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Jamie Dimon to criticize bank capital requirements and lament impact of inflation on regular Americans in coming Capitol Hill testimony

Jamie Dimon to criticize bank capital requirements and lament impact of inflation on regular Americans in coming Capitol Hill testimony


JPMorgan Chase & Co. CEO Jamie Dimon will focus the bulk of his prepared remarks in Congress this week on the bank’s positive role in the U.S. economy and the threat of inflation, but will spend some time criticizing capital requirements for banks, according to his written testimony.

“We finance Americans’ ambitions with loans for homes, autos, and growing a small business, and provide valuable products and services to more than half of American households,” Dimon said in 14 pages of written testimony submitted Tuesday ahead of his appearance in Congress this week with other bank CEOs.

Signaling a confrontational tone with banks, House Democrats vowed to “fight for the working Americans and small businesses that make our economy work,” according to a statement released Tuesday.

“While these megabanks rake in huge profits, they have continued to fail their customers and workers,” the House Democrats statement said. “Banks bring in billions of overdraft fees from customers, put their wealthy Wall Street clients over Main Street small businesses and consumers for PPP loans during the pandemic, and fail to help customers whose money is stolen on Zelle.”

Also Read: Consumer Bureau to push banks to refund more victims of scams on Zelle and other payment services

Dimon said the U.S. economy currently faces positive tailwinds in the form of strong consumer spending and “encouraging” job reports, but headwinds from higher prices and other woes such as the Ukraine war.

Also Read: Fed says banks could withstand 10% unemployment, 55% stock price drop in annual stress test

“Americans are being crushed by high inflation eroding real incomes, particularly from higher prices on gas and food,” Dimon said in his written testimony. “Many Americans are feeling the pain, and consumer confidence continues to drop.”

Regulatory capital requirements for banks are “not reflective of actual risk” and are therefore present a significant economic risk because “unrepresentative capital requirements erode banks’ ability to meet customer needs,” Dimon said.

Also Read: JPMorgan exec sees roughly 50% chance of ‘mild’ recession and eyes chance to hire laid-off bankers

JPMorgan Chase
JPM,
-1.97%
is currently required to keep $200 billion on its balance sheet as part of its capital requirements, in addition to its loan loss reserves. JPMorgan’s capital requirements are going to rise in coming months, not because of risk but because of rules that have yet to be adjusted.

“This is bad for America, as it handicaps regulated banks at precisely the wrong time, causing them to be capital constrained and reduce growth in areas like lending, as the country enters difficult economic conditions,” Dimon said.

On the subject of recession prospects, Dimon mostly reiterated his thoughts from May when he predicted an economic hurricane but said he wasn’t sure if it would be a blockbuster storm or a more minor downturn.

“While these storm clouds build on the horizon, even the best and brightest economists are split as to whether these could evolve into a major economic storm or something much less severe,” Dimon said. “Regardless, JPMorgan Chase is prepared for even the worst outcome.”

Dimon’s testimony includes descriptions of the bank’s work on PPP loans, services for customers and small business, efforts to boost diversification in its loans and its work force, and how the bank remains accountable to its shareholders.

Also Read: Can an effort to revamp anti-redlining lending laws survive the swamp?

JP Morgan shares have fallen 26% in the year to date, while the Financial Select Sector SPDR ETF
XLF,
-1.47%
has fallen 16% and the Dow Jones Industrial Average
DJIA,
-1.01%
has lost 15%.



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