CNBC's full interview with JP Morgan Chase CEO Jamie Dimon at Davos

[00:00:00] Speaker 1: For a reaction to the president's comments, the state of the economy and the markets and much more, we are joined by Jamie Dimon. He is JPMorgan Chase, chairman and CEO. And Jamie, it's great to see you today. [00:00:08] Jamie Dimon: Happy to be here. [00:00:09] Speaker 1: One of the stocks that has helped fuel that rally has been JPMorgan. I know you guys are just coming off your most profitable year ever. You talked an awful lot about the strength of the consumer, what you're seeing in the United States. What's happening in the beginning part of 2020 after such a successful 2019? [00:00:23] Jamie Dimon: Welcome, everybody. Welcome, viewers. So the economy is doing fine. You know, if you look at 2020, it just began. But the consumer, people remember, is strong. Seventy percent of the GDP is the consumer. Their balance sheet is in great shape. Housing is in short supply. Their confidence is way up. Their wages are up. The jobs are up. Millions have come back to work. There are probably millions more who are still going to come back to work. Things are working. On the corporate side, you know, you did have a reduction in confidence and CapEx, mostly, in my view, related to trade. But that may have leveled off at this point, because now you have some positive trade news about USMCA and the China trade deal. [00:01:01] Speaker 1: Joe actually asked the president about that this morning when he sat down with him. Just do you expect to see a return of CapEx? It sounds like you do expect to see a rise in capital expenditures this year. [00:01:09] Jamie Dimon: I think it's very possible. Remember, a lot of companies, they do CapEx when they need to. Receivables go up. Inventory goes up. They build that plan when there's demand for their products. So you've already seen more CapEx in the consumer side. You may very well see it more in the manufacturing side. And global growth is 3.3 percent. It's not terrible. So, yeah, you can see it. You can see continued growth. [00:01:31] Speaker 1: Part of the reason that you had such strong revenue last year, in part, was because of what happened with trading revenue. So it rebounded pretty sharply in 2019. How are the markets feeling to you right now? How do things look? [00:01:42] Jamie Dimon: They're fine. I mean, that trade is actually not that big a part of it. We were up across the board. And we look at more things like number of customers, satisfaction, number of accounts, market shares, which is what we try to drive all the time. But the markets right now are fine. I mean, they're in a Goldilocks place. [00:01:57] Speaker 1: I was going to say, fine, it sounds like it's almost underselling it when you look at new records that are being set every day. Do you have any trepidation about anything you see here? [00:02:04] Jamie Dimon: The only thing I have trepidation about is negative interest rates, QE, and the diversion between stock prices and bond prices and yields and stuff like that. It's kind of one of the great experiments of all time, and we still don't know what the ultimate outcome is. [00:02:18] Speaker 3: Do you—are you in favor, though, of the way Powell has approached this? Yeah. And do you think that he is responsible in large part for this? Do you think it's fiscal policy or monetary policy that's created this Goldilocks period? [00:02:30] Jamie Dimon: I think it's a little bit of both, but Goldilocks has two sides to it. So—but I also think that we have to have coordinated fiscal monetary policy and regulatory policy. You see China do that. In the United States, you don't see it so much. You know, industrial, regulatory, fiscal, if you want to kind of grow faster and not cause some of the problems that could be caused by rapidly rising rates or something like that, you're going to need a bit of both. And you're going to need it globally. [00:02:53] Speaker 1: That sounds like you don't think the Federal Reserve should operate independently from the White House and the presidency. [00:02:59] Jamie Dimon: If they could be completely independent, that doesn't mean they can't be coordinated, so that if they feel that if governments do X, they will be very comfortable doing Y. Okay? That's not lack of independence. That's—you both independently said, "That's a good course for the country. Let's go do it." But who's supposed to listen to the other? For China, they do it all the time. No, obviously. [00:03:18] Speaker 1: But China also tells its companies what to do. [00:03:19] Jamie Dimon: And they can manage their— Yeah, but they can manage their economy much better. And, you know, we fail. You know, we fail to do that. We need to have more coordinated policy. [00:03:26] Speaker 1: Who kind of runs the ship in that situation, though? Does—is Congress supposed to listen to the Fed in terms of what to do? The Fed's supposed to listen to Congress? How does the White House play into all of that? Because it sounds like you're right. I can absolutely see how we could better manage our economy doing that. But it does sound a little counter to how we've operated to this point. [00:03:42] Jamie Dimon: I'm not sure it's true. I think in the—if you read history books about the Fed and the government, usually through the administration, they've sat down and had coordinated policies to accomplish the goals of the country. They did it to get out of the Great Depression. Like they did in 2008. They did it to get out of World War II. They did it to multiple times. Those were in times of crisis. [00:03:57] Speaker 3: But also, even arguably after the crisis, even in 2008, they didn't do it. I mean, yes, they had a stimulus plan, but clearly it was— I think, in retrospect, people don't think it was big enough. There were lots of things that Ben Bernanke was screaming and hollering and saying, please change—you were screaming. Everyone was saying—and Bernanke would say that he lowered interest rates in large part because he couldn't get Congress to move. [00:04:19] Jamie Dimon: Right. I think it's very hard for central banks to forever make up for bad policy elsewhere. And that puts them in a trap. And we're a little bit in that trap today, with rates that are so low around the world. [00:04:31] Speaker 1: You think that's a bigger problem in the United States, or you think because of Europe— In places where it's negative interest rates, that's where they've kind of gotten themselves into that, right? Yes. [00:04:40] Jamie Dimon: I mean, did you know anyone who's actually bought a negative interest rate bond? No. [00:04:43] Speaker 1: That's what President Trump said this morning. Was that in your interview with him? Or is it— [00:04:46] Jamie Dimon: Yeah, because the buyers are central banks and certain banks— And insurance companies. —insurance companies that have to or index massive mutual funds or passive funds. I would never buy a negative rate bond. Why would you? [00:04:56] Speaker 1: Not unless I was forced. Hold my money. [00:04:58] Jamie Dimon: But in history, whenever you've seen something like that, it doesn't necessarily end well. [00:05:04] Speaker 1: I know we've been talking about this for a long time. What do you think the potential end looks like? When do you think it comes? Is there any way of knowing any of these things? Are there any signs to say we're getting closer to a point where this actually does play out? I don't know. What would you watch for? [00:05:19] Jamie Dimon: The biggest surprise would be inflation, if you have any kind of inflation in the United States. And right now, people think central banks around the world can do whatever they want. They can't. They will have to be reactors as opposed to just actors if you see adverse consequences going a certain way. And, look, they're intelligent looking at all the facts and trying to figure out what to do. But that would be the big negative surprise. [00:05:39] Speaker 3: Do you see bubbles? [00:05:40] Jamie Dimon: Only in sovereign debt. [00:05:42] Speaker 3: Sovereign debt is where you see the bubble? Yep. You don't see the bubble? I mean, even we were talking about -- we had Uber on, a lot of these private companies. Is that a bubble? Is that a -- [00:05:52] Jamie Dimon: It's not a bubble, because those are -- in total, they're not that big. And, yeah, some are overpriced. But we've always had overpriced companies in life. And stock prices are at a high. But those prices can be justified if you have a growing economy. We've had 11 years of growth. Australia has had 28. 28. I'm going to take this out. That's my -- [00:06:12] Speaker 4: You know, if I try to really be, you know, half-full and optimistic, it's that, true, here we are at these rates that seem like they're not normalized and they don't seem appropriate. It's beeping. That's why I took it out. They don't seem appropriate for where unemployment is right now, the rates where we are. But if inflation really is low because of technology and innovation, why not, in an expansion, leave rates low, let corporate earnings catch up with where stock prices are? Maybe this isn't -- maybe these stock prices aren't just following accommodative Fed and central banks up. Maybe it's more than that. Maybe it's justified. Maybe it's not just cheap money. [00:06:51] Jamie Dimon: The other reason I think rates are low is because growth has been so slow. And, Mac, I pointed this to you all before. Over the last 11 years, we had, like, 23 percent growth. It should have been 40-plus. Okay, how do you -- which would have been normal. And people act like it's just because, well, it's just too slow. No, it wasn't. It was our own bad infrastructure policy, work skills policy, litigation, regulation, taxation, some of which got fixed. I can go on and on, but what we did to ourselves is slow down growth. Slow growth means you have less need for capital, lower rates, slower growth, lower wages. You know, we need a growth strategy, which is why you say fiscal. It's not just spend more money. Do the things that create more growth and then acknowledge that we can help people left behind. [00:07:30] Speaker 3: But what do you do in a country that is clearly politically so polarized that virtually nothing gets done, right? I don't know. That's the fundamental question. [00:07:37] Jamie Dimon: Well, they've gotten some things done recently. You know, they did do a budget deal. They got USMCA done. They got the China trade deal done. They got tax reform done. They've got a lot of regulatory reform done. But, look, if it were up to me, I'd make Congress compromise, you know, any way you can. I think it's absurd in a democracy that your starting point is you won't compromise. That is what a democracy is, that we don't completely agree. And then we find a way, OK, well, I'll do this for you and you do this for me. Now we agree. [00:08:03] Speaker 3: You just listed a number of accomplishments by the administration. One of the things we've been talking about for the past two days is just how the Davos community, in large part, has been, dare I say, surprised, two years later, three years later now. Because when he first came into office, there was such trepidation. There was such anxiety and worry that the economy wasn't going to go up. It was going to go down. Right. What do you think everybody got wrong? I read your piece. [00:08:29] Speaker 1: Your piece in time that says, unless we change capitalism, we might lose it forever. That's the headline they wrote. [00:08:34] Jamie Dimon: No. The headline is always not the accurate thing. So what did we get wrong? Yeah. That good policy matters. Good government matters. We don't build infrastructure. We -- it takes us 10 years to get the permits to build a bridge. Half the kids in inner city schools don't graduate. Litigation costs 1 percent more in our country than all other countries. Health care is 19 percent of GDP. Our competitive countries are 9 percent. I can go on and -- immigration. If we had an immigration bill, it would be 0.2 percent a year, a year of more growth. And so we haven't done these things. That's why. I don't think it's China or trade or technology. I think it's the bad policy that's been effectuated in the United States. And you've seen similar things in Europe, by the way. And, you know, fortunately, you have Macron trying to change it. You need labor flexibility. You need innovation. You need positive capital. You need all these things to have a vibrant economy, which is good for everybody. As a CEO. And the politicians should focus on that. Right. In addition to focusing on who's left behind. Because you have more wealth to take care of everybody if you have a better growing economy. [00:09:37] Speaker 3: Yu Wong said you were barely a Democrat. I think you said that here many, many years ago. You look at this election. Is there a Democrat you like? [00:09:44] Jamie Dimon: Yeah, I like a lot of the moderates. I'm not a socialist. I mean, capitalism is the greatest thing that ever happened to mankind. I think people who haven't read the history books about socialism really should. I think we ought to educate our younger kids. Freedom and free enterprise are inextricably linked. They are not different. I mean, you can't tell people where you can work or how you're going to work. Free enterprise was the pursuit of happiness. And, you know, once you have governments taking control of businesses, it ends up in corruption in Venezuela. And it arose over time because companies get used for political purposes, not to give you great products and services. Does that mean companies are perfect? No. If it's Trump and Bernie or Trump and Elizabeth Warren, what do you do? That does not mean we can't acknowledge that some people are left behind. I've already mentioned inner-city school kids. I think wages need to grow up to the lower end. I'd be in favor of a lot of the business roundtables in favor of increasing their income tax credit, get more money into the hands of people who -- to give them more of a living wage. I'd be in favor of universal health care if it's properly done. I'd be in favor of -- but the other thing is, properly done. That's a big caveat. You could design these things badly or well, and we've just gotten really bad at designing them well. [00:10:54] Speaker 1: Jamie, you just listed a laundry list of things that you think government should be doing. I think you've gotten a little bit impatient waiting for them -- Government's already doing a lot of it. [00:11:01] Jamie Dimon: They're doing it badly. [00:11:02] Speaker 1: You've gotten impatient, and as a CEO, you've kind of taken matters into your own hand. I'm thinking of Haven, the health care initiative that you at JPMorgan, along with Berkshire Hathaway and Amazon have been working on. Do you have any updates there, anything you can tell us about what's happening? [00:11:15] Jamie Dimon: I really don't, because it's still nascent, and we're still -- you know, just doing some test experiments and big data. But I think the business roundtable, which I'm not the chairman anymore, is attacking these issues head-on, work skills, like how you can get into cities and get kids more trained for jobs, either out of high school or out of community college or certified training. Infrastructure. They have got programs for infrastructure and immigration. If you went to the BRT site, these things need to get done, and they will be much better for America. The BRT support raising the minimum wage. The BRT supports expanding the earned income tax credit, both of which would get wages to the lower paid, and then giving them opportunity, like through schools and education. And those things work. They're known to work. And any country that's ever done them properly, they work. And then you have a more equitable society. You've got to match the skills. You've got to match skills with where the job is. You've got to match skills. And we have a whole bunch of more stuff coming out and things like that. [00:12:03] Speaker 4: And then with 3.5 percent unemployment, you match the skills, and then you get organic wage growth, which we're already starting to see. It's much higher than it was for the past 10 years. [00:12:10] Jamie Dimon: I think that the bottom quintile, the bottom 10 percent, it's up 8 percent for two years in a row or something. Right. You are seeing what we typically would see in a recovery. It just took a long time. [00:12:20] Speaker 4: But that's because it was a very slow recovery. What you don't see with crappy policies that lock the Fed in at zero. And it exacerbates, well, the income inequality. And that's what we saw prior to this. Yeah. [00:12:33] Speaker 3: There's lots of reasons for that. Becky had mentioned this piece that you just wrote in Time magazine. And we wanted to ask you about it. It refers specifically to what seems like you poll young people about the word capitalism. And they may be on the socialist side of things. [00:12:50] Jamie Dimon: I don't think they understand. Honestly, I don't think people understand what socialism is. Socialism is when the government controls companies. There is no example where the government controls companies. They do it well and they don't start to use it for votes, satisfying people. They don't even want competition because if we're two government companies, you know, why have competition? They do it for jobs and votes. They have bad allocation to capital. Most state-owned enterprises don't do a particularly good job. Just take a look around the world and they become corrupt over time. That does not mean that capitalism is perfect. It doesn't mean that every public company is perfect. No, there are flaws. [00:13:23] Speaker 3: Do you think that Bernie Sanders or Elizabeth Warren are socialists in the construct that you talked about it? Or in the construct of this idea of a democratic socialist, which is something that may feel more European in some ways? [00:13:35] Jamie Dimon: I don't want to talk about any particular people, but if you're talking about governments controlling corporations, that's socialism. You can do it in a small way or you can do it in a big way. The small way is to put a commissar on your board. Remember the old Russian commissars? You know, that's all? They're just going to sit in the room or do it through regulatory or stuff like that. The other way is that they actually own the company. And, you know, that's -- if you look at all these other countries, they start to take over the oil companies and the steel companies and the utility companies. And the banks. And the banks. And then the banks start making loans not to a good company, not because they're probably allocating capital to its highest and best use, but to keep that factory open, the bridge to nowhere, to make sure the mayor doesn't lose jobs in his town. And once you do that, you will have an eroding society. And having settled that, that doesn't mean that -- when I listen to people talk about a society, that things need to be fixed. They do need to be fixed, inner city schools, infrastructure, education, health care. We could fix all of those in a capitalist society. [00:14:32] Speaker 3: What did you make of Larry Fink's letter last week? [00:14:36] Jamie Dimon: You know, I read it. And, actually, we've done a compare side-by-side. I think it's fine. I mean, the -- you guys, everywhere you go, climate, climate, climate. Climate is a real issue. I think most people want to be part of the solution. You know, we are green. We're going to be 100 percent green ourselves this year. We are doing $200 billion of green financing, probably going to be increased sometime this year. We only do responsible financing to come. We don't do mountaintop removal. We don't do dirty coal mines. We're not doing new coal power plants. But there's -- you need a transition. And at the end of the day, what the public has to know is, you can yell and scream all you want at private enterprise. You need government policy. Government policy, good government is the only thing that will -- globally, it will solve this problem. And, at the end of the day, you need a carbon tax. And there's a great thing called the carbon tax, the carbon dividend, where it doesn't get sent to Washington. It gets sent back to the people. And then you just start buying things and doing things that make more sense. You know, get a small car or get, you know, windows that block -- you know, the blackouts. [00:15:32] Speaker 3: So then does it make sense for companies like Microsoft to announce their own plans around trying to be carbon negative or trying to run internal expensing around carbon? [00:15:41] Jamie Dimon: I think it makes sense for people to show their intent and to want to do a better job and to say it's important. Is that real? Is that virtue signaling? Is that marketing? It's not going to solve the global problem, OK? You have got two countries which are growing the pollution dramatically. I'm not against them, but India and China. America is already coming down 20 percent over the last 15 years or something. You will not solve the problem without real government policy. So I appreciate all the people who say, stop doing this and stop doing that. And all that happens is, you know, if you stop financing this dirty coal plant, someone else is going to come and finance it and make a lot more money than you. Because the world needs the energy. What you need is policy, R&D, government, a carbon tax. The citizens of the world have to take a vote at that level, understand it's going to have some sacrifice and pain. So you would advocate for carbon tax? Absolutely. Just to be 100 percent clear? Absolutely. With the carbon dividend? With the dividend. That it gets paid back, too. That means you all pay... Carbon dioxide. CO2. This means you all pay based on some base of the... You mean the sooty, black, smoky stuff? [00:16:44] Speaker 4: Yeah. You see, it's an odorless, colorless gas called carbon dioxide. Yes. It's trace levels. But it could be... What about clean water? What about particulate pollution? What about chemical waste? What about what we've done with strip mining? So all those things are okay, too? How about clean water? No, no. Most of those things are being cleaned up, so... No, not really. We're a little bit focused on all of this gobbledygook that you were just telling me about. I don't know. Carbon zero. [00:17:11] Jamie Dimon: I would look at carbon a different way, Joe. Carbon dioxide. I would look at carbon a different way. There is a risk that something is going terribly wrong here. We can handle that risk today, and rather painlessly if we do it right. That's what we should do. [00:17:23] Speaker 4: We need to decide what the problem is, whether it's causing slight warming of eight-tenths of a degree Celsius, or whether it's causing every single adverse weather event that's been occurring on its own for four billion years. I understand that. More snow, less snow. More drought, less drought. More flooding, less flooding. Earthquakes. [00:17:38] Jamie Dimon: Forget all that. Well, that's what they equate it to now. That's so people can get noised about it. But if we have a CO2 problem in the air, which is hurting the world, and most of the scientists say that, my view is it's a risk mitigant. We should say, if there's a chance that's bad, we should do something about it now. But not if it costs $30 trillion. [00:17:55] Speaker 4: You can do it cost-free. [00:17:56] Jamie Dimon: That's what I'm trying to tell you about carbon tax, that you pay -- you all pay carbon. It goes to a bank. You get it back. [00:18:03] Speaker 4: Oh, I understand. I understand. But, I mean, there is a certain amount of carbon that's going to -- carbon dioxide, it's going to be released for years, whether you balance it out and do, you know, your carbon offsets and feel better about your, you know, your G650, whatever you came over in, fine. But, you know. [00:18:19] Speaker 1: Can I just tie it back to where we started this conversation? You mentioned risk mitigation. That's what you do very well. When you look out there, what are the big risk factors, since we just had a phase one trade deal signed with China, and since we kind of know where Brexit is headed at this point, what are the things you're kind of watching? [00:18:35] Jamie Dimon: MARK SHIELDS: Well, you know, cyber is a big one. I mean, you look at our system's vulnerability to cyber, and that could be banks or water or grids or you name it. I put it up there. I'm not going to talk about geopolitics, because that's kind of always noise. That could always cause something that we don't fully understand today. I put the QE as one. You know, it just is in the back of my mind. It's such an abnormal situation. It's been going on for a long time. We don't completely understand why or the cause of the effects. And we may not know for another 10 years in this particular one. And then good policy. I mean, I get frustrated that we don't have better policy around the world. And I applaud the politicians who are strong enough to get up and fight for good policy, which doesn't always sound like it's good for the citizens, but it is. You know, and so -- and President Macron. I mean, I think he's fighting the fight to get France growing better. Jamie, I want to thank you very much for your time. [00:19:25] Speaker 1: It's always a pleasure seeing you. And we love this interview here in Davos. So, thank you. You're very welcome. [00:19:29] Jamie Dimon: Jamie Dimon. [00:19:30] Speaker 3: Thank you. Good to see you.