The banking crisis caused by the recent collapse of Silicon Valley Bank and Signature Bank has increased the odds of a US recession, JPMorgan Chase CEO Jamie Dimon told CNN’s Poppy Harlow in an exclusive interview on Thursday.
Speaking in his first interview since the failure of SVB, Dimon said that while the banking system is strong and sound, the recent turmoil around the financial system is “another weight on the scale” towards recession.
“We are seeing people reduce lending a little bit, cut back a little bit and pull back a little bit.” While the banking chaos won’t “necessarily force a recession,” he said, “it is recessionary.”
There are storm clouds ahead for the economy, said Dimon. The Federal Reserve’s current tightening regimen, plus higher, sticky inflation and Russia’s war on Ukraine are the largest risks he sees for the economy. But Dimon said he does feel hopeful about the strength of human capital in the United States.
“I’m a red-blooded, full-throated, free-market, free-enterprise capitalist,” he said. “I think we should applaud free enterprise and we should sing from the hills the benefits while we fix the negatives, as opposed to denigrate the whole thing.”
Banking sector meltdown
Dimon said he isn’t sure if the US economy is through the thick of the current banking crisis just yet.
“I’m hoping it will resolve, you know, rather shortly,” he said.
Dimon said he doesn’t know if more banks will fail this year, but was quick to point out that this turmoil is nothing like the financial crisis of 2008. In 2008, he said “it was hundreds of institutions around the world with far too much leverage. We don’t have that.”
We don’t have huge problems in our mortgage markets, either, he added. “This is nothing like that. And the American public shouldn’t think that.”
Still, said Dimon, it’s okay to let some banks collapse. “Failure is okay,” he said. “You just don’t want this domino effect.”
Debt ceiling pain
Lawmakers are growing more uneasy about raising the debt ceiling, the self-imposed $31.38 trillion borrowing limit they hit in January. Without new legislation, a default by the US government could come over the summer or in early September, according to various analyses.
But talks between House Republicans and the White House remain stalled.
Dimon, who has worked closely with the White House and Congress this year on various economic problems, told Harlow that there would be no default under his watch. “Not as long as I’m alive. Boy, we’re going to keep fighting this one” he said.
Dimon said he believes Congress will come to a resolution on the debt ceiling within the next few months, but that there could be more economic pain to come before an agreement is made.
“You’ll feel the pain before it happens,” he said of breaching the debt ceiling. As a potential default comes closer “you’ll see it in the markets and that will scare people,” he said.
Still, “When I go to Washington, most people there know how serious this is, and they want to get it to a resolution.”
This story will be updated.