JPMorgan Chase CEO Jamie Dimon on Tuesday said the collapse of Silicon Valley Bank (SVB) and Signature Bank will have long-lasting impacts on the U.S. economy.
“As I write this letter, the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come,” Dimon wrote in his annual letter to shareholders.
Dimon said that the bank failures will prompt banks to be more conservative, leading to tighter credit conditions. However, he said that the recent banking crisis is “nothing like” the 2008 financial crisis, where $1 trillion in mortgages were at risk of going under.
“This current banking crisis involves far fewer financial players and fewer issues that need to be resolved,” Dimon wrote.
Dimon’s comments come after U.S. officials expressed confidence that the banking system has stabilized following unprecedented federal action to protect depositors. The bank run on SVB and Signature Bank prompted concerns that other midsize banks, such as San Francisco’s First Republic Bank, would fall.
JPMorgan teamed up with other large banks to provide $30 billion in deposits to First Republic in an effort to shore up confidence in the banking system and stop depositors from pulling their funds.
“Any crisis that damages Americans’ trust in their banks damages all banks,” Dimon wrote. “While it is true that this bank crisis ‘benefited’ larger banks due to the inflow of deposits they received from smaller institutions, the notion that this meltdown was good for them in any way is absurd.”
Dimon also urged Congress to “avoid knee-jerk, whack-a-mole or politically motivated responses” to the crisis. Lawmakers are considering a wide range of bills, including legislation to roll back a 2018 bill that loosened regulations on midsize banks.
Dimon said lawmakers should find ways to boost small and midsize banks and make regulations more effective. He noted that federal regulators failed to prevent the bank failures. The Federal Reserve’s stress tests didn’t account for rising interest rates — which ultimately led to SVB’s collapse.
“This is not to absolve bank management – it’s just to make clear that this wasn’t the finest hour for many players,” Dimon wrote.