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JPMorgan CEO voices pessimism about US Economy

  • By Al Mayadeen English
  • Source: Agencies
  • 8 Apr 2023 09:40
4 Min Read

In light of an ongoing banking crisis in the country, JPMorgan Chase's CEO voices stark warnings about the US economy's future.

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  • JPMorgan Chase & Co Chairman and CEO Jamie Dimon appears before a House Committee on Financial Services Committee hearing on Capitol Hill in Washington, September 21, 2022
    JPMorgan Chase & Co Chairman and CEO Jamie Dimon appears before a House Committee on Financial Services Committee hearing on Capitol Hill in Washington, September 21, 2022. (AP)

There are storm clouds on the horizon for the US economy, and recession is looming closer, JPMorgan Chase CEO Jamie Dimon said Thursday during an interview.

"I don't know [if more banks will fall this year] but if there are, honestly, it will be resolved and there will probably be less of them. I think we are getting near the end of this particular crisis," Dimon said.

Moreover, he admitted that he believes the banking crisis will increase the chance of a recession, though it might not be the sole cause behind one.

In broad terms, he said it was "just like a weight on the scale."

"We are seeing people reduce lending a little bit, cut back a little bit, and pull back a little bit. It won't necessarily force a recession, but it is recessionary," the US billionaire underlined.

This comes after the collapse of the Silicon Valley Bank (SVB) last month. The bank was America's 16th-largest bank and marked the second-largest bank failure in US history.

As depositors rushed to withdraw their money following the news, SVB tried to reassure its clients of its solid finances, but that did not stop over $80 billion in shares value from being slashed within 48 hours, followed by a free fall of its stock values until their trade was halted.

The bank, which is one of the main lenders and a partner to technology and healthcare startups that went public in 2022 - including well-known firms - sent early-stage tech companies and the US economy into a spiral.

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Biggest danger is default on government debt

Despite the banking sector crisis, the JPMorgan Chase CEO underlined that the bigger fear for the economy was the Federal Reserve's "tightening regimen", and it is likely that he meant the treasury's increasing of interest rates amid high inflation and the potential default of the US government if the debt ceiling is not raised.

SVB's collapse was attributed by many to soaring interest rates sanctioned by the US Fed.

Federal Reserve Chairman Jerome Powell said before the collapse that the Federal Reserve expected further increases in a bid to lead the US to a restrictive stance to combat inflation, adding that a few more hikes might remedy the inflation crisis.

The Fed has since March 2022 added 475 basis points to interest rates after they stood at a mere 25 basis points in the wake of the Covid-19 pandemic.

Read next: US set for recession next year, economists predict

The Treasury's policies seem to have paid off, as inflation rates fell to 6% in February compared to the 9.1% of June 2022. However, experts say a mere 2-3% inflation is what is considered healthy.

Trying to further cool down inflation, the US Treasury is considering another rate hike later in the year as economists warn that a sharp increase would lead the US to financial ruin and plunge it into recession.

Still, Dimon is optimistic about the economy due to the US human capital, underlining that the biggest risk to the economy was the potential default on government debt.

The government will not default, Dimon said. "Not as long as I’m alive. Boy, we’re going to keep fighting this one," the bank CEO claimed, without delving into much detail of how this fight would go down.

Read next: US capitalism is ‘breaking down before our eyes’: Griffin

  • United States
  • Federal reserve
  • JPMorgan
  • inflation
  • US inflation
  • Silicon Valley bank
  • SVB

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