Responding to questions about Europe, Dimon estimated the bank’s total exposure to Portugal, Ireland, Italy, Greece and Spain at about $15 billion. The bulk of that exposure is to Spain and Italy. In his worst-case scenario, JPMorgan would lose about $3.5 billion, he said. Dimon made it clear that JPMorgan was sticking by European sovereign and corporate borrowers, and that it would not pull these positions to save its skin.
”I hope that one day some of these European nations appreciate the fact that we're not cutting and running,” Dimon said to both the press and analysts on two separate calls.
To further soothe investor nerves, Dimon said that a big part of the exposure to the weaker European countries was to corporate borrowers. He noted that corporate borrowers can remain solvent even when their countries default, as was the case in Argentina and Mexico.
From the cheery topic of European debt woes, reporters moved on to the possibility of a U.S. debt default. Dimon had some memorable words: “No one can say with a straight face that a default of the U.S. government wouldn't have a huge impact on the global economy.”
Referring to the possibility that Congress fails to agree to raise the debt ceiling, he said, “I wouldn't take that risk.” The market is assuming this will get resolved, says Dimon, adding that if it doesn’t he expects major upheaval in the markets.
The topic of mortgages came up with both analysts and reporters, of course. JPMorgan added $1 billion to reserves for the potential cost of the settlement with the states' attorneys general over JPMorgan’s role in the mortgage meltdown.
Dimon did his best to make it sound as if JPMorgan, and other banks are steadily climbing out of the hole. He said he expected foreclosures to stay high for another 12 to 18 months, and that home prices would “continue to go down a little” as a result. But Dimon was optimistic, saying the economy would drive the housing market, not the other way around. With a little time, house prices will start to rise again, he said.
It was almost enough to make you forget that CFO Doug Braunstein’s evasive answer to the question from this reporter: Will you have more mortgage charges as big as the $2.3 billion you took this quarter against litigation, settlements and foreclosures?