WHEN: Today, Monday, September 24, 2018
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with JPMorgan Chairman and CEO Jamie Dimon and CNBC's Jim Cramer on CNBC's "Squawk Alley" (M-F 11AM – 12PM) today, Monday, September 24th, as JPMorgan opens its first retail location in Philadelphia. Additional footage from the interview will air tonight on CNBC's "Mad Money w/ Jim Cramer" at 6:00PM ET. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2018/09/24/watch-cnbcs-full-interview-with-jp-morgans-jamie-dimon.html.
All references must be sourced to CNBC.
Carl Quintanilla: In the meantime, JPMorgan announcing this morning it plans to open 50 new branches in the Philadelphia area, as part of the company's announcement earlier this year to open 400 branches across the country. Our Jim Cramer is out in Philly with JPMorgan's Jamie Dimon for a CNBC exclusive. Hey again, Jim.
Jim Cramer: Thank you so much, Carl. Yep, we're here with Jamie Dimon. Jamie, this is a quite a commitment to an area that frankly has gone from bank to unbank. Citi just pulled out over the course of the last five years $50 million in net worth. 330 banks have closed in the last ten years. Why? Why now?
Jamie Dimon: Yeah, you know, with regulatory and tax reform, we announced a $20 billion thing, going to many cities. Obviously Philadelphia is the seventh largest market in the United States. That's not including their biggest suburb called New York. And you know, we like to be part of the community. We are already here investment banking, commercial banking and private banking. Retail is a gap. So we're going open 50 branches. 20% will be in LMI neighborhoods, neighborhoods like this. Alright. And when we come in, we bring the full force of JPMorgan, which is philanthropy dollars but to really help people, like the entrepreneurs of color fund, affordable housing units. And we enjoy it, it is good for the company, and overtime we're -- we invest for the long run. We never pull in and out of something.
Cramer: talk about the multiplier effect. When you open a branch, people think, "You know what? We don't need branches any more. Everything is digital." But brick and mortar works.
Dimon: It's amazing. So I think people aren't thinking clearly. A million people visit the branches every day. The type of branch is going to change. The size of the branch is going to change. They're getting smaller, but more advice. So there's a mortage loan office there. There's a small business loan office there. There's a financial adviser, for financial affairs. So that will change. But a million people -- even the average millennial visits something like three times in a quarter. So to me, of course the branch will morph, it will change, but you still need to serve your client the way they want to be served. Not the way I want to serve them. As you know we've rolled out all these new products, too.
Dimon: Like Finn – the online only banking.
Cramer: Well I'm glad you mentioned this, because a lot of people feel that ten years ago one of the problems was the education of the borrower. The borrower did not know enough about what to do. You said there will be someone in there literally to help and to teach. Will that make a difference, versus ten years ago?
Dimon: Yeah. I've told the people here, "When you go to these LMI neighborhoods, try something special." But we're going to roll out a lot of financial investment education tools. We have you invest and we're going to roll out a self-advised group, and we haven't decided on the price of it yet, so that you can advise and think about it. And we already put on the screen, you can get your FICO score, and we're going to teach you ways in which you can improve your FICO, so that you can reduce cost of borrowing and stuff like that. We have to do a better job, not just us but the -- America, educating people in financial matters, from rainy day funds to handling you know, retirement accounting. And, so we're making an effort to do that now. So we have things coming out that hopefully our customers will enjoy.
Cramer: Let's talk about the power of business versus the power of government. The government, legendarily got big settlements from different banks. $13 billion from you. Keith Bliss says that you paid a total of $44 billion. Did that money go into the community, and did that -- was that the way to get things done, versus the targeted way you're doing?
Dimon: Well this actually helps the community. Some of those funds -- we don't actually know how they're disbursed. And I think one day someone should look at that. And – but you know, that's kind of the past. We've moved forward about how we do it. But this is how you build a community. Small business lending, affordable housing, branches that advise people. And we know that that works. Cities – this city of Philadelphia, you're a great hometown, the city is doing better and better but parts of it are not. So we do make a special effort in those parts of the city.
Cramer: Now, there is a sense that lending nationally slowed down. I'm not getting that from your bank. Can you give us a sense of what's going on in places that frankly are unbanked and whether there is a revival that can actually move the needle for you?
Dimon: So, one important thing: these things work when you actually do it with civic society and government.
Dimon: They don't work when we're at each other. So we have seen all around the world when mayors, not for profits, businesses work together, you can get people jobs, you can get them trained, you can get them employed, and it actually works. But in America, in America the economy is quite strong. And it's grown at 3%. It has been now for a couple of quarters. And it looks like that way, there are no great potholes. So, that may very well continue. And so, lending -- there is a little bit of a reduction of lending in the middle market. We don't exactly know why. Large corporations of course --
Cramer: Too flush. Could clients be too flush?
Dimon: I think -- you know -- we do know there's an effect that with tax reform and corporations earning money, they need to borrow less. It's just hard to -- tease it out to figure out exactly what that means. But you look at employment, growth, people going back to work, it is pretty good.
Cramer: Alright. Now, last week you told CNBC that it is not -- don't call it a trade war, call it a trade skirmish. Previously you had said there could be at times, perhaps, a slow down or at least in the psyche because of the – of any sort of trade war. How are you feeling about that?
Dimon: Yeah, I called it a trade skirmish. $20 billion of tariffs in and of themselves are a little bit of a tax – if it all gets paid -- tax in America. Remember, people do other things. They have other supply lines. But it's a $20 trillion economy. So that is a negative. The real negative isn't that. It's confidence, consistency, if people start reducing investment, if people start moving to supply chains around, that we have seen already moving around the markets a little bit. And so -- and the fear that the skirmish may become a war. So we don't really think it is a great way to go about it. It could easily offset some of the benefits that we've seen from regulatory reform and tax reform.
Cramer: I wanted to talk to you about regulatory reform. You know, Marianne Lake said recently -- your fabulous CFO – that we haven't really seen genuine regulatory reform that would make her happy. But there's been so much. There's been a change of attitude, no?
DIMON: So I think if you -- when i travel around, CEOs of other industries: logistics, steel, manufacturing, pipeline, they've all seen it. Have we seen actual changes in regulation for us? Not really. They have a long list of things they want to do. There has been regulatory change for the smaller banks, which we totally support, to make it a little bit easier for them, to reduce the burden on them. But it doesn't – it didn't have anything to do for the bigger banks. I think -- and the public should know, we're no not asking for the throwing out of Dodd-Frank. We're simply purposefully looking at calibrating, getting rid of duplication, looking at things that hurt the mortgage markets, hurt this kind of market, so you can enhance growth and do it safely. No one is looking at, you know, going back to the good old days. It's just recalibrating. And you know, remember, there were 2,000 rules. It wasn't like one or two. There were a lot of – and they were done in haste. And people should always rationally look at cost benefit, you know, what makes sense, what doesn't, all keeping the system safer. And remember, growth, a stronger economy also makes the financial system safer.
CRAMER: Now you just mentioned no rate potholes. We've got a fed meeting that's coming up this week. The spread that you would get, 2 and 10 to use the hike. You know, the -- the typical logic that people say means that you can't make as much money and then you can't lend as much.
Dimon: So, when I say no potholes, the household in good shape --
Cramer: Okay –
Dimon: People going to work –
Cramer: FICO scores, high --
Dimon: FICO scores are fine. Companies are flush. Tax reform is still a benefit. We don't have the extreme leverage we had in '08. And all of the lending has been pretty good. Prime, good lending. So it's not been bad lending. But absolutely, there's friction out there. There's always friction. You open up the newspaper on any week of any month, there's tons of friction. And it's mounting. Brexit, QE, Turkey, Argentina, and we don't know the full effects of those things. So yeah, we keep our eye on that. But it may not derail the economy. You've got to separate the two.
Cramer: I keep thinking these are all things that should play to your fortress balance sheet strength. We've not seen – we've got European banks that are really – really on the run so to speak. Why isn't JPMorgan making a greater presence given the weakness of the rest of the world?
Dimon: Well, we do. In every country we're in, we're steady, growing. And if we do country by country, adding more bankers, systems, people and all the support – risk, legal, credit, compliance. So our share in Europe has gone up considerably. And we're just doing it by adding people, and adding branches, and you know the basic good old three yards and a cloud of dust.
Cramer: Well, okay, when i hear three yards and a cloud of dust, I think you should get a higher price to earnings multiple, for heaven's sake. You're selling at 12 times net returns. We've been at this game for a long time. If for growth financial with money that's made every day you open the door, why aren't you valued like a typical S&P company?
Dimon: That's a question you're going to have to answer. The banks are under -- still under political regulatory constraints and all that. We just went through the crisis so i think a lot of people's investors are probably always worried. But you're right – we're in very good returns in capital, we're growing. You know, whenever -- when the cycle hits, obviously it's going to effect the bank, but we will manage through the cycle just like we did right through the last one.
Cramer: Okay. When I think about that, I think that you must be in there buying stock every day for the company. You have chosen a path of buying back stock. Shrinking, but I still can't believe how many shares you have. For ten years, your share count has not gone down enough. When will you start getting down to a level where you really are not – where you're sopping up the darn supply?
Dimon: So I don't remember the exact number but our share count is down like 15%.
Cramer: Yeah, but it's still 36 versus ten years ago, at 35 --
Dimon: Yeah – but there's some inhabitation over time – but since I've been there it's been coming down. So – but if you want to look into something, i would prefer to spend that money not buying back stock, doing this. So growing our business is far better for the economy. Right now we don't have a lot of choices, but over time I really would prefer not to buy back stock. You know, companies should do what makes sense. And I also don't buy this argument that it's bad. Buying back stock is simply giving it back to you, an investor, who then redeploys it to a better use. It's redeployment of capital that should redeployed if a company can't use it. But my choice is always to grow our business. Which we're now doing.
Cramer: Okay --
Dimon: -- 500 branches. We're now in all major cities for investment banking, middle market banking, etcetera. We've been growing overseas. But think about any bankers and people, and stuff like that. So that is my preference. P2P. You Invest. You know, building products and services. So you're going to see a lot more of that come in the next 12 months.
Cramer: When I think about this, and i am very proud of what you're doing in my home city, but I do say, okay, but as a pure capitalist – you know, "Listen, Jamie, we're shareholders, we should get that money. I -- there's no real instant payoff here, within two, three years. It's going to take a long time."
Dimon: No, it's not true. Now first of all, accounting, you have to be careful about. But when we build a branch, okay. And we put a million, I don't know if I want to put numbers publicly, we put capital in the branch, but five years later that branch could be earning -- contributing to profit a million dollars a year. So you know, the timetable of that in new cities is a little more complicated than when we open a branch in a city we're already in, but again, we already serve 60 million households. We want to serve 70 million. We want to bring them all the products and services we have. So there is a financial payoff. It is not overnight, but I don't worry about that. I just explain to people like you that's okay. The MPV is very good, and it's going to be negative the first year, you know, maybe break through by the third year and then a plus.
Cramer: How about us who are depositors of JPMorgan? We're not getting the rate that you're gonna get on the two year. When are you going to start paying your CED and your depositors more?
Dimon: When rates came down, it came down like this. As rates came down to zero, banks didn't do it. So when rates started going up, they didn't pass it on. I think now you're gonna see – and obviously people have other options, money market funds, et cetera. But I think now as rates go up the next 25, the next 25, you'll see what we call beta, how much will be passed on. It will go up and up and up.
Cramer: Well, is that going to shrink possibility? Should I be worried?
Dimon: Not -- not really because it's -- we are gaining deposits. And the spread that you're maintaining between your cost of funds and what you're paying will be about the same.
Cramer: Jamie, you're talking about the politicians – just like the politicians did in 1964 – you're talking about a war on poverty, that business needs to do a better job. You mention that in big settlements from say 2013, when attorney -- Associate Attorney General Tony West was kind of after the bank, that was you being on the defensive. You're playing the offensive in trying to change poverty in this country. Do you feel you can do it better than the government?
Dimon: No, I think government and business have to do it together. And it works at a local level. We see it in Detroit, we see it in New Orleans, we see it in Chicago, we see it in L.A., you see it in in Philadelphia. With great ideas. And most of the things we talk about, affordable housing, skills, commercial development, entrepreneurship, that's not democrat or republican. But i think business and government together can do it. If business -- you can't do it without business and business can't do it without government. And you know, government is obviously going to play a role in terms of regulation and licensing and stuff like that. And while America is the most prosperous nation on the planet, we really have to focus on these issues about income inequality, infrastructure, opioid crisis, lack of education in inner city schools -- end of up in good jobs.
Cramer: Jamie, you know what you sound like when you say these things? You sound like a politician.
Dimon: Well, I am a patriot.
Cramer: Okay, but if you're a patriot, so was General Eisenhower. We didn't know if he was Democrat or Republican but he ran for President because he was a patriot.
Dimon: He won World War Two.
Cramer: Well – you're --
Dimon: I am a banker first. I am not running. I just – I think it is very important that we have good policy. And that we should focus on good policy and -- all the time, and as you know, I don't mind speaking about good policy, analyzing it, participating in it in a way that JPMorgan can. So if you're in other areas – you know, other companies will be a far better job than we can, because they are far more knowledgeable. But in these kind of areas, we can really help communities.
Cramer: Are good business skills ever really transferrable to government, though?
Dimon: I think some are. Yeah, I mean, administration, management leadership, organization. But that doesn't mean a CEO will translate to a good politician. You know, politicians have a whole different set of skills, and relaying to people, and understanding empathy. But that doesn't mean -- I would never say never that people can or can't. Some have done it. Most have failed.
Cramer: When you say never say never, again, it brings me back to the dialogue.
Dimon: -- I would never say never for someone else. I would not say a CEO cannot be a good president.
Cramer: Do you think it's too soon –
Dimon: And President Trump was a CEO. So --
Cramer: You just met Mayor Kenney here from Philadelphia. That's something that would not -- I don't want to say frowned on, but wouldn't be believable ten years ago, when bankers were considered to be antithetical to democracy even because of President Obama. What -- has it changed enough that now you're welcome in communities that were solid democratic areas that I think really abhor banks?
Dimon: It's nice to be welcomed. But just you know -- we never stopped seeing Mayors, Governors, Presidents, Prime Ministers, Senators -- even people that didn't like us. Because we always said it isn't about whether you like us, it's are we doing a good job? Are there legitimate complaints we should handle? What should we do to make it better for people? And so we never stopped doing it. But it is nice when people do like you.
Cramer: Okay. I want to speak about the country. You have been on record saying we know, "greatest military, greatest educational system." Is there any --
Dimon: Education -- the best and the worst. We are failing inner-city kids. Half of them don't graduate, like in the poor neighborhoods. And a lot of kids aren't getting the skills they need to have a job. And so that is a failing. We should be ringing an alarm bell about that. But we don't. And I don't know why.
Cramer: Well, why don't -- what can you do beyond what you're doing?
Dimon: Well, we're doing tremendous in skills. So what we're doing in skills, we go to local schools – like we're now working with the government in New York – my wife did this, by the way -- to train kids to be tellers. $36,000 a year, 12,000 medical and pension benefits, the kids like the jobs. And that's the first rung. Then they can move up. They can become a banker. A lot of our branch managers were tellers. And a lot of the regional managers were tellers. So we can do it for ourselves, but we also help schools locally, whether it's a high school, whether it's apprenticeships, whether it's a community college with money, but it's not just us. It's all businesses need jobs locally. They need special training. So that really has to be done locally. That should be a national --
Cramer: Alright. $1.5 trillion in student loans. 23% default last year. It's supposed to be 40% by 2023. I know Marianne Lake said, "Look, that's not really an issue for our bank," but how about for our country?
Dimon: It's a huge issue. You know, we've -- this is all government lending by the way. And bad lending is bad. Whether it was the mortgages that you make or businesses. One of the things you have to do is have discipline around capital so you get a return. Bridges to nowhere are bad. Schools that don't work are bad. Lending money to people who can't pay it back, it's a mistake. So that student lending – there was a tremendous amount has been done in seven years. The folks are having a hard time paying it back. It is all owned by the government. So it is the taxpayers who lose – whatever -- hundreds of billions of dollars. But it is not good. Because what we're seeing today is that in other lending: so mortgages, these kids are having a hard time getting a mortgage. Credit card, these kids are having a hard time getting a credit card. So it is effecting the economy. It is not like the mortgage crisis. It's a trillion 3 or a trillion 4, I wouldn't call it systemic -- it is just really highly unfortunate.
Cramer: Okay. Let's go back to international a second. You talked about the idea of the tariffs so far. That you know, you've got a skirmish. But at what point would it be a war and at what point should we be worried that it's really gone overboard?
Dimon: You know, I worry about it, and I just don't know. I think china has been predictable in retaliation. And I think the market kind of expected a tit for tat retaliation. I they're kind of expecting NAFTA to get done. It could get worse from here. And I just – I really don't know and I hope it doesn't. I hope that they sit down and have rational conversations. And we have a both NAFTA, which we should do because Canada and Mexico are good neighbors of ours. I am going to Mexico later this week. And with china. And I don't know what the conversations are behind closed doors anymore, so I really don't know. But I urge -- I think we should try to get -- again, the president raised very, very, very good issues. We're only talking about the process to the conclusion. I hope their process works. I just think it's kind of a riskier way to go about it.
Cramer: How do you -- the president says the problem with banker Jamie Dimon running for president, is he doesn't have the aptitude or the smarts and is a poor public speaker and nervous mess. That doesn't sound like cooperation. How did you patch that up? I mean, I'm sure in the last ten days you patched this up.
Dimon: I have not spoken to the president.
Cramer: You haven't?
Dimon: And -- again, I made a mistake. I shouldn't have yapped like that, which some of you have mentioned on TV. But again, I want to focus on policy. So my view is let's just focus on policy. I shouldn't have been taking shots and having jokes at anyone's expense.
Cramer: Would you think -- would you put this in the case of say the London Whale, where you said it was the stupidest thing – "the stupidest, most embarrassing situation I've ever been a part of"? Is this right up there with the London Whale?
Dimon: I've said a lot of stupid things in my life. The London Whale we lost some real money.
Cramer: Okay – because what i am thinking about is the things you're saying are common sense things that we have not heard from bankers. We heard from bankers on the defensive for decades. You are saying here's how public private partnership make these neighborhoods better, get better -- much better schools and we change our country. Are you changing city by city?
Dimon: We are trying. But again, you have a lot of guests on TV, you ask most of them what they're doing, a lot of companies, they're doing stuff just like this. It's not just JPMorgan but all these companies – they're part of the BRT – we actually put out a booklet of work skills, everyone is doing something. And everyone is doing a lot in diversity and other things --
Cramer: So you don't think we are falling behind other countries? We've seen mortality numbers, we've seen --
Dimon: I can -- in total, we are slipping. I think that bad policy is why we've grown at 2% over the ten five years and not more in the last ten years. The American public should know, 20% growth in ten years is half what it should have been.
Cramer: Is China going to pass us?
Dimon: I doubt it. Okay. We -- this country is blessed with things that are just way beyond, schools, universities – the good part – the universities, land, water, energy, the Atlantic, the Pacific, the best business and innovation, but we have this series of problems. We fix one, uncompetitive tax system for business. That was a bad idea. We have to fix immigration, inner-city schools, opioids, we have to give felons a chance to have a job, we've got to get people back to work skills, we should double the earned income tax credit, and one day we'll have --
Cramer: Tax reform 2.0 is reasonable.
Dimon: -- and we should have a negative income tax of some sort. Make jobs that people have, because jobs give dignity, jobs have better social outcomes, but they need to be a living wage. So I agree with that concept when i hear it from folks, and the earned income tax does that. And if we need to double it, we should double it. And if you have to pay more, so be it.
Cramer: I agree. Painful, but I agree. Now we're going to send it back to New York and then we're going to spend time a little more time talking about "Mad Money" and what you're -- more bigger -- big picture issues. Thank you so much. Carl.
Dimon: Thank you all.
Quintanilla: Jim, we look forward to tonight's show. "Mad Money," 6:00 p.m. Eastern time. More with Jamie Dimon of JPMorgan.
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