Jamie Dimon’s big win

This is an audio transcript of the FT News Briefing podcast episode: ‘Jamie Dimon’s big win’

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, May 2nd, and this is your FT News Briefing.

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China is leading the world in IPOs and Germany wants more immigrants. Plus, we’ll talk about what JPMorgan gets out of its rescue purchase of First Republic.

Brooke Masters
Well, first off, I think Jamie Dimon gets to be the hero. I mean, he likes to be the hero. He thinks of himself as the dean of banking.

Marc Filippino
There is more to it than just that, I promise. I’m Marc Filippino and here’s the news you need to start your day.

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Initial public offerings have dwindled in the US and Europe. Companies are holding off with all this economic and financial uncertainty. In China, though, it’s a very different story. Pandemic restrictions are over. There are new streamlined rules for listings in Shanghai and Shenzhen. And so far this year, Chinese IPOs have raised five times as much money as IPOs in the US. Chinese companies have raised about $20bn in new stock market listings, according to Dealogic. That’s more than half of all the funds raised by IPOs around the world.

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The fate of First Republic has been decided. The struggling lender will be swallowed up by America’s biggest bank, JPMorgan Chase. US regulators brokered the deal and made the announcement early morning yesterday before markets opened. This follows two other nerve wracking bank collapses: Silicon Valley Bank and Signature Bank. To talk more about this, I’m joined by a very sleep-deprived Brooke Masters. Hey, Brooke.

Brooke Masters
Hey, Marc.

Marc Filippino
So this is now the third bank the FDIC has taken over in the past two months. Are people confident that if it’s gonna be the last or is there still concern about lingering contagion?

Brooke Masters
Nobody wants to cause a bank run by saying, oh, my goodness, more banks are gonna fail. But there have been comparisons to the S&L crisis of the 1980s, which saw something like 900 banks fail over the course of a decade. So I think no one wants to say never say never. It’s a tough question.

Marc Filippino
OK. So some people are comparing this crisis to the savings and loan crisis. But there’s also been a lot of confidence since this deal has closed. I mean, JPMorgan CEO Jamie Dimon came out and said that the crisis is over. I mean, that takes a ton of confidence.

Brooke Masters
Yup. But, you know, Jamie Dimon does not lack for confidence. I think other people are not as sure. The big concern, I think, is commercial real estate, which is having a hard time because it is a sector that is always heavily affected by rising interest rates, which is what we’re having right now. Plus, work from home means that lots of companies don’t need as much office space. So it’s already a sector under pressure and it is a sector that a lot of the lending comes from these regional banks, which is where the problems have been so far. So if commercial real estate goes bad, it will hit banks that are already having a tougher time. And I think that’s what people will watch. If commercial real estate sorts itself out without big problems, then it’s not a big deal. But if it has trouble, that is going to be an issue.

Marc Filippino
Right. We actually said on yesterday’s show that Charlie Munger, Berkshire Hathaway, has flagged commercial real estate as a big issue. We’ve also talked about the issues in Europe. It’s definitely one we’re gonna watch. But I want to go back, Brooke, and talk about the deal itself. What exactly is in it for JPMorgan?

Brooke Masters
Well, first off, I think Jamie Dimon gets to be the hero. I mean, he likes to be the hero. He thinks of himself as the dean of banking. He’s one of the last surviving CEOs from who survived the financial crisis. He runs America’s biggest bank. He can’t ever buy other banks in a normal circumstance because there’s a law in the US preventing a bank with more than 10 per cent of deposits from buying any other one. JPMorgan can only buy when there is a collapse. So I think he’s very keenly aware of that. What they get in First Republic is a bank that had a tremendous reputation for brilliant customer service. Its customers love it. So it’s getting that and it obviously is losing, it’s gonna get rid of the First Republic name, so it’s gonna have to work hard to hang on to these customers. But JPMorgan has been trying to grow its wealth management division, and it’s sort of mass affluent, which is like rich but not super-rich division. And that’s exactly what First Republic does. And so JPMorgan’s gonna get some really dedicated staff and hopefully have a chance to hang on to some really, you know, striver clients. I mean, these are entrepreneurs who are making it. You know, they’re often in the younger part of their careers and they’re, you know, over time they’re gonna become really rich. And if they decide to stay, it’s gonna be a great deal.

Marc Filippino
Brooke, what are your final thoughts on the past few days? I mean, we’re talking, and you are on like 5 hours of sleep, if that I mean, that’s probably being generous. I mean, what did the last 48, 72 hours feel like and what do you feel like coming out of it?

Brooke Masters
You know, I would like to believe that this is the last big, you know, wobbling bank I’m gonna cover. You know, I did 2008 and I had a nice break. I would like (Marc laughs) to believe that I’m going on to another break. I worry a bit that we are not yet quite at the problems that are causing these bank runs. Hopefully, it won’t be as scary. But the reality is the interest rates are rising really quickly. The US banking sector is a very large boat and it’s kind of trying to turn and adjust to the fact that the way it’s been doing business for the last 15 years has to change. Cracks and strains show. I would really like not to be up again until, it was I actually got two and a half hours of sleep, so I’m, five would be great. (Marc laughs) But, you know, I think it would be surprising if other cracks did not show. But they may not be as bad as this. I mean, this was a big bank to go down. This bank was worth $25bn in the middle of February. It’s now, if you own shares in it, it’s worth nothing.

Marc Filippino
Amazing. Brooke Masters is the FT’s US financial editor. Thank you, Brooke.

Brooke Masters
Thanks for having me.

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Marc Filippino
Businesses in Germany have struggled with rising energy costs and supply chain issues. But the problem that’s eclipsed all of them is the country’s labour shortage. Germany’s labour minister, Hubertus Heil, told the FT’s Berlin bureau chief, Guy Chazan, that companies were desperate for staff. In the coming weeks, Germany’s parliament is expected to approve immigration reforms to address all this. Guy joins me now to talk more about it. Hello, Guy.

Guy Chazan
Hi there.

Marc Filippino
Guy, can you talk a bit more about how serious this worker shortage is right now in Germany?

Guy Chazan
Well, Germany definitely has a very serious problem in that it has a shortage of skilled workers, which is sort of rippled really throughout the economy now. And it’s affecting all industries, all sectors, the public sector, the private sector. I mean, Heil in the interview quoted a figure that said, that a statistic that said, that Germany will lack 7mn workers by 2035 if the government doesn’t do something. He warned that this would be a real brake on Germany’s economic growth. So it really is a very serious issue.

Marc Filippino
So as you report, there are these immigration reforms coming down the pike. Is it an overhaul, are they just tweaks?

Guy Chazan
They’re very much tweaks to the system, but they’re quite significant tweaks. I mean, basically it’s kind of making it a bit easier for people to work in Germany, even if they don’t have a German professional qualification. That’s been one of the big hurdles so far. They’re also introducing something called a chance card. It’s basically similar to the Canadian points-based system and that allows people to earn points based on their vocational training and experience, whether they have a connection to Germany and speak German and are younger than 35. And the more points you earn, the easier it will then be to come to Germany.

Marc Filippino
Is the government trying to recruit certain types of immigrants, Guy? For example, those with a certain skill or education level?

Guy Chazan
It’s really across the board, but there are certain areas of the economy where they really need skilled workers more than others. Predominantly the IT sector and Heil was sort of hinting that they’re gonna now do a massive kind of advertising and recruitment campaign in countries like India, which obviously have a lot of IT workers, to get them to come to Germany. He and the foreign minister, Annalena Baerbock, are going together to Brazil soon, and I think they’re also gonna be trying to recruit Brazilians into the German care system, because that’s another really, really serious problem. The country just does not have enough care workers and hospitals and care homes are really seriously suffering from that.

Marc Filippino
Are people worried that more immigration could lead to social or political conflict? I mean, can Germany even handle a new influx of immigrants?

Guy Chazan
It’s a tricky one. I mean, we now have this rightwing party called the Alternative for Germany, the AfD, which is doing quite well. And they’re very, very anti-immigration. So there is opposition to this among certain sectors of German society. But on the whole, Germany has over the last ten, 15 years, maybe 20 years, become a much more liberal place, which with less of a hang up about immigration. As you saw with the enormous influx of refugees from Syria, from the Middle East, from North Africa in 2015 and 16, when more than a million people arrived in Germany and they were absorbed very, very well. I mean, it was an extraordinary achievement really, to absorb that many people. And I think that has shown that Germany’s capacity to adapt and to be more inclusive and welcoming to foreigners, it’s really been a significant change in this country over the last generation or so.

Marc Filippino
Guy Chazan is the FT’s Berlin bureau chief. Thank you so much, Guy.

Guy Chazan
Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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