(NEW YORK) — A crippled banking system, stubbornly high inflation, recession fears — the growing set of threats has tipped the U.S. into precarious economic territory but the leader of the nation’s largest bank is nonetheless optimistic about the financial outlook.
Resilient consumer spending and a strong job market have buoyed the economy, padding the savings of many households and buttressing them against a possible downturn, Jamie Dimon, the CEO of JPMorgan Chase, said in an annual shareholder letter on Tuesday.
“When one talks about risk for too long, it begins to cloud your judgment,” Dimon said. “Looking ahead, the positives are huge.”
Consumer balance sheets are in “great shape,” Dimon added, noting that “unemployment is extremely low, and wages are going up, particularly at the low end.”
The unemployment rate stands at 3.6%, hovering near a 50-year low.
Meanwhile, Americans retain $1.2 trillion more “excess cash” in their checking accounts than they held before the pandemic, Dimon said, citing JPMorgan Chase data. Those savings have kept consumer spending relatively robust even as pandemic-era fiscal support fades further into the past.
Consumer spending accounts for roughly two-thirds of the U.S. economy.
Still, the bank’s measure of excess savings held by U.S. households has fallen nearly by half since November 2021, suggesting that Americans have drawn down their accounts to contend with high inflation.
Inflation has fallen significantly from a summer peak, though it remains more than triple the Fed’s target of 2%.
To fight high prices, the Federal Reserve raised interest rates last month for the ninth time in a year, making its policy the most aggressive since the 1980s.
The Fed’s borrowing cost increases aim to slash prices by slowing the economy and choking off demand, but the approach risks tipping the U.S. economy into a recession and putting millions out of work.
On top of these headwinds, the collapse of Silicon Valley Bank last month, the second-biggest bank failure in U.S. history, thrust the financial system into distress.
Acknowledging economic uncertainty and persistently high inflation, Dimon described last year as one marked by “significant challenges.”
Addressing the recent banking distress, he added, “The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come.”
In the aftermath of Silicon Valley Bank’s failure, some Democrats called for strengthening banking regulations that they say could have prevented the collapse. Such officials, like Sen. Elizabeth Warren, D-Mass., have focused their ire on a 2018 measure that weakened banking oversight imposed by the previous Dodd-Frank Act.
Rejecting calls for stronger regulation, Dimon said additional protections would not have prevented the recent banking crisis.
“Regarding the current disruption in the U.S. banking system, most of the risks were hiding in plain sight,” he said, referring to long-term treasury and mortgage bonds that were known to risk a loss of value if the Fed rapidly raised interest rates.
“It is unlikely that any recent change in regulatory requirements would have made a difference in what followed,” he added.
Returning to a sunny tone taken up elsewhere in the letter, Dimon downplayed the threat posed by the current financial distress.
“Recent events are nothing like what occurred during the 2008 global financial crisis,” he said.
A group of big banks, including JPMorgan Chase, made money from the recent banking distress, since a flood of depositors opened new accounts at large lenders amid the uncertainty.
JPMorgan Chase received a huge wave of customers and deposits, amounting to hundreds of accounts and billions of dollars, a source familiar with the matter previously told ABC News.
In his letter, Dimon rebuked the notion that JPMorgan Chase, or any bank, emerged from the turmoil unscathed.
“Any crisis that damages Americans’ trust in their banks damages all banks – a fact that was known even before this crisis,” Dimon said.
“While it is true that this bank crisis ‘benefited’ larger banks due to the inflow of deposits they received from smaller institutions, the notion that this meltdown was good for them in any way is absurd,” he added.
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