Jamie Dimon Warns Banking Crisis 'Is Not Yet Over!'

Jamie Dimon, the chief executive of JPMorgan Chase, warned that the banking crisis 'not yet over' in an annual letter to shareholders just weeks after the collapse of three US banks.
He said he didn't expect the turmoil to lead to a global crisis like in 2008, noting that it involved "involved fewer players and fewer issues". But he warned the impact would linger.

Patrick's Books:

Patrick Boyle On Finance Podcast:

Join this channel to support making this content:

[PBoyle]

Get Surfshark VPN at surfshark.deals/BOYLE. Enter promo code BOYLE for 83% off and 3 extra months FREE!

[raynoldgrey]

It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007–2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.

[jamesharrison]

Silicon Valley Bank (SVB) was the 16th largest bank in the US, and it wasn't subject to the most strict controls. How many banks actually are subject to those controls, besides the big four? Any bank could suffer a run and fail, and if that happens to a community level or even state level bank it probably won't upset the national economy or ecosystem of banks, but any multi-state bank should be more closely watched.

[eldencw]

I think the banking crisis could be easy to deal with: if FDIC insurance is accessed by a bank, the top 10% of the highest earners (all forms of compensation) are fired and all golden parachutes are severed. That would make the executives highly incentived to not make excessively risky positions

[lanevotapka]

Back after the 2008 financial crisis, my dad worked at a small bank that survived the crisis (without receiving bailouts) but was then basically regulated out of existence. Big banks have the resources to comply with onerous regulation, and they get the bailouts. Small banks get no help, just trampled on.

[santiagopm]

As I understand it, regulators had flagged silicon valley bank's gross mismanagement more than a year in advance. They had warned the bank in multiple reviews, but recent deregulation didn't allow them to force the bank to address the issue as it fell below the stringent regulation threshold. So it's ass backward for Dymon to say that the solution isn't to regulate small banks the way we do larger ones.

[deceneu]

Damn regulators not letting us do whatever we want, its not like we ever acted irresponsibly and crashed the economy

[michaelmanning]

After years of record low interest rates people that are paid 7 figures per annum or more didn't bother modelling what might happen if interest rates rise? I guess that business cycle thing is something new!

[dougritchie]

in 2009 we learned that all the "brilliant" financial minds at banks couldn't understand credit risk so they simply ignored it. Now we find that they also don't understand something far more basic: interest rate risk.
Wow, stunning...

[brianchris]

Of course, it's not about to end soon. By understanding how cash and banks work, it becomes clearer why they must ultimately fail. Ever heard the saying cash is thrash? Just hold your money in more stable and lucrative ways and save yourself the stress and heartbreak.

[baler]

Dear Patrick. I am an engineer and find your teachings in finance fascinating. As an engineer we run simulations on our designs to assess performance. Do bankers run “simulations” to see what might happen with their designs? It seems the fed interest rate would be a primary part of any financial models…

[youngpuma]

“Babe wake up, New Patrick Boyle dropped”

[Darkfyreofthezenith]

Wait, so let me see if I understand 8:10. “The regulators had too narrow a view focusing on credit risk. They should instead have had a broader view considering other failure methods. So they should instead focus on this other specific failure mode.” Nice to see Dimon is logically consistent

[thomas]

Are we the problem? Every decade we bail out banks (depositors, shareholders etc.), there might be very little incentive remaining now to actually manage bank risk. We are enabling this cycle. 🤷🏻‍♂️

[Bagger]

I really enjoyed the Patrick's last point. Small shocks have brought awareness to this problem and hopefully that allows us to avoid a bigger shock in the future.

[paxdriver]

Liz Truss's 4 week experiment and subsequent bank run and bond defaults were a pretty clear red flag for regulators to focus on interest risk and duration stress tests. I don't buy it that they just couldn't see it coming. How did they get that job if a public highschool grad in his 30's like me could figure it out first. No ceo of any bank should miss things I can catch just by watching markets and forecasting as a hobby.

[SalemikTUBE]

I don't know what the F is going on. I have no money and therefore have no interest in banking but I see a Boyle vid and I click. The financial history ones are good too.

[MrDadyD]

A new Glass-Steagall Act is needed. Having commerical and investment bank as one entity is insane and is just asking for trouble...

[tomlxyz]

Yesterday I've read that banks in my country had a surge in profits. I wonder if that's a contrast because of different practices or just yet problems to unfold

[pokergeniusordonkey]

I would caution about placing too much blame on regulators. Regulators should not be expected to spot every problem. The owner of the bank, is the owner of the bank, is the owner of the bank and that where the rubber hits the road.. I caution about bankers who look to blame someone else.