Jamie Dimon Endorses Stress Tests & Mortgage Relief (JPM)

Jamie Dimon, Chairman and CEO of J.P. Morgan Chase (NYSE: JPM) just gave a CNBC interview with Melissa Francis.  While he would not give exact predictions on the environment and a turnaround, nor on how JPMorgan’s quarter is going, he did offer some insight into how the stimulus package and the financial rescue package and mortgage restructuring could go.

For starters he noted that JPMorgan expects to modify about 600,000 mortgages, and there was even a brief hint of a million mortgages.  He called the first stage of the Obama mortgage plans “very elegant, very well designed.”  On the stress test for the banks, he does not have any hard numbers but believes there will be a national standard.  But reworking the mortgages can be a win/win situation for lenders and consumers.  The plan to reduce rates for many mortgages for 5 years is part of that.  And here is where Dimon stuck with his tune that borrowers are effectively “supposed to meet your obligations rather than run away… even if you are underwater in the debt.”

On bank stress tests, he wants this to come sooner rather rather than later.  He noted that some banks will fail and come under the FDIC, and other banks will not.  He noted that the stress test will include how general conditions would go.  One figure that Jamie Dimon threw out there was 10% to 11% unemployment.  And he also noted that the tests would include the value of loans declining further.

As far as WHEN a recovery is coming, he wouldn’t predict. But he did note that the sooner the tests come the better.  He noted that if the tests coem soon that maybe later in the year could start to see a base rather than in 2010.  Unfortunately, that was more of a pondering rather than a prediction and that was also when he said he couldn’t comment on this quarter.  But what he did note is that the lagging effect of unemployment may continue rising while things start to stabilize.

Jon C. Ogg
February 18, 2009