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JPMorgan's Dimon takes on public policy, regulation in 2016 annual letter

JPMorgan Chase & Co. Chairman, President and CEO Jamie Dimon defended his participation in President Donald Trump's policy group and maintained that "too big to fail" has been effectively solved in comments to a town hall with business school students following the release of the bank's 2016 annual report.

Many of his comments about infrastructure, problems facing U.S. growth and regulations during the question-and-answer session came from the annual letter, which was released April 4. For the first time, Dimon addressed public policy as a main theme with its own section in the letter, saying it is "tougher than most issues." He listed multiple reasons why productivity and growth in the country have remained low in recent years, but highlighted "excessive" regulations and the corporate tax system as obstacles.

In his comments, Dimon said JPMorgan has tried to position itself as a "reasoned voice" when it comes to regulation. He said the bank is not opposed to all of Dodd-Frank and believes regulators fixed many things that exacerbated the recent financial crisis, but that some regulations have gone "too far" and created adverse consequences.

"We need good regulations, and what people have to start to learn is ... not more or less, but good," he said. "To have good regulations, you have to constantly look at them, too. You should have a permanent cost-benefit analysis, [and ask yourself]: Is it still necessary? Et cetera."

His letter detailed specific aspects of today's regulatory regime for global systemically important banks that he would like to see changed, as well as the overall approach regulators take toward rule-making and collaborating with each other and supervised institutions.

He wrote that banks carry too much capital when compared to their results under the severely adverse scenarios in annual stress test exercises, and that the GSIB and supplementary leverage ratio rules need to be "significantly modified" to promote lending and other policy goals like liquid capital markets and directing more private capital to the mortgage market. He argued that operational risk capital and the U.S.'s "gold plating" of international capital standards should be eliminated and that the Financial Stability Oversight Council needs to be modified to become more effective.

Dimon also maintained that "too big to fail" has been solved through total loss-absorbing capacity rules and regulators' liquidation authority. During his talk, Dimon said JPMorgan is big, but that it undertakes all of its activities at the behest of its clients, many of whom are large multinational companies. JPMorgan was ranked as the largest bank in the U.S. by asset size at year-end 2016.

He also said current regulations and enforcement mean that community banks often find it difficult to make profitable real estate or small-business loans in their communities, following a question about President Donald Trump's assertion that his real estate friends could not get loans from banks. He also defended his participation on Trump's strategic and policy forum, saying that he is a patriot and that everyone cheers for the pilot when riding on an airplane.

But he said his participation should not be seen as an endorsement of the president's policies, and that Trump sometimes disagrees with his own previous statements. He said during the meeting that the president sought to have a dialogue, asked a lot of questions and showed a willingness to change his mind. When asked if he felt comfortable speaking his mind to the president, Dimon replied: "I feel comfortable speaking my mind to anyone, anywhere, anytime."

He paused.

"Not completely true. My regulators get me scared."