DealBook: Jamie Dimon Expects a ‘Bad Recession’

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The JPMorgan C.E.O.’s latest letter to shareholders was just published.

The letter is widely read on Wall Street, where Mr. Dimon often expounds, at length, on topics like the bank’s performance, taxes and America’s role in the world. This year’s edition was especially anticipated because it will be the first time Mr. Dimon has communicated publicly since undergoing emergency heart surgery a month ago. He returned to work — remotely — last week.

Mr. Dimon expects “a bad recession,” he wrote, “combined with some kind of financial stress similar to the global financial crisis of 2008.” JPMorgan’s “huge and powerful earnings stream” enables it to absorb losses, he wrote.

• Halting stock buybacks was “a very prudent action,” but a decision to suspend dividends would be made only “out of extreme prudence” under the bank’s most pessimistic economic scenario. “This scenario is quite severe and, we hope, unlikely,” he wrote.


It’s not easy to spend $2 trillion, the U.S. government is learning. Several of the targeted aid programs begun in recent days have struggled amid heavy demand and unclear instructions. Passing the stimulus quickly is one thing, but implementing it is another.

Small businesses are having trouble applying for emergency loans. Banks have been overwhelmed by inquiries in the early days of a $349 billion program, and borrowers say that many lenders are limiting the crisis loans to a narrow subset of existing customers.

Stimulus checks for individuals could be delayed by months. Although millions of checks worth up to $1,200 per person will go out by mid-April, people without direct-deposit information on file with the I.R.S. may have to wait until August.

Airlines are balking at the conditions attached to aid. About $50 billion in funds has been set aside for the industry, but executives are wary of giving equity stakes to the government to get access to it.

The next phase of stimulus is taking shape, The Washington Post’s Jeff Stein reports. Measures under discussion could prove more politically contentious, with some Republicans — including the new White House chief of staff, Mark Meadows, and the economic adviser Larry Kudlow — opposed to large-scale spending on infrastructure, while Democrats are likely to resist tax cuts and other proposals favored by Republicans.

• As Mr. Stein describes it, the White House has been pitching “a payroll tax cut, a capital gains tax cut, creating 50-year Treasury bonds to lock in low interest rates, and a waiver that would clear businesses of liability from employees who contract the coronavirus on the job.”

The hedge fund billionaire captured Wall Street’s attention for his panicky appearance on CNBC last month, when he said, “Hell is coming.” Now, it appears he’s in much better spirits.

“I am beginning to get optimistic,” Mr. Ackman tweeted yesterday, citing what he believed to be a slowing rate of infection in New York, a potentially lower-than-expected Covid-19 fatality rate and other signs.

That newfound cheer ran up against skeptics who recalled his previous outburst a few weeks ago. (A reminder: Mr. Ackman fretted that shares in Hilton could sink to zero, then later revealed that he had bought shares in the hotel chain and generated more than $2 billion in returns on short bets.) One Twitter user pithily responded to Mr. Ackman’s newfound optimism: “Is this because you’ve gone long now?”

America’s central bank has pledged to provide billions of dollars to businesses through one of its lending programs, known as TALF. But the giant investment firm Apollo thinks the Fed can do much more.

It thinks the Fed should expand TALF to accept more types of collateral, according to a presentation prepared by Marc Rowan, an Apollo co-founder. TALF, short for Term Asset-Backed Securities Loan Facility, was last used during the 2008 crisis. It accepts only some kinds of debt assets — chiefly securitized bundles of credit card, auto loans or small business loans — that carry the highest possible credit ratings.

• The Fed should accept more types of assets, Mr. Rowan says, including other kinds of mortgages, certificates of deposit and short-term business loans known as commercial paper, across the investment-grade spectrum.

Mr. Rowan’s argument: Lending markets are more troubled than they appear, so a broader program is needed to support a wider range of players. AAA-rated borrowers will mostly stockpile funds they receive from aid programs.

Apollo says its concerns are shared by other nonbank organizations, like fellow investment firm TPG as well as insurers and retirement plans. A bipartisan group of Congress members also sent a letter to the Fed chairman, Jay Powell, last week urging him to expand TALF’s eligible assets.

• It isn’t clear how much Apollo itself stands to benefit from a change in the Fed’s program: Many of its investments wouldn’t qualify because of their credit ratings, but some of its other businesses would. Mr. Rowan argues in his presentation that he’s looking out for the economy as a whole, and that failure to act would lead to a wave of bankruptcies and layoffs.

That said, investment firms are eyeing opportunities amid the panic. One area of interest for firms like Apollo is lending to distressed companies, while others are hoping to snap up long-desired assets.

In other coronavirus news:

• President Trump is using the Defense Production Act to claim masks made by 3M for other countries, potentially inviting a backlash. (NYT)

• The coronavirus has swept through a trading floor at JPMorgan in New York, rattling workers who were asked to continue coming to the office. (WSJ)

• The pandemic is pushing European banks to the brink. (NYT)

• Yes, a tiger at the Bronx Zoo has tested positive for Covid-19. (NYT).

• No, we are not making this up: Grupo Modelo is temporarily halting the production of Corona beer. (NYT)


• Stopping share repurchases removes the biggest buyers of stocks from the market. (WSJ)

• The investment firm Silver Lake is reportedly seeking to raise at least $16 billion for its next private equity fund. (Reuters)

Politics and policy

• Prime Minister Boris Johnson of Britain was hospitalized yesterday for tests on his persistent coronavirus symptoms. (NYT)

• The White House reportedly surprised health officials by refusing to reopen Affordable Care Act health insurance markets. (Politico)


• Quibi, the short-video streaming service founded by Jeffrey Katzenberg and Meg Whitman, has opened for business. (NYT)

• How Facebook’s efforts to help small businesses might repair its reputation. Separately, the social network’s automated content moderation mistakenly threatened organizers of hand-sewn face mask campaigns. (WSJ, NYT)

Best of the rest

• Texas had one of the best-performing economies of any state. Then the coronavirus and plunging oil prices hit. (WSJ)

• The Times’s contributing opinion writer Kara Swisher and “On Tech” writer Shira Ovide will discuss Big Tech’s role in fighting the pandem
ic live today at 3 p.m. Eastern on Shira’s Twitter page. (@ShiraOvide)

Thanks for reading. We’ll see you tomorrow.

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