JPMorgan CEO Jamie Dimon Sees ‘Golden Loop Moment’ for US Economy

By Orla McCaffrey 

The head of America’s largest bank said the US economy was emerging from the coronavirus pandemic to enter a boom that could last until 2023.

In his annual letter to shareholders on Wednesday, JPMorgan Chase & Co. chief executive Jamie Dimon said big savings for consumers, increased vaccine distribution and the infrastructure plan proposed by the Biden administration of 2 $ 3 trillion could lead to an economic “golden loop moment” – rapid and sustained growth alongside inflation and slowly drifting upward interest rates.

Mr Dimon’s outlook is decidedly more optimistic than a year ago, when he warned shareholders to prepare for a “bad recession” in which US gross domestic product could drop as much as 35% . He wrote last year’s letter just weeks after being rushed to emergency surgery to repair a life-threatening heart injury, and the United States has gone dark to prevent the spread of the coronavirus .

The U.S. government’s quick and deep monetary and fiscal intervention over the past year has averted many of the worst outcomes, said Dimon, who has since fully recovered from the torn aorta he suffered in March 2020.

“It’s a lot of money, and it’s bound to cause a booming economy,” he said in an interview with The Wall Street Journal. “Shame on us if we don’t use this growth to help those who need it most.”

In his letter, Dimon called for laying the foundation for long-term economic growth with a multi-year national “Marshall Plan”, referring to the US initiative to help Western Europe rebuild after the Second World War.

Affordable child care, streamlined social protection programs and skills training leading to better paying jobs would increase labor market participation, he said. But such a plan, Dimon said, “could very well mean higher taxes for the rich.”

“[Taxes] will have to go up; you can’t have a 10-15% deficit indefinitely, “he said in the interview.” If people thought their taxes were going to help the poor and disadvantaged, they would much rather pay an amount higher. ”

Any change in the corporate tax rate, he said, would have to be “reasonable and moderate” to keep the United States competitive with other countries.

Banks, which tend to take advantage of periods of growth, would favor a boom. They have held up better than expected after the coronavirus devastated the economy last year, in large part thanks to unprecedented government stimulus measures given to consumers and businesses. Much of this aid has flowed through large banks such as JPMorgan.

The $ 3.4 trillion asset bank posted a record quarterly profit in the last three months of 2020, a solid end to a year that started with a 69% drop in profits. Analysts expect a profit of around $ 9.26 billion when JPMorgan releases its first quarter results next week.

Over the next few months, JPMorgan and other major banks are expected to release tens of billions of dollars in reserves that they have set aside to cover bad loans that still have not materialized, a year after the start of the pandemic.

Still, a number of hurdles could derail the boom, Dimon said. Faster-than-expected inflation could lead the Federal Reserve to raise short-term interest rates, weighing on business investment and overall growth. The recovery may also fail to reach its potential if government investments in infrastructure are not accompanied by specific mechanisms to measure effectiveness, he said.

In his 65-page letter, Dimon also explained how the bank’s roughly 250,000 employees will work after the pandemic. Many will be in the office full-time, with a smaller number sharing time between home and office or working entirely remotely, Dimon said.

A coronavirus outbreak in the trading room at the bank’s headquarters on Madison Avenue last March and April rocked some basic workers who were expected to continue entering the office.

The bank is moving forward with plans to build a new headquarters in New York that will accommodate between 12,000 and 14,000 employees, he said.

Write to Orla McCaffrey at orla.mccaffrey@wsj.com

 

(END) Dow Jones Newswires

April 07, 2021 06:44 ET (10:44 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

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