Wednesday, October 15, 2008

Jamie Dimon: "If you are not fearful, you're crazy"

by Bill McBride on 10/15/2008 10:20:00 AM

Some excerpts from the JPMorgan conference call (hat tip Brian). Note: it is rumored that Dimon will be the new treasury secretary if Obama is elected President.

Meredith Whitney: I just want to be clear in terms of the decline in originations on your mortgage portfolio, was that more credit based or in terms of tightening underwriting standards or LIBOR challenge?

Jamie Dimon: The origination business, and I think it's true for a lot of people in the industry, Meredith, people have gone back to old fashioned 80% LTV, real verified income, more disciplined appraisals, and then in some areas they won't even go to 85% LTV because of expected home decreases so we are not at 85% in California, Nevada, or Florida we're at 65. So that's why it's down. I think it's true for us and everybody else. Almost everything being originated is eligible for Fannie Mae, Freddie Mac, or FHA. So therefore you have this great reduction. Obviously the quality of that stuff is going to be much higher.

Meredith Whitney: Thank you for that. My follow-up, given the fact that the industry is pulling back credit across the board is that sort of a chicken and egg question, are you seeing areas where you've pulled back credit deteriorating much further? Obviously the sand states are experiencing the most deterioration but have you given an example of seeing all your competitors being a catalyst for deteriorating credit?

Jamie Dimon: I think the answer is yes but we'll never really know ... Let me make general comments about a crisis like this. One of the things that happens which I think the government is to cushion on, a lot of individual actors. I am talking about you as investors, banks as providers of credit, individuals, small businesses, large businesses, all start to take actions that are rationale for them as an individual or corporation, but in total, can cause exactly what you are talking about. And that's one of the things that the government is trying to reverse. Not just the banks. It's the individuals who invest in banks, people who provide capital to other financial institutions, moving money back overseas, so you do see a little bit of that, and they are trying to arrest that. That is the one thing that's got people most scared and they are trying to stop it. Like I said before I think what the government is doing is pretty powerful medicine. I say the governments around the world is pretty powerful medicine, and I think will you start to see some beneficial effect of that in the next couple weeks.

Meredith Whitney: if you really believed that you'd buying beginning credit card lines, right?

Jamie Dimon: ... we are buying slightly more risky assets and we're growing our businesses everywhere so we're not panicking. Credit card receivables are up. We are not pulling out of California . We're still marketing. Obviously we try and modify what's going on, but we are not going to say, yahoo this is over, extend credit liake we did without fear. If you are not fearful, you're crazy.

Meredith Whitney: I'm fearful.

Jamie Dimon: we know you are. We're waiting for you to reverse your position.

William Tanona: Some of the other investment banks provided some pretty good color in terms of where they have certain assets marked within their investment bank. Just wonder if you guys would be willing to provide that same level of detail across prime, alt-A, prime, subprime.

Jamie Dimon: Leverage loans we did [took marks of 29% on total commitments], and I'll give you some numbers now. Ready? Prime, loans is not really applicable. Alt-A performing about mid 70s, nonperforming 40s. That's loans. Alt-A securities, high 20s. Subprime mid-30s. CMBS mid-80s, that's all we are going to give you because it's competitive information.
emphasis added