Jamie Dimon, the CEO of JPMorgan Chase, is sounding the alarm bell, warning investors that he is starting to see some similarities between today’s financial landscape and the lead-up to the 2008 financial crisis, nearly 20 years ago.
“Unfortunately, we did see this in ’05, ’06, ’07, almost the same thing,” Dimon said at the firm’s annual investor day in New York on Monday. “The rising tide lifting all boats, everyone was making a lot of money, people leveraging to the hilt. The sky was the limit.”
“I don’t know how long it’s going to be great for everybody,” he explained. “I see a couple of people doing some dumb things . . . they are just doing some dumb things.”
While Dimon didn’t specify which competitors he was calling out, he says he worries about banks taking on risky loans again, and the high price of assets.
Those factors come at a time when technology companies are lavishly spending billions in an AI arms race, much of which they are borrowing, to see who can dominate artificial intelligence in the future.
What happened during the 2008 financial crisis?
In a nutshell: At that time, banks were issuing risky loans to borrowers, and when new homeowners couldn’t make their payments, the effects led to crash of the U.S. housing market. That crash, in turn, created a ripple effect through the global markets that threatened a global financial collapse.
Major U.S. banks teetered on the brink of disaster—and notably, investment firm Lehman Brothers went bankrupt. The U.S. government made a decision to bail out some big banks, famously making the calculation they were “too big too fail,” spending some $700 billion to avoid a U.S. economic collapse. The fallout of all this eventually led to what is now known as the “Great Recession.”
The Great Recession officially started in December 2007 and ended in June 2009, before a very slow economic recovery in the U.S, according to the Federal Reserve. Sparked by the 2008 financial crisis, it is considered the most severe economic downturn in U.S. history since the Great Depression.