planning. Again, I don't -- people talk about base -- you know, the Treasury may move to -- it's like 1.75 (percent) or I saw this morning it might move to 2 (percent) or 2.50 (percent). I'm worried about 5 (percent) or 10 percent. This company's going to be prepared for much bigger, higher -- not right away. I don't see any reason why it would happen right away.

Now, by the way, I'd want to point out, I think the Fed, by the way, has been an adult in town, has done a magnificent job, and their QE 1, 2 and 3 have added together $3 trillion so far. You all know what the financial assets of America are? Eighty trillion (dollars). And the reason I point it out is because people have mentioned to me Argentina, the Weimar Republic, runaway inflation. You know, there was far more stimulus than that -- like, it was GDP every year (in ?) financial assets.

So I think the economy -- like I said, things are in pretty sound shape. There's been a lot of fiscal monetary stimulation. I think it's kind of like on the ground, unused. We think corporate America has 1.5 trillion (dollars) of too much cash, and some of it overseas. We think consumers are probably -- I would -- if I asked you for a show of hands, how many of you hold too much cash in your own portfolios, my guess is a lot of you would say, yeah, I'm scared and, you know, I'm holding more cash and stuff like that. And so, yeah, if you have -- if you have runaway -- if you have real growth, you're going to -- (inaudible) -- inflation.

So here's -- I look at the best case, worst case. The best case is we start to grow 4 percent, you know -- (inaudible) -- goes up, inflation goes to, you know, 3 percent or 3 1/2 percent, the Fed removes some of the stimulus, bond rates -- the 10-year will go to 5 (percent) and short-run goes to 3 (percent). That'd be great.

It's possible, by the way. The worst case is what I call stagflation, that we're not -- not only are we not growing, but now you start to see inflation. We've had that before in this country. And -- but I think what the Fed needs now is good fiscal policy.

HAASS: (Inaudible.)

DIMON: I think the Fed needs good fiscal policy, folks. And you all got to get on board that. That is -- that's what's going to kill this thing, not debt policy, because if we don't get our act together on controlling our fiscal deficit in the future --

HAASS: You just talked about bringing -- some of the corporations bring some of the money back home. I assume, then, you would favor change in corporate taxation?

DIMON: Yeah, the corporate taxation system doesn't work. You know, and I try to explain to my -- and they say, well, prove it. You know, it's hard to prove some of these things, like, in real time. I would say, you know that book called this -- they wrote the book "This Time Is Different," and they said a financial crisis takes a long time getting out of? Well, if you read the five or six examples, it's because of bad policy. It didn't have to be that way. I think -- and I'm convinced that Ben Bernanke Jr. will write a book down the road saying, it could have been a lot better. We could have made this a lot better.

And one of the things is taxation. We are driving brainy immigrants back to -- they get trained here and we have to send them back home, and we're driving capital at the margin. Don't argue all capital. Some companies, they earn money, they have to invest here. They're only here. But if you're building a semiconductor plant or a shipbuilding plant or a data center or a research center or (a pharma ?) -- it doesn't have to be here. And a lot of it -- (inaudible) -- be made over there, because their taxes are lower and they don't have to pay the repatriation tax, which makes the returns 30 (percent), 40 percent higher.

And you know, I -- and that's not because they're immoral folks. That is economics. And I beg my Democratic friends to separate morality from economics. Set up the economics system so it's conducive to growth, conducive to jobs, conducive to GDP and then we'll have a conversation about taxation.

So for example, I don't mind paying 39.6 percent taxes. I don't mind my capital gains are (something ?) at 20 percent. I want a more -- I want a society which is -- that is always getting more equitable. I think that's a good thing. Don't mess up the economic engine that made it all possible. And that's the problem with what we're doing. And you could talk to business people all day long. It's kind of anecdotal. Like I said, it will be academic 10 years from now, it's anecdotal today -- that we're driving capital and brains overseas.

And the problem with that, by the way -- the other problem is, when they make those investments overseas, they're also sending engineers, R&D and other people over there. And some of them may stay.

HAASS: Our immigration policy's doing that too.

DIMON: (Inaudible.)

QUESTIONER: Peter Ackerman, Rockport Capital. I've -- since the crisis I've had numerous conversations with people who I consider very intelligent who will say something like this to me: We have to return Glass-Steagal by instituting the Volcker rule, or we have to basically restrict the banks from taking any positions in the -- in a variety of securities that are their bread and butter. And when I tell them you can't underwrite without making markets, it just passes over their head. It seems to me that the industry itself -- and maybe it's because of the political din that created post-recession -- could do a better job explaining to average Americans what your business is and what you're required to do to make the business work for the customer. What do you think?

DIMON: Yeah, look, I -- obviously, you want to do a better job. And everyone in my industry is talking about how you can earn back trust and do a better job of explaining some of these things. I think -- and it's really a multiple thing here because a lot of people say things that they don't know and don't understand. And I think it's incumbent upon the leaders to make sure we have intelligent conversations, we don't politicize things for the sake of, you know, politics.

And, you know, the banks lost -- and I didn't realize this, and punish me for this, too -- when every bank-- when they said that all the banks failed and were bailed out, the game was over. That was it. If you really believed that, then some of that anger was completely justified. But that are predicated on those two lies is -- that (banks/they ?) solely caused the problem and they all would have failed, all other things -- it's almost defenseless. You almost can't defend yourself at all.

And those things aren't true. Not all banks would have failed. You know, some of these banks were ports -- JPMorgan was a port in a storm, but so was Wells Fargo. So were a lot of the regional banks out there. They weren't going to fail. They didn't need TARP to succeed. They would try and make loans and do what they had to do in times of need for America.

So it's hard to make the case and I don't know how to do it, but I'm not going to give up. I mean I love this country too much. I'm not giving up. That's why I do some of these things like this, and that's why i talk about the widest and deepest and most transparent capital markets. And in my chairman's letter, which I -- where I get help -- from the lady sitting right behind you, in fact, but -- and my wife -- but I describe capital markets. What is market making? Why is it a -- there's market making in lumber, aluminum, grass -- not grass, grass-grass, you know, like -- (laughter) --

HAASS: Thank you for clarifying.

DIMON: There's amrket making in everything. That's -- right, there's market-making -- there was market-making in communist China, in the Soviet Union. There are markets in Cuba. I mean, I don't know what people think when they talk about -- (inaudible) -- they go -- you know, if you can sell your goods for a better price over here than over here, you go over there. That's what the people do. That's what each and every one of you would do. It's not like there's a morality around that.

And some of which -- I don't know, we're teaching people all the wrong things. But banks have acknowledged there were flaws, and they should be fixed. We should be punished for what we did wrong. The punishment should fit the crime -- and not that we all committed the same crimes -- so we can move on. And I do think the American public feels there was no, like, Old Testament justice. What they saw, banks bailed out, and all these people make all that money, and including the banks that failed -- people made all that money. And there's some truth to that. There is some truth to that. I can't make up what other boards did or didn't do, but there is truth to that. There are people who destroyed their companies, virtually brought the United States down to its knees and walked away with $50 million. Pisses me off too.

HAASS: Just to defend the Old Testament for a second -- (laughter) -- when the Old Testament came up with the idea of an eye for an eye and a tooth for a tooth, that was an innovation. The idea was that punishment should not exceed the crime. So that actually was a progressive innovation at the time. (Laughter.)

The gentleman from UPI. (Laughter.) Didn't think of that way, but OK.

QUESTIONER: Arnaud de Borchgrave. Mr. Dimon, about four years ago the chief security officer of one of the major houses in New York told us that there'd been up to 1 million attempted intrusions, cyberintrusions in one day. How concerned are you about the cyber threat, cybercrime and cyberterrorism?

DIMON: We get hundreds of thousands a day, OK. And we've got these major security centers, and we work with the governments around the world to protect ourselves. A lot of -- (inaudible) -- they call do not -- denial of service -- they're not getting into our computers; they're flooding the lines and -- (inaudible) -- Iran. OK, a lot of this is coming out of Iran. They're flooding the lines so that you can't get through. So it's not -- they're not getting inside our computers.

But some, like JPMorgan, spent a tremendous amount of time and effort in cybersecurity. We work closely with every government agency there is. We're in favor of those new cybersecurity laws, though we think they should be done in collaboration, you know, not like all these other laws are set up where, you know, you shall be cybersecure, and if you're not, we're going to come after you. We've got to -- we need their -- we need their help. Remember, you know, the CIA, the NSA, the Department of Defense -- they actually know what these attacks are at the border sometimes, and we don't.

So business and government have to work together in this, protect the American public so we can stop cybercrime. But it's a big deal. It's going to get worse. Computers in 10 years are going to be a hundred thousand times faster. And so they'll be able to do calculations quicker and get through quicker. And we're going to have to meet that in every way, shape or form. And so we -- believe me, I -- and the banks, I think, are pretty good at this. They -- we've been doing this a long time, and there are rules and regulations. And -- but we have to really stay in front of it.

And I'm -- you know, how many of you worry about it? Those that worry about it, don't think of just the cybersecurity coming over the Internet to you. Like, we -- everything we do, we do authenticate you. We know more about some of that stuff than you think. But think of the person in -- that joins your company from inside. That's where you're going to get it. So --

HAASS: Thank you for that reassuring point. (Laughter.) There's a young lady in the second-to-last row. I see her hand.

DIMON: (They say ?) internal firewalls too is how you protect yourself from any one individual having -- getting to all access to all systems and all that.

QUESTIONER: Hi. Danielle Douglas from the Washington Post. So many of the rules coming out of Dodd-Frank have yet to be written. So I'm curious, how much of an impact is the current regulatory environment having on your business?

DIMON: So separate the business, OK? If you look at -- (inaudible) -- this quarter through release earnings on Friday, so think of prior this quarter, underlying is pretty good: small-business loans up, 12 straight months of -- 12 (straight) quarters of middle-market loans up, market shares up in investment banking, trade has been OK, mortgage loans are up, mortgage problems are coming down, so actually pretty good.

If you talk about -- and I think -- (inaudible) -- point. Dodd-Frank, I think, 25 percent has been done, OK? It's being fought in the courts now, huge -- I think -- and I -- it's really hard for me to calculate a number, but I'm going to tell you it's going to cost us overhead well over a billion dollars a year at one point. And not just Dodd-Frank: Basel III, FSA, we get MiFID, (MiFID ?), we get rules from Brussels. A lot of these are contradictory, overlapping.

All I want at one point is we sit down and we have a conversation about what do we really need for safety and -- (inaudible) -- all that, and what's creating unnecessary burden? And that burden's going to be higher in small -- the smaller you are, in my opinion.

And I'm not in favor -- I don't want to hurt community banks. They have a great, long life. So I just think you need to collaborate to get it done. It's just not going to get done properly if we just always fight with each other. Like I said, the biggest -- the most important: capital and liquidity. (Audio break) -- and there are 398 other roles. (Laughter.)

But we're -- but you should know we're trying to work with everyone, accommodate -- we have no choice. I mean, we have to accommodate all the new rules, and we are going to do it. And we're going to do it in a way -- in the spirit and the letter of the law. That's what we're going to do.

And it doesn't mean we won't comment on it, because regulators get very mad at me when I comment at all. We are going to comment, but we will meet the terms we're required to meet. And I think -- and that is a conversation should be -- forget JPMorgan. JPMorgan will be fine no matter what. Just believe me. I -- I'm not worried about JPMorgan. I am worried about the country, so we should do these things right for the future of the United States of America, not for JPMorgan.

HAASS: We have time for one last one. Garrett.

Let me apologize in advance for the many people with their hands up. It's just demand exceeds supply -- (soft laughter) -- a well-known market problem.

QUESTIONER: Mr. Dimon, thanks. I'm Garrett Mitchell, and I write The Mitchell Report. And I want to ask you arguably a "too big to fail" question, but this is not about JPMorgan Chase or Barclays; it's about the U.S. and China. China is on the brink of a major change in its leadership. It has written its own sort of prescription for new economic directions, which they know have to initiate or they too will fall off the cliff.

We may or may not be looking at a major change in leadership in this country, but we are looking at the fiscal cliff, and I'm wondering, from your perspective, as somebody who does business all around the world and despite your protestations about not really knowing much about politics, how you assess the relative chances of success for America dealing in the short term with its fiscal cliff and longer term with its ability to get some semblance of good governance and with the Chinese to able to do the same and make the changes in their economy, so that the two largest economies and polities in the world will help things stay on line.

DIMON: You know, China has huge issues it's got to deal with, OK? And there are really two. They got to broaden out to democracy -- and remember, our democracy started as, you know, white men over a certain age who owned property. They got the -- there are 90 million people in the Communist Party vote. They got to broaden it out.

Every society that's created a middle class creates some form of democracy over time. And it's hard, and they're worried about losing control and social unrest, et cetera. They've got to -- and they've got a broaden out their economy. And when you look at the economy, think of the financial system as kind of the spin wheel, because it's not the most important thing in the economy but it is where people, investors of all type -- pension funds, (insurers ?) individuals -- meet through vehicles of all type to invest in projects and companies and start-ups and venture -- R&D, and you -- they can't micromanage down down the road, so they've got two huge things to go through.

We, as the United States, should help them do that. It's in our interest that they grow, that they grow peacefully, they can take care of their 1.3 billion people, et cetera. There are going to be complaints, but I much would defend, you know, the -- Hank Paulsen had that strategic economic dialogue; I would -- we have to do that. It's the right thing to do.

America will have the -- America's might, in my opinion, is based upon three things. Economic power, which is the foundation of all other things and all jobs and all buildings and all -- you know, I know if I see -- (inaudible) -- standing in front of the Hoover Dam, you know, the government -- no, that was actually built by Bechtel. It was your taxpayer money; the know-how came out of -- you know, it usually comes out of American business, including -- I checked, you know, who built the spaceships that landed on the moon. It was a predecessor of Boeing. And so these are great things. Those are collaborations between government and business.

And economic -- and military is directly related, and the United States will be the military power for a long time period, as long as we're the economic power. And I think -- and then I think the moral power of the United States, which is -- which is called freedom and democracy and human rights and rule of law and those things. We shouldn't forget that.

You know, you go to China; they look at America, they say, you -- how lucky we are to have those things, and the businesses and -- you know, why do we complain so much about our situation; they're in a much tougher one. But I think we should help them, but make sure we're strong. We should never give up in our strengths, which I said are economic, military and moral.

Folks, thank you very much.

HAASS: Thank you, sir.

DIMON: Appreciate it. (Applause.) Thank you.


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This meeting is part of the Corporate Program's CEO Speaker Series, which provides a forum for leading global CEOs to share their priorities and insights before a high-level audience of CFR members. The series aims to educate the CFR membership on the private sector's important role in the policy debate.

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