In a conversation with CNBC’s Andrew Ross Sorkin, JPMorgan CEO Jamie Dimon details the events leading up to the 2008 crisis. Ten years later, he says he doesn’t trust doing business with Washington because “the next government can do whatever they want.”
Q2 hedge fund letters, conference, scoops etc
Jamie Dimon On The 2008 Crisis
Transcript
When do you think when you go back and start thinking about 10 years ago.
When you think before 2008. Because I think for you might happen in 2006 or seven now that you started thinking there was a problem.
It was probably though I have to go check my memory but probably the summer of 0 7 there was a whole list of issues have been building up syndicated leverage lending which is literally five to ten times what it is today was a problem. The Quantum Fund overelaborate the investment banks levelers 30 to 40 to 1 which is far more than it was before. So you already had this teetering thing which is very nerve racking. And you know some people taking action to fix that and someone you were you're damn straight we were raising capital liquidity and trying to be prepared for what I thought could be a very difficult time.
OK so fast forward to Bear Stearns is 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. And also the idea of moral hazard. What did you think the weekend of Bear Stearns about those issues. So first we we bought bail Bear Stearns.
And it wasn't bailed out by the government the government did a little bit of financing because they act like the financed by the guys not we. We did the whole thing. They took virtually no risk the way were structured from them it just reduced reduced the balance sheet we were taking on. And we thought we helped the system. We only did it because we have to buy Hank Paulson. And we thought if we 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.
You know Lehman was next in the queue. Everyone knew that. Now remember there were a lot of the things that were having problems Freddie Mac countrywide wamu you know prime by then a lot of things was going through. Bair was in more trouble. Wait. Six months later Lehman but I thought that Lehman had time to fix their problems. So my view is that that given time given this notice you can raise capital you know reduce your leverage to a bunch of stuff. So I was kind of a little surprised in June or July of that year. But they made an announcement. Big losses they hadn't taken action and they scared the marketplace and so here 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 Freddie Mac and now been put into conservatorship.
The Koreans are if you remember were around the hoop on Lehman Brothers they're out now and we're now walking into this weekend. It's Thursday and for the second time in two weeks you tell Lehman that you have to get some more collateral. Now. Why did you make that call. What happened.
Yeah and again that people blow it way out of proportion. We were the largest counterparty. They had tons of extra collateral. So we were taking on Lehman so our compensated readers were about hey we're going to try to help you guys out then you can give us more clout and give us more Clavel. And they were always fine and everyone around the world was asking for more haircuts so everyone was demanding higher cloud with exactly the same trade sucking the equity out of the system and we're doing a little bit too. But very respectfully so we wouldn't hurt Lehman but you know now you had this succession Fannie Mae Lehman we bought WaMu like a week after Lehman. So I think you're happy that point there were you know but beyond anything that we've all ever seen just to the point though on the collateral because there are Lehman people who sayJ.P. Morgan they they took our bet they were asking for too much money at a time when we were. Ignorant people were asking for more collateral everywhere. The day after we went bankrupt we financed Lehman almost I think the number is 70 to 80 billion dollars. Morgan not the federal government. And we needed collateral against the 70 billion dollars we were taking collateral because our exposures like this.
