WHEN: TODAY, THURSDAY, January 23, 2014
WHERE: CNBC'S BUSINESS DAY PROGRAMMING
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with JPMorgan Chase Chairman & CEO Jamie Dimon today. Excerpts of the interview will run throughout CNBC's Business Day programming.
All references must be sourced to CNBC.
ANDREW ROSS SORKIN: Jamie Dimon, thanks for being here.
JAMIE DIMON: I'm thrilled to be here, Andrew.
SORKIN: we're in Davos and i want to talk to you about the global economy and the world. but we also haven't talked to you in a while since a lot of the issues that have taken place at the firm.
DIMON: right.
SORKIN: so i just want to talk about that for a little bit if you'd indulge me.
DIMON: go ahead.
SORKIN: you know, between the mortgage settlement and the whale and Madoff. you know some people put the number $23 billion, whatever number you want to put out. what do you think, and i think about this a lot, what do you think the public is supposed to think about you and the firm?
DIMON: right. so the first thing i would tell you about – and i want the public to know, I'm very proud of JPMorgan. we operate in 100 countries. we did $2 trillion of lending or credit recoveries last year. we have very high customer sat scores, in middle market, consumer credit card. that's what we do. we try to do great stuff for communities. we were there in '08, '09, 2010 – for cities, schools, states, hospitals when lots of other people weren't. we also have a series of problems. the problems don't detract from all the great stuff our people do, but you've got to acknowledge problems and fix them. so a lot of those problems, by the way, were '08 and prior. so if you talk about mortgage, 80% were bear Stearns and wamu. there is no one at this company who's responsible for 80%. and i would tell you we shouldn't have paid for 80%, but that's neither here nor there. so you know, companies have problems. press has problems, the military has problems, the government has problems. companies – that does not necessarily mean CNBC is bad because you have one bad reporter. so you've got to be a little careful about how you judge a whole company because something went wrong.
SORKIN: So, you look at these big numbers. And they are big numbers. And so the public looks at them and they are trying to grasp and understand what to make it. Do you think ultimately, that it was fair?
DIMON: No. I think a lot of it was unfair, but I'm not going to go into the details. Also, remember, it all relates to – most of relates to stuff that happened from 1990, 2000 up to 2008. So this wasn't like a one-year number. This was litigation that kind of built up over time, you know and was settled and paid in kind of big numbers this year. And I'm grateful to have it behind us. Because the most important thing for a company is you do your job. Serving clients and communities around the world. And this is a huge negative for the company – a huge distraction of management time, board time, when we should really be helping our clients, which includes cities and schools. So we just wanted to get back, do what we're good at and what we are supposed to be doing.
SORKIN: On the stuff you think was wrong, do you think you fully remedied it?
DIMON: I guess at one point it doesn't matter who you think is wrong or right, so we can debate all day long whether we should have paid. You know, all the bad mortgages in WaMu and Bear Stearns. You know, again, you're really caught between two bad choices. We made the one that was better for the company.
SORKIN: Right.
DIMON: Whether it should have been high or low, I don't care anymore. I've moved on. That was last year. I'm looking forward to 2014.
SORKIN: One more question on that, which though is, was there a moment – what was the moment for you when you said to yourself, "ok. Pay it. I want to put this behind me." And was there something that happened? Was it a conversation with the board? Was it a conversation with Eric Holder? What was that moment for you?
DIMON: First of all, the board was involved every step of the way in this. It was this kind of unprecedented, kind of – you know we have multiple regulators and multiple U.S. attorneys and district – Department of Justice. And it was just, thinking it through, looking at our options and realizing there are two really bad options. And that the wrong thing to do is to complain, fight and then you could have said, well why not go to court all those years? So if you are my board, you would have said, why would you do that and subject your company to three or four more years and the outcomes could be worse. Then wouldn't even necessarily be better. So a lot of people said fight – if you think you are right, fight – banks have a very tough time doing that. It would really hurt this company and that would have been criminal for me to subject our company to that kind of – those kinds of issues.
SORKIN: Right. I don't know if you saw it, but Chris Christie compared himself to you over the weekend. Suggesting when you run a big state in his case, or a big company, he said it is impossible to really understand everything that is going on inside. As a CEO, do you feel that way?
DIMON: You know, I have enormous respect for Chris and I don't know exactly what words were used. I was aware he did something like that. I do think it's true and I think it is important for the press when you talk about the military – we have the best. The skills and capabilities of our people are exceptional. That doesn't mean bad things – to know every single thing people are doing. So that's why you have kind of controls and good people and I tell you, even good companies, good governments are going to make mistakes
ANDREW ROSS SORKIN: Philosophically-- you just said, you know, you have a lot of good people at JPMorgan. One of the things and one of the critiques of the government in this whole sort of prosecuting of Wall Street is that they've gone after the companies and the shareholders and not held the individuals who actually made these decisions accountable. What do you think of that?
JAMIE DIMON: You know, I think that's a legitimate complaint. Like, I think if people broke the law, they should be punished. You know, in the old days if someone in a company broke a law the person would be punished and only if the company was found to have, you know, very broad-- there was systemic in the company all the way to the top would a company be punished. So I think that's a legitimate thing.
I think the lawyers and the courts have to figure out where the balance is. And obviously it seems to have changed a little bit. But I can sympathize with anyone who says, "Where should it be, and if individuals broke the law, why aren't they being punished?"
ANDREW ROSS SORKIN: But the flip side is shareholders say, "Why is it that I'm holding the bag as the shareholder and I'm looking at the company and I'm-- and we're the ones paying for " you know, somebody in the bowels of these organizations made a decision, right or wrong, and the government's decided it's wrong.
JAMIE DIMON: That's totally true. In a lot of things that's totally true, and you pay twice. So you-- so the my shareholders benefit from the good things we do. They get punished from bad things we do. If the government punishes, they get punished for that too. So-- but I'm going to let this to people who are professionals and the courts can sort that out. That's not my job.
ANDREW ROSS SORKIN: Two years ago when we were in Dallas together (I don't know if you remember this), you said you were barely a Democrat. You still a Democrat?
JAMIE DIMON: I am still a Democrat, yes.
ANDREW ROSS SORKIN: Despite all of this hasn't changed your view?
JAMIE DIMON: Well, I've look, I've said to you before, you know-- there are social reasons I'm a Democrat. I'm fairly more fiscally conservative. I always wish that the Democrats on the left would celebrate private enterprise a little more, celebrate success a little bit more.
Yes, I believe…we should lift everybody up. I believe in-- in progressive taxation. I want a more equitable society. And the question that I- urge people to do is look at the facts and figure out why it isn't, how did it get there, what we should do about it and collaborate in fixing it. That's what I'd like to see.
ANDREW ROSS SORKIN: Okay, one more JPMorgan question. In terms of just looking out, in terms of risks, either legal or otherwise that you think about, there's this investigation into the Chinese princelings, where does that stand?
JAMIE DIMON: So I'm not going to go through any of the current stuff. I would tell you that some of these things are beginning, some companies did worse than others like in LIBOR and stuff likelet the courts figure it out. If we just-- I just want to continue to build JPMorgan and we'll sort those out in the due course.
ANDREW ROSS SORKIN: Okay, but in terms of--
JAMIE DIMON: And again if we find people that did something wrong, we will independently take action.
ANDREW ROSS SORKIN: One of the things that's happened in the past week-- on the Chinese princelings issue and I'm curious what it means to the bottom line, is you got out recently of a chemical company IPO in part because you had employed the daughter. Is that going to be something we're going to be hearing more and more about in terms of you deciding, "You know what? I don't want to touch the--" and by the way, that company was not a government controlled company.
JAMIE DIMON: I understand that. I think we're-- look, I don't know the-- circumstance exactly, but I think we're trying to make decisions that try to make us as pure as possible, that we're trying to do the right thing. And you know, I think the-- I think everyone's got to go look back at the rules, not just banks by the way, this is, like-- it's been a norm of business for years that people hire, you know, ex government officials, they hire sons and daughters of companies, and give them proper jobs and don't violate, you know, American Foreign Corrupt Practices Act. But we got to figure out exactly how to create a safe harbor for that so you don't get-- end up--
ANDREW ROSS SORKIN: Is there anything in this--
JAMIE DIMON: --getting punished.
ANDREW ROSS SORKIN: --whole thing that you've read that's made you uncomfortable?
JAMIE DIMON: I'm not-- actually I don't want to go anymore into that one, yeah.
ANDREW ROSS SORKIN: Okay. Let's talk about where we are in the economy. 'Cause we are here in Davos, lot of people talking about what the next year looks like. The last year-- last year when we were here, you were very positive, everyone was positive and it was right both in terms of the economic growth and perhaps more importantly the stock market. Is the stock market out over its skis relative to where we are in the true economy?
JAMIE DIMON: Yeah, so I-- you know-- I never look at stock market as necessarily telling you about the future, but sometimes it actually does. 'Cause that's a lotta smart people buying and selling something and looking into prospects of 5,000 or 8,000 individual companies and saying, "I feel pretty good about that." That is a reflection sometimes of the American economy and what people think.
But-- I'll tell you, the American economy-- and look, I don't know-- no one predicts the future. But I believe the sun, the moon and the stars are lined up. And you know, we don't bet our company on that. This isn't anything other than look how the table's set. Corporate America's in excellent shape.
Got profit margins, a lotta cash and cap which you guys always point out, middle market companies are in excellent shape. Small business is kind of back to where it was. Not small business formation but credit, the access to credit, housing has turned the corner. Six million more Americans are working.
Americans are wealthier in their homes, their 401(k)s. And government is doing no damage. We-- you know, we just had-- I am so grateful we did-- didn't have-- that we have a budget. I'm going to be really grateful when we get through the debt ceiling crisis. And I think those things are going to line up, that it's possible that we're just going to start to strengthen as a company, that investors will be looking for opportunities, companies-- remember companies want to expand their company-- I've never seen a CEO who says, "My goal is to shrink." So you know, the-- kind of the switch is always set to grow and you may see people be more aggressive. We do need immigrant reform--
ANDREW ROSS SORKIN: And do you think we're going to get those things?
JAMIE DIMON: --tax reform. No, but I think we'll grow in spite of them--
ANDREW ROSS SORKIN: Okay--
JAMIE DIMON: --I'm praying that we get them 'cause we are now driving at the margin, you know, capital overseas and brains overseas. It's a bad idea for America.
ANDREW ROSS SORKIN: When you think about Europe, when you think about China, when you think about the rest of Asia, where are you?
JAMIE DIMON: Again if we were sitting here a year ago, okay, the-- I think we-- about a year ago there a lot of chatter about can Europe grow at all. Well, Europe's been growing a little bit. I think Europe still has a tough sledding, so I don't expect it to boom. But if it could just grow a little bit, it's a plus.
Japan is doing better. China-- you know, w-- people are worried they wouldn't grow at 7%. Well, they've been growing at seven and a half or seven-- they just reported yesterday. And you know, my-- I believe that China has the wherewithal to keep growth meeting their targets for the next couple years. In spite of the fact they may have banking problems, they have enough wherewithal to meet those targets. So they're probably going to meet them. So if you have China, Japan, Europe and the United States possibly all doing a little bit better, that's a pretty powerful thing. That's 75% of the global GDP right there.
ANDREW ROSS SORKIN: Banking business: What are we supposed to think of the la-- not just the last earnings reports but even the trend which is to say overall revenues have not gone up, they've gone down. To the extent that profits have gone up, it's been a lot of-- lot of cost cutting and perhaps you could-- argue some of the loan loss reserves which will come back to actually make those profits look better.
JAMIE DIMON: Yeah, well-- it's a tale of two cities here. If you look at banks, and I think-- a lot of the banks you'll see-- some loan growth, some deposit growth and you see it kind of broadly. So that's the under-- that's the real underlying business. That doesn't always reflect itself in revenue growth 'cause you have net interest, margin spreads, you have higher expenses from a whole bunch of different things.
But you do have some good signs. So JPMorgan had-- you know, we had deposits up 10%, assets under management up 15%, commercial real estate loans up 15%. You know, the bond markets are open, the capital markets are wide open. So you see a lot of positive signs. They will eventually lead to profits.
But you know spreads are going against you, costs are going against you. And that'll change, that'll change. And the mortgage thing, I know people made a lot of-- big deal about mortgages. When rates went up, we told everyone refis are going to go down and it's-- they're--
ANDREW ROSS SORKIN: The refis have gone down a lot.
JAMIE DIMON: --and-- right, but--we know that's going to happen. That is the business. That's like a pizza shop when it's storming outside will have less business. You shouldn't look at it that it's necessarily a bad thing. There are positive aspects in my opinion to rates going up. And there'll be other positive aspects. There's not-- there's not just one thing. There are a lot of things got to deal with in a business and-- we shouldn't overreact to mortgages 'cause they're down that much.
ANDREW ROSS SORKIN: Janet Yellen's going to start her job in a week. What do you think the difference is going to be between her and Ben Bernanke?
JAMIE DIMON: I don't know. Look, if sheI think she's been part of those policies. And I have enormous respect for her as does every single person I meet, you know, smart--
ANDREW ROSS SORKIN: Did you know her before?
JAMIE DIMON: --knowledgeable, experience-- I've met her before, yeah. And-- so you know, she'll have to pave her own way. And you know, I personally think QE-- I think the tapering thing's a good thing. I saw a headline the other day and someone said tapering-- strong economy bad because it means we're going to start tapering.
I think-- I thought the purpose of it was a strong economy. And so I think if we have a strong economy makes it easier to taper. Normalization of interest rates and Fed policy is a good thing as long as the economy is growing. So I don't think you're going to see the Fed completely do very tough tightening things or dramatic tightening if the economy starts to weaken. I think it's almost predicated upon as long as you start having jobs at 200,000 a month, you might have this tapering thing, which is a good thing.
And if we-- and if we start having 4% growth, you aren't going to care-- you know, if we're buying an extra $10 or $20 billion a month. The U.S. economy is worth $100 trillion, all stocks, all bonds, all real estate, all private companies. And that-- that sort of money isn't going to be the end all, be all if this economy starts to really take off on its own.
ANDREW ROSS SORKIN: Final question Bitcoin, your take. Will you be-- will JPMorgan be accepting Bitcoin ever?
JAMIE DIMON: I doubt it. I mean, there could-- the question isn't whether we accept it. The question is do we even participate in people who facilitate Bitcoin? So it's a terrible store of value, it can be replicated over and over. It doesn't have the standing of a government. And I-- and honestly-- it-- a lot of it-- what I've read from you guys is a lot of it's being used for-- illicit purposes.
And the people who are going to eventually really get upset with it will be governments, you know. So governments put a huge amount of pressure on banks and so-- to know who your client is, anti money laundering, is it being used for legal purposes, did you do, you know-- real reviews of that? Well, obviously it's almost impossible to do with something like that. So they will eventually be made as a payment system in my opinion to follow the same standards as all these other payment systems. That will probably be the end of them.
ANDREW ROSS SORKIN: I said it'd be my final question, but you-- you're leading me somewhere else which is the security though, the security of money these days. We saw what happened with Target. Some people-- Mark Andreessen said actually if that had been all done in Bitcoin somehow that would've been safer. I don't know where you agree-- if you agree with him on that. But where--
JAMIE DIMON: Actually that's totally untrue.
ANDREW ROSS SORKIN: where are you though on--
JAMIE DIMON: That totally untrue- first of all—cyber is a huge deal. And so all of you have got-- all of you have got-- you know, these things could be-- well, I don't have my-- but you know, if s-- smart phones can be invaded, s-- point of sale things can be invaded, your computers can be invaded. It is a very big deal and we're putting in enormous efforts to protect our clients, our company-- and the system. The system is also-- everyone's hooked into each other. So sometimes the weak spot's through something else. Bitcoin-- retailers-- I'm not blaming retailers. I actually think retailers and JPMorgan--
ANDREW ROSS SORKIN: Are they doing enough? I mean, who's-- going to be--
JAMIE DIMON: Look, I don't want to--
ANDREW ROSS SORKIN: Who's going to be holding the bag when it's over?
JAMIE DIMON: -- we all should be doing EMV, that's the chip and tokenization which is-- the-- essentially the same as Bitcoin. It's basically where it's like-- every-- when you-- instead of using Visa, instead of swiping Visa, your name and number, you swipe Visa just with us, we give the retailer-- a token which lasts for a split second and disappears. It can never be used again, it has no personal information whatsoever. And that's doable.
So I think that retailers and banks should work together to create a really great system. You're still going to have weak spots. You still have to look at vendors, third parties-- all the ways to get in your system. It's a big deal and anyone I know is worried about it and working hard on it--
ANDREW ROSS SORKIN: What are you--
JAMIE DIMON: --and this one by the way the government's being quite helpful. With need the government to work collaboratively with banks on this one.
ANDREW ROSS SORKIN: What are you worried most about? When you-- biggest risk to the firm, to the economy? What's the thing you--
JAMIE DIMON: I-- hope-- I mean, I-- w-- I would like to see more collaboration between government and business. And I'd like to see less things which are disruptive. I don't want to blame the Democrats, Republicans. And you know, we all talk about income inequality, let's get jobs growing. You want kids to go back to work? Let's get jobs growing.
Job growth and the economy growth will pay for education, it'll reduce the budget deficit, it'll make it easier to come up with ideas that can, you know, improve the lives of everybody. So I just-- I think what we should focus on is getting the job engine growing, which is the economy. That's the number one thing-- and let's not do things to distort it. I always tell-- if you're a Republican or Democrat and you do something to distort that for a small-minded reasons, shame on you.
ANDREW ROSS SORKIN: Final, final, final question-- CNBC's turning 25 years old this year. We are trying to put a list together of the 25 most important people in the business world over the past 25 years. Your name is on the list of the top 200. But I'm curious--
ANDREW ROSS SORKIN: --if you took your name off of it, who--
JAMIE DIMON: I don't-- I don't expect--
ANDREW ROSS SORKIN: --do you think about?
JAMIE DIMON: --I don't expect to be in it, but I-- and that's flattering. But there are a lot of people who I think have been enormously important the last 25 years. So it's just hard for me to pick one out. If you'd give me more time I would've spent some time on it. And it-- and it might not just-- be just one.
ANDREW ROSS SORKIN: Okay, I will-- I will call you back on that one--
JAMIE DIMON: Okay, okay, thank you.
ANDREW ROSS SORKIN: --thank you very much, Jamie. Appreciate it. Thanks.
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