The days of “too big to fail” are over and taxpayers are no longer on the hook for bailing out the country’s biggest banks, should a 2008-style collapse occur again—at least that’s the bold statement made by the CEO of JPMorgan Chase.
In his annual letter to shareholders, Chase CEO Jamie Dimon claimed, “Essentially, too big to fail has been solved. Taxpayers will not pay if a bank fails.” Released on Tuesday, the letter stated that the failure of a major bank wouldn’t have the same impact as in years past.
“The American public has the right to demand that if a major bank fails,” Dimon wrote, “they, as taxpayers, would not have to pay for it, and the failure wouldn’t unduly harm the U.S. economy. In my view, these demands have now been met.”
“Too big to fail” was a term coined during the financial crisis of 2008—when regulators deemed the collapse of several of the nation’s biggest banks to be a threat to the country’s financial system. As a result, a number of institutions received bailouts via taxpayer dollars.
But according to Dimon, banks don’t pose this same threat anymore, thanks to more transparency, higher levels of capital, more liquidity, and a more secure regulatory environment. In fact, Dimon thinks Lehman Brothers wouldn’t have failed at all under today’s capital rules and, even if it had, the market’s multiple safeguards wouldn’t let the organization’s bailout fall to taxpayers anyway.
Still, there are people in the industry who fear another collapse, something Dimon said is natural.
"Market panic will never disappear entirely,” Dimon wrote, “and regulations must be flexible enough to allow banks to act as a bulwark against it rather than forcing financial institutions into a defensive crouch that will only make things worse."
In addition to addressing “too big to fail,” Dimon also covered technology in his shareholder’s letter—particularly Chase’s $9.5 billion-dollar investment in it last year, as well as the organization’s plans to introduce digital banking, online investment advice, and electronic trading in 2017. According to the letter, Chase is “collaborating with some excellent FinTech companies to dramatically improve [its] digital and other customer offerings.”
Dimon also participated in a town hall event on Tuesday, in which he called the country’s social and economic status a “slow train wreck.”