Jamie Dimon’s Sharp Message: Think Before You Act
In his annual shareholder letter, the Chase CEO surveys the current state of the world and finds no shortage of fecklessness and downright stupidity. The record of the Biden administration merits special contempt.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
Jamie Dimon’s latest annual shareholder letter, running to the length of a small book, tackles issues ripped from the headlines, like the potential impact of tariffs and a reimagined role for America on the world stage, as well as the state of banking and how to run banks better.
A theme running through much of the 59-page letter: The importance of thinking through policy decisions and tactical actions before putting them into motion, whether running a country or running a banking organization.
Policy Decisions Have Real-Life Results We All Live With
A good example is his discussion of the state of banking regulation in the U.S. in the wake of the 2008-2009 financial crisis, including the decade-long development of the Basel III capital rules. Even now, many don’t understand how this regime affected loans and liquidity and, in the end, the economy. Dimon suggests that the result was diversion of resources from what was important to the country.
Says the letter: "Banks used to lend out nearly 100% of their deposits, and now they lend approximately 70%. Before the great financial crisis, banks had less than 15% of their assets held as liquid assets, and they now hold over 30%. If that capital and liquidity, now sitting idle, could be put to better use driving the economy without creating additional risk, shouldn’t we do this?"
Dimon also makes the case for a fresh look at regulation, one that he thinks would ultimately forestall most bank runs, enable more and cheaper credit, and improve access to services for the unbanked, while maintaining system safety and soundness.
The Chase chairman and CEO doesn’t whitewash the crisis. He said that "the financial system deserved a lot of the negative attention it received. … However, as usual in a crisis, we also overreacted."
And he attacks the rulemaking establishment in the U.S. and elsewhere, including Europe, in decisive terms.
Government burden has been ramped up "by people who really like it and want even more of it. They have doubled down on regulations and bureaucracy, which also dramatically increased red tape. In so doing they made sure that new rules were written by academics with no pragmatic experience, guaranteeing that they would be excessive, confusing, contradictory and infused with ideology." [Emphasis added.]
He says that few in the Biden administration understood business or had business experience, "and it showed."
How Chase Chairman Views America’s Pending Reboot
Dimon devotes much of the first part of his letter to the current administration’s remaking of Washington and its way of dealing with the world. He has much to say about the Trump tariffs that is favorable, but he also waves some yellow flags.
As a major player on the world economic stage, intricately involved in many aspects of trade, Dimon shares many of the concerns behind the tariff effort, especially when it comes to China. China coordinates business and government to achieve strategic goals, and Dimon thinks the U.S. must "act in a more organized and strategic way."
On the other hand, Dimon worries about retaliation to the tariffs, the impact on consumer and business confidence, the influence on investments and the flow of capital, and how it will all hit the U.S. dollar.
"In the short run," writes Dimon, "I see this as one large additional straw on the camel’s back," adding a recession is possible and raising the specter of a return of the stagflation of the 1970s.
He expresses concerns about undoing or at least stressing longtime alliances, such as the North Atlantic Treaty Organization, the International Monetary Fund, the United Nations, and the Bretton Woods monetary system. Tearing all that apart would lead to a "multipolar world" where "it will be every nation for itself."
"America First is fine," Dimon writes, "as long as it doesn’t end up being America alone."
As for Europe, he says members of the European Union need to reform their economies and increase their military spending and preparedness. "This is going to be hard, but our country’s goal should be to help make European nations stronger and keep them close."
Read more about Dimon’s past shareholder letters:
Why Dimon Calls Consumer Payments ‘A New Battleground’
Dimon points out an irony in the rise in buy now, pay later financing as part of a detailed explanation of the economics of the banking payments business.
Retailers of all sizes have often complained about the fees — an average of 47 basis points — on debit card transactions through institutions like Chase.
Yet, says Dimon, "retailers are now adding ‘buy now-pay later’ features as another payment option for their customers, which usually cost the retailer considerably more than processing a debit or even credit card transaction."
Dimon criticized the Durbin Amendment, which set debit card transaction pricing, in part, because the government took the side of retailers over bankers. The government view was that only the cost of processing the transaction should be considered, but debit card payments are just one facet of the overall checking account relationship.
"The true cost of providing debit cards should also include the costs associated with operating checking accounts (e.g., the costs of branches, bankers and so on)," he says. Maintaining a single consumer checking account and the supporting facilities, staff and support, such as anti-fraud, averages about $225 annually at Chase, according to Dimon. Fees often don’t cover that.
The final section of Dimon’s letter consists of a redacted version of a speech he gave to senior leadership conference at Chase. It’s well worth a read by any working financial executive. Some nuggets:
• Don’t compare your performance to averages. "You should always compare yourself with the best," he says. "… Remember that the peer average includes some really crummy companies, too."
• Watch your terminology. "I hate the concept of cutting costs; instead, the concept should always be cutting waste. If costs are investments that drive healthy growth, then I want more of them."
• Let innovation breathe. "You can kill innovation with too many resources, too few resources or bureaucracy, and you’ve got to really think through what you are trying to accomplish. Similarly, it’s important to evaluate innovative ideas through testing and learning rather than rote analysis, which can stifle creativity."
• Budget with common sense. "Think very carefully about the assumptions that go into your budgets because, sometimes, they cause you to do stupid stuff, and sometimes they stop you from doing good stuff."
Dimon tells the story of a branch in Old Greenwich, Conn., that managers wanted to shutter. Basically, they felt it was too small.
"I just looked at some of the numbers," said Dimon, "and I went numb."
The branch may have been physically small, but it was making a larger profit of $500,000 annually. The closest alternative Chase branch is six miles away. Dimon knew people would leave for competitors who were closer. And, likely, he says, a competitor would have grabbed the Old Greenwich spot if Chase pulled out.
"Would you rather have $500,000 a year profit or $1 million in cash in your pocket? I’d rather keep the $500,000 annually," says Dimon.
Read Jamie Dimon’s 2025 letter to shareholders [PDF download]
