Jamie Dimon On The 2008 Crisis

when do you think when you go back and start thinking about 10 years ago when do you think before 2008 because I think that for you might happen in 2006 or 7 know that you started thinking there was a problem yeah it is probably I have to go check my memory but probably the summer of oh seven there's a whole list of issues have been building up syndicated leveraged lending which is literally five to ten times what it is today was a problem the quant funds were over leveraged the investment banks were leveraged thirty to forty to one which is far more than was before so you already had this teetering thing worse it was very nerve wracking and and you know some people taking action to fix that and some work you were you damn straight we were raising capital and liquidity and trying to be prepared for what I thought could be a very difficult time okay so fast forward to Bear Stearns because to me Bear Stearns was a crucial turning point in a national conversation about bailouts and rescues and the role of the government and the idea of a public-private partnership right and also the idea of moral hazard what did you think the weekend of Bear Stearns about those issues so first we we bought Bear Stearns and it wasn't bailed out by the government the government did a little bit of financing could they act like the financed by the guys not we we did the whole thing they took virtually no risk to where a structure for them it just reduced reduced the balance sheet we were taking on and we thought we hoped in the system we only did it cuz we asked to by Hank Paulson and we thought if it went down that could be a huge crisis for the globe was it clear to you in the aftermath of bear that Lehman Brothers was next yeah you know it Lehman was next in the queue everyone knew that remember there are a lot of other things that were having problems in DMACC countrywide WaMu you know prime by then a lot of things was going through it so bear was in March of oh wait six months later is Lehman but I thought that Lehman had time to fix their problems so my view is that that given time given us noticed you can raise capital you know reduce your leverage do a bunch of stuff so I was kind of a little surprised in June or July of that year but they made an announcement of big losses they hadn't taken action and they scared the marketplace and so yeah we knew Lehman was next in the line I was hoping thinking that they would be able to fix it fast forward to early early September Fannie Mae and Freddie Mac could now been put into conservatorship the Koreans and if you remember were around the hoop on Lehman Brothers they're out and we're now walking into this weekend yeah it's Thursday and for the second time in two weeks you tell Lehman that you have to get some more collateral yeah why did you make that that call what happened yeah again that people blow it way out of proportion we were the largest counterparty they had tons of extra collateral so we were taking a Lehman risk so our conversation lemurs more about hey would I help you guys out but to the extent you can give us more cloud or give us more cloud and they were always fine and remember everyone around the world was asking for more haircuts so everyone was demanding higher cloud look exactly the same trade sucking likutey out of the system and we're doing that a little bit too but very respectfully so he wouldn't hurt Lehman but you know you now you had this succession Fannie Mae Lehman you know we bought one with like a week after Lehman so a lot of things you happy at that point that were you know but beyond anything that we've all ever seen just to the point though on the collateral because you there are Lehman people who say JPMorgan they they they took our but they were they're asking for too much money at a time when we were ignorant people we're asking for more collateral everywhere the day after they went bankrupt we financed Lehman almost I think the number is 70 to 80 billion dollars JPMorgan not the federal government and we needed collateral against the 70 billion dollars so we were taking collateral because our exposures like this and other fears were like this but we're doing it to help facilitate them we could have closed them all off like most people did saying you get a call on Friday yeah it's pouring rain outside yeah to get down to the Fed yeah what are you thinking when you get that call I knew what it's about me Hank called me up and said you got to come down I said I can't I'm having dinner with my my soon-to-be it my son-in-law as parents for the first time and and he said you have to come too I said I'm not coming Hank here to go downtown is a long trip I said you got to come and was gonna be there it's critical I said okay I'll go and what was the scene like in the room do you remember yeah I'm gonna say there's 17 banks there so it's all the big bank couple of big farm banks I think I think Ben Bernanke's on the phone and Chris Cox on the phone and Hank was there I'm pretty sure Geithner was there they basically you know pretty mature young people trying to help out so they said what can you guys do to fix it like we did remember for LTCM right and we actually worked in a facility that might fix it that somehow could take on some his ass's given long-term financing and reduced the burden on Lehman and or anyone else who may be needed to help they said second is can you be are you well prepared for a failure and the third you know they said they're looking for a buyer I thought it was a day late and a dollar short that there's no way they're gonna find a buyer and that lien was gonna go down and it's gonna go down hard you know disorderly collapse because regulars had no legal authority take it over like they did a waddle and so when I left I said this it's goodbye Lehman before you break for the night Paulson tells you and some of the other CEOs that there's gonna be consequences if you don't help do you remember what he said except horrible this is no not tarp this is Lehman Brothers this is this is him sort of laying down the gauntlet this idea that if you don't help it will be real angry I think yeah I I think he he said something like that bye thank you he also meant that if you help yourselves you it's not going to have all this huge negative political ramification and he was right about that it wasn't a threat it was like hey guys this is we got to do it for it we got to do it for yourselves if you can't there will be a price to pay and he was absolutely dead right about that the next morning you wake up and you do a conference call no I was there was that night it was that night I was driving I think I was driving home I called up my whole operating committee I told him we're about to have a catastrophe take place all hands on deck the next day so I think that Saturday everyone was at work we had work forces and teams going through every single part of our exposures every single part of which we've been through before I think I called my board that Saturday right and said we have a national emergency and I took them what it was I try to explain it to him how better can get now we're gonna trying to handle all that and when you told him how bad it could get what did you tell them what did you what did you say I said you're going to see the worst week ever and financial history since the Great Depression then my opinion Lima is going to go bankrupt that the AIG is a possibility and that it might be the domino effect after that and that we just don't know how bad it's going to get what do you think the incentive was for everybody around the hoop to value the assets the reason I the reason I make the mention is just this idea that a lot of people to some extent I would imagine would have wanted to buy these assets for either as little as humanly possible or they'd be better off without a competitor there may be some people who were patience and would love to see Lehman go bankrupt like bear because bear didn't help out much in LTCM I mean most of people there's more like they're your friends you know you you're if I'm playing tennis I want to beat you but you having a heart attack we stopped the game and we get you to the hospital so I think most of people are trying to legitimately do we have to do by Hank Paulson where they all were I don't know the person I care that's Sunday morning you come back to the table and I'm told that you were the ringleader at that point in terms of everybody going around the table and saying who would put up a billion dollars to try to help finance this industry tell us about that one oh if I was a ringleader but the idea was that obviously this is going to be a disaster that it's huge risk for everybody in the room and the idea was could we put up I've got it you know twenty billion dollars between us when you put up some money and everyone so we have equity that can borrow more money that can basically finance their bed assets okay and and then basically we capitalized Lehman effectively and and it was a good effort like I said if we had another week or two we might have been a pulsing like that off and we just it was just a day late a dollar short was your first instinct that morning that everything that could have been done was and or do you think should have still found some other way to do this I I have a disability that I don't really agree the people say well the Lehman had been bailed out or not the crisis was gonna unfold the leverage was there the repo is there there's a lot of losses in mortgages money was sloshing around the world government started to guarantee deposits which actually made it hard for banks so it was going to unfold anyway whether they went bankrupt or whether they bailed out and whether they born bank were bailed out as people realized the severity of this problem which we just told you a bill I would have told you the same thing there's something deeply amiss in the system you still would had a very bad market afterwards it just would have unfolded slightly differently so you don't think that exacerbated the crisis it might have but it would happen anyway fast forward two weeks after that so Banco they become bank holding companies do you remember getting the call to get to DC photographer yes do you remember where you were what month was that again that was early October yeah yeah I was I was I think was taken off the first weekend so I take it off in almost six months you know as I was at my house in Bedford and Haines calls me again you got to come to Washington I said Hank I'm not coming he said Jamie you got to come this is critical and your Brethren's gonna be there so I said okay so I got my suit on I got in an airplane I flew down to Washington I walked into that I think they called the cash room and Hank was there Geithner was there sheila bair was there Ben Bernanke was there and they obviously had a plan what did you think when they told you that you had to take 25 billion dollars I thought that they had a lot of time to think about and we didn't that they wanted a plan to try to save the American financial system that I would consider it I would definitely have to talk to my board about it I spoke to my board and you know I saw them this is asymmetrically not good for JPMorgan but it goes back to my example about someone having a heart attack but it's good for America they're asking us to do it you know is at the request of the Secretary of Treasury with the full understanding of the president knighted States top had been voted and that if we should do we can to help and and you said yes and I said yes when you look back now 10 years later what's the great lesson of this whole period I would not have done Bear Stearns I don't particularly trust the government like I might have back then it was used as a political weapon afterwards so after tarp the banks were toast in hindsight the better thing to do was provide a lot of the coordinate system remember what the Fed provided through all their alphabet plans or keep it and T PAP and PPP pip and all that stuff they were financing America and so the banks consider make loans the market didn't the Fed financed it well when you look at today's political environment here in the United States globally oftentimes people connect the financial crisis to sort of a modern-day sense of populism do you think that's that connections real a little bit yeah amending the American public I mean there was a huge problem and the American public blames the elite the people in charge was politicians CEOs you know Congress etc and they're right in general that's who should lie and the people who are in charge after everything happened in October you sent Paul a Hank Paulson a quote actually the last line in too big to fail right as well from Theodore Roosevelt that reads in part it's not the critic who counts you know that you know I know the corium not the critic who cares but the man in the arena do you remember it say yeah but it's not the critical councilors like the man in the arena bloodied and bowed and fighting for a good cause and I look Hank was being criticized left and right as we're Ben and Tim and stuff like that but I thought they were in the arena they were trying to fix a terrible problem and I guess it's very easy to criticize people I think if you're in the arena and you're trying to solve what terrible I'm gonna try to help you you know and I don't just want to be the critic telling you every little mistake I think you might have made it done differently so I give him full credit for that under all of them and including President Bush who stood behind Hank and for a while President Obama who stood behind the idea I think they after that they politicized the whole thing but but at that point in time they're all doing the right stuff but the public perception turned and so what the lesson for CEOs in terms of dealing with the government in the future you think it's gonna be what I wouldn't take their word there is no word the next government do whatever they want I mean I don't know if the American public knows that you could agree with what everyone this government the next one can change their minds do you think there's another financial crisis no that you can that you can enforce it I think people said but the leverage is nothing like it was before the off-balance sheet vehicles aren't there there's shadow banking but it's still it's still containable repos properly done is very much less unsecured credit unsecured short-term borrowing capital is higher the could is higher regulators have more authority I mean the whole thing is different Lehman wouldn't happen today

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Keywords: CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable news, finance news, financial news, Stock market news, warren buffett cnbc, warren buffett lehman brothers, lehman brothers doc, lehman brothers, too big to fail, andrew ross sorkin, jamie dimon, why did lehman fail, lehman brothers collapse, erin callan, next financial crisis, financial crisis 2008, jamie dimon donald trump

Id: QE3QwTA5ujE

Length: 14min 9sec (849 seconds)

Published: Wed Sep 12 2018