JPMorgan Chase

JPMorgan Chase

For JPMorgan Chase, all things being equal (which they are not), the new lower tax rates added $3.7 billion to net income. For the long term, we expect that some or eventually most of that increase will be erased as companies compete for customers on products, capabilities and prices.

One of the reasons for JPMorgan Chase’s enduring success is we have always recog-nized that long-term business success depends on community success. When everyone has a fair shot at participating in and sharing in the rewards of growth, the economy will be stronger and our society  will be better.

Closing the racial wealth gap is good for Americans, and it makes good business sense. We know employees from diverse backgrounds offering different perspectives drive better corporate outcomes. A recent study showed that businesses with diverse leadership generate 19% more revenue than non-diverse companies.

We have been raising wages for our 22,000 employees at the lower end of the pay range. For those earning between $12 and $16.50 an hour in the United States,  we have been increasing hourly wages to between $15 and $18, depending on the local cost of living. For employees making $40,000 a year or less in the United States, our average pay increases are around $4,800. This is the right thing to do, and  we now offer well above the average hourly wage for most markets.

Good leaders have the humility to know that they don’t know everything. They foster an environment of openness and sharing. They earn trust and respect. There are no “friends of the boss” – everyone gets equal treatment. The door is universally open to everybody

And true leaders don’t just show they care – they actually do care. While they demand hard work and effort, they work as hard as anyone, and they have deep empathy for their employees under any type of stress.

Many people still ask me about the Troubled Asset Relief Program (TARP), a government program that provided funding to banks in the midst of the crisis. JPMorgan Chase did not want or need TARP money, but we recognized that if the healthy banks did not take it, no one else could — out of fear that the market would lose confidence in them. And while it helped create the false rallying cry that all the banks needed support, the government, both the Federal Reserve and the Treasury, was trying everything it could in addition to TARP. And the Federal Reserve and the Treasury should be congratulated for the extraordinary actions they took to stave off a far worse crisis. In hindsight, it is easy to criticize any specific action, but, in total, the government succeeded in avoiding a calamity.

Shareholders may be surprised to find out that, fundamentally, we are not a risk-taking but rather a risk-mitigating institution. Risk mitigation is not guessing – it is a thoughtful, detailed analytical process that leads to measured decision making.

I want to be very clear that we do not advocate for the repeal of Dodd-Frank. We believe that the strength and resilience of the U.S. financial system have benefited from the law. Ten years out from the crisis, however, it is appropriate for policymakers to examine areas of our regulatory framework that are excessive, overlapping, inefficient or duplicative. At the same time, they should identify areas where banks can promote economic growth without impacting the very important progress we have made on safety and soundness. In fact, a stronger economy, by definition, is a safer economy. Our goal should be to achieve a rational, calibrated approach to regulation that strikes the right balance. This should be an ongoing and rigorous process that does not require any significant piece of legislation and should not be politicized

While we do not believe that the rise in non-banks and shadow banking has reached the point of systemic risk, the growth in non-bank mortgage lending, student lending, leveraged lending and some consumer lending is accelerating and needs to be assiduously monitored. (We do this monitoring regularly as part of our own business.) Growth in shadow banking has been possible because rules and regulations imposed upon banks are not necessarily imposed upon these non-bank lenders, which exemplifies the risk of not having the new rules prop-erly calibrated. An additional risk is that many of these non-bank lenders will not be able to continue lending in difficult economic times – their borrowers will become stranded.

In fact, contrary to popular belief, capital expenditures as a percentage of GDP are higher today than in the “good old days” of the 1950s and 1960s....The benefit of tax reform is the long-term (multi-year) cumulative effect of capital retained and reinvested in the United States. And third, the capital that was used to buy back stock did not disappear – it was given to share-holders who then put it to a better and higher use of their own choosing.

...large swings seemed to be an overreaction, but they highlight two critical issues. One, which we never forget, is that investor sentiment can veer widely from optimism to pessimism based on little funda-mental change. And second, for the fourth or fifth time in this recovery, there were excessive moves in the market with rapidly increasing volatility accompanied by steep drops in liquidity

The Chinese lack enough food, water and energy; corruption continues to be a problem; state-owned enterprises are often inefficient; corporate and government debt levels are growing rapidly; financial markets lack depth, transparency and adequate rule of law; and Asia is a very complex part of the world geopolitically speaking. Just as important, not enough people participate in the nation’s political system....We should also point out that over the last 30 years, the Chinese have been on a high-speed path that includes increasing transparency and economic reform, and while the momentum slows down periodically, they have continued relentlessly on that path. We believe the odds are high that a fair trade deal will eventually be worked out – but if not, there could be serious repercussions.

China can deal with many serious situations because, unlike developed democratic nations, it can both macromanage and micromanage its economy and move very fast. Government officials can pull, in a coordinated way, fiscal, monetary and industrial policy levers to maintain the growth and employment they want, and they have the control and wherewithal to do it. That being said, the American public should understand that China does not have a straight road to becoming the dominant economic power. The nation simply has too much to overcome in the foreseeable future. If China and the United States can maintain a healthy strategic and economic relationship (and that should be our goal), it could greatly benefit both countries – as well as the rest of the world

America’s debt level is rapidly increasing but is not at the danger level. While America does owe in excess of $6 trillion (essentially 40% of its publicly held debt) to creditors outside the country, U.S. companies and investors hold more than $25 trillion in total claims on foreigners, including more than $12 trillion of foreign portfolio holdings, and the U.S. economy is worth more than $100 trillion. So we earn more on foreign assets than we pay to foreign creditors. This is not a major issue. However, our country’s debt level over the next 30 years will start to increase exponentially, and at a certain point, this could cause concern in global capital markets. We have time to address this problem, but we should start to deal with the issue well
before it becomes a crisis.

... I feel compelled to emphasize an obvious point: Bad public policy is a major risk. It could be central banks and monetary policy, trade snafus or simply deep political gridlock in an increasingly complex  world – but bad policymaking is definitely an increasing risk for the global economy.

70% of today’s youth (ages 17–24) are not eligible for military service, essentially due to poor academic skills (basic reading and writing) or health issues (often obesity or diabetes).

Forty percent of foreign students who receive advanced degrees in science, technology and math (300,000 students annually) have no legal way of staying here, although many would choose to do so. Most students from countries outside the United States pay full freight to attend our universities, but many are forced to take the skills they learned here back home. From my vantage point, that means one of our largest exports is brainpower. We need more thoughtful, merit-based immigration policies. In addition, most Americans would like a permanent solution to DACA (Deferred Action for Childhood Arrivals) and a path to legal status for law-abiding, tax-paying undocumented immigrants — this is tearing the body politic apart. The Congressional Budget Office estimates the failure to pass immigration reform earlier this decade is costing us 0.3% of GDP a year.

Irrational student lending, soaring college costs and the burden of student loans have become a significant issue. The impact of student debt is now affecting mortgage credit and household formation — a $1,000 increase in student debt reduces subsequent homeownership rates by 1.8%. Recent research shows that the burdens of student debt are now starting to affect the economy.

Many countries are called social democracies, and they successfully combine market economies with strong social safety nets. This is completely different from traditional socialism. In a traditional socialist system,
 the government controls the means of production and decides what to produce and in what quantities, and, often, how and where the citizens work rather than leaving those decisions in the hands of the private sector.

I am not an advocate for unregulated, unvarnished, free-for-all capitalism. (Few people I know are.) But we shouldn’t forget that true freedom and free enterprise (capitalism) are, at some point, inexorably linked.

We need to set aside partisan politics.

None of these issues is exclusively owned by Democrats or Republicans. To the contrary, it is clear that partisan politics is stopping collaborative policy from being implemented, particularly at the federal level. This is not some special economic malaise we are in. This is about our society. We are unwilling to compromise. We are unwilling or unable to create good policy based on deep analytics. And our government is unable to reorganize and keep pace in the new world. Plain and simple, this is a collective failure to put the needs of society ahead of our personal, parochial and partisan interests. If we do not fix these problems, America’s moral, economic and military dominance may cease to exist.

While it is a constitutional right to petition our government, and many organizations legitimately fight for the interests of their constituents,  we all may have become too self-inter-ested. I fear that this self-interest is part of  what is destroying the glue that holds our society together. We all share a collective responsibility to improve our country