Dive Brief:
- JPMorgan Chase CEO Jamie Dimon on Tuesday called the Federal Reserve’s independence “absolutely critical,” not just for Fed Chair Jerome Powell, but for his successor.
- “Playing around with the Fed can often have adverse consequences – the absolute opposite of what you might be hoping for,” Dimon said during a call before the bank’s second-quarter earnings presentation with analysts. Dimon said his understanding is President Donald Trump isn’t going to try to remove Powell, whose term as the central bank’s chair expires in May 2026.
- As for whether expectations have already changed regarding the independence of the next Fed chair and potential presidential influence, Dimon replied, “Let’s just see who the president picks.” The independence of the whole Fed board, not just the chair, is crucial, he added.
Dive Insight:
Trump may maintain that he won’t try to remove Powell, but members of his administration appear to be pushing for Powell’s departure, whether by resignation or possibly forcing out the Fed chair on a technicality, if he misled legislators over renovations at the central bank that have gone beyond budget.
Treasury Secretary Scott Bessent said Tuesday that the administration has begun the formal process of selecting Powell’s successor. The Wall Street Journal has reported Kevin Warsh, a former Fed governor, and Kevin Hassett, director of the National Economic Council, are two of the top contenders.
Bessent suggested Powell should leave the board when his term as chair expires next year, although Powell’s governor term doesn’t end until January 2028.
“There’s been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination. And I can tell you, I think it would be very confusing for the market for a former Fed chair to stay on also,” Bessent told Bloomberg.
During JPMorgan’s earnings call Tuesday, Dimon largely dismissed the idea that the bank would use its excess capital to fund a sizable acquisition. “It’s a good discipline to always be looking” at inorganic opportunities, but “I wouldn’t have high expectations that will be how I use a lot of capital.”
Dimon and CFO Jeremy Barnum faced a handful of questions from analysts on how the bank’s billions of dollars in excess capital might be used and whether JPMorgan might consider acquiring a large language model company or a private credit firm.
Neither of those ideas appealed to Dimon. Buying a private credit firm is “not high on my list, because we can do it ourselves,” he said, adding that he thinks “you may have seen peak private credit a little bit.”
The bank remains open-minded about potential deals, but with regard to acquiring a direct lender, “I would have a slight reluctance, depending on who it was,” Dimon said.
As for the former option, “we use LLMs and we’re going to be agnostic about that,” Dimon said. “There’s no reason for us to own one. At least, we can’t figure out why that would make sense.”
With so much excess capital, “everything is on the table,” including inorganic growth opportunities like acquisitions, Barnum said. Yet, “acquisitions have a high bar, both financially, strategically and, importantly in some cases, culturally,” Barnum said.
A natural fit would relate to product, people and culture, Dimon noted.
JPMorgan also needs to think carefully that “things that work outside the regulated perimeter might not work inside the regulated perimeter as well,” Barnum said. “We have learned some lessons; we don’t want to overlearn those lessons.”
The better use, Dimon indicated, is further investment in the bank’s organic growth pursuits.
JPMorgan reported net income dropped 17%, to $15 billion, while net revenue dipped 10%, to $45.68 billion.
