JP Morgan Chase chief executive Jamie Dimon has insisted the bank did the US government a “favour” buying troubled rival Bear Stearns and would probably not do something similar again.Mr Dimon bought Bear Stearns for about $1.5bn in the spring of March 2008 as the failing bank threatened to unravel America’s financial system.
As part of the deal, the Federal Reserve pledged to take some of the losses on the $30bn of mortgages that Bear accumulated as part of an ultimately reckless bet on the US housing market.
“We did them a favour,” Mr Dimon said in Washington on Wednesday. “We were asked to do it and we did it at great risk to ourselves.” The banker estimates that the deal has cost JP Morgan up to $10bn as it wrote down the value of mortgages Bear owned and spent money fighting legal cases against the bank.
“Would I have done Bear Stearns again knowing what I know today?”,” said Mr Dimon. “It’s really close. Knowing what I know today, if they called me to do something again like that, I couldn’t do it.”
Mr Dimon’s comments come as regulators in New York last month launched a multi-billion lawsuit against JP Morgan, alleging that Bear misled investors over the sale of mortgage-backed bonds in the run-up to the financial crisis. JP Morgan has said it will contest the suit from the New York attorney general’s office.
In sharp contrast to 2008, Wall Street has had a smaller profile in this election as the debate focuses on the broader economy.
However, the regulation of financial services did provide a flashpoint in the first presidential debate when President Barack Obama said that the plan by Mitt Romney, his Republican challenger, to unwind some of the new rules would threaten another financial crisis.
Mr Dimon, once dubbed President Obama’s favourite banker, has been battling to contain the fall-out from a $6bn trading loss racked up by traders in London .
At an event in Washington yesterday he said he should have caught the “London whale” derivatives trades that resulted in a multibillion-dollar loss for the bank.
“We made a stupid error,” Mr Dimon told an audience at the Council on Foreign Relations in Washington on Wednesday. “I should have caught it … I didn’t.”
The bank’s profits for the third quarter are expected to roughly match the $4.9bn it made in the second quarter of the year. JP Morgan will report its results on Friday.