Dimon Letter 2023

Jamie Dimon's Letter to Shareholders, Annual Report 2023 | JPMorgan... about:reader?url=https%3A%2F%2F1.800.gay%3A443%2Fhttps%2Freports.jpmorganchase.com%2Fin...
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Letter to Shareholders from Jamie

Dimon, Annual Report 2023 |
JPMorgan Chase & Co.
168–214 minutes
Dear Fellow Shareholders,
Across the globe, 2023 was yet another year of significant

challenges, from the terrible ongoing war and violence in the
Middle East and Ukraine to mounting terrorist activity and growing
geopolitical tensions, importantly with China. Almost all nations felt
the effects last year of global economic uncertainty, including
higher energy and food prices, inflation rates and volatile markets.
While all these events and associated instability have serious
ramifications on our company, colleagues, clients and countries
where we do business, their consequences on the world at large
— with the extreme suffering of the Ukrainian people, escalating
tragedy in the Middle East and the potential restructuring of the
global order — are far more important.
As these events unfold, America’s global leadership role is being

challenged outside by other nations and inside by our polarized
electorate. We need to find ways to put aside our differences and
work in partnership with other Western nations in the name of
democracy. During this time of great crises, uniting to protect our
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essential freedoms, including free enterprise, is paramount. We

should remember that America, “conceived in liberty and
dedicated to the proposition that all men are created equal,” still
remains a shining beacon of hope to citizens around the world.
JPMorgan Chase, a company that historically has worked across
borders and boundaries, will do its part to ensure that the global
economy is safe and secure.
In spite of the unsettling landscape, including last year’s regional

bank turmoil, the U.S. economy continues to be resilient, with
consumers still spending, and the markets currently expect a soft
landing. It is important to note that the economy is being fueled by
large amounts of government deficit spending and past stimulus.
There is also a growing need for increased spending as we
continue transitioning to a greener economy, restructuring global
supply chains, boosting military expenditure and battling rising
healthcare costs. This may lead to stickier inflation and higher
rates than markets expect. Furthermore, there are downside risks
to watch. Quantitative tightening is draining more than $900 billion
in liquidity from the system annually — and we have never truly
experienced the full effect of quantitative tightening on this scale.
Plus the ongoing wars in Ukraine and the Middle East continue to
have the potential to disrupt energy and food markets, migration,
and military and economic relationships, in addition to their
dreadful human cost. These significant and somewhat
unprecedented forces cause us to remain cautious.
2023 was another strong year for JPMorgan Chase, with our firm
generating record revenue for the sixth consecutive year, as well
as setting numerous records in each of our lines of business. We
earned revenue in 2023 of $162.4 billion1 and net income of $49.6
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billion, with return on tangible common equity (ROTCE) of 21%,

reflecting strong underlying performance across our businesses.
We also increased our quarterly common dividend of $1.00 per
share to $1.05 per share in the third quarter of 2023 — and again
to $1.15 per share in the first quarter of 2024 — while continuing to
reinforce our fortress balance sheet. We grew market share in
several of our businesses and continued to make significant
investments in products, people and technology while exercising
strict risk disciplines.
Throughout the year, we demonstrated the power of our

investment philosophy and guiding principles, as well as the value
of being there for clients — as we always are — in both good
times and bad times. The result was continued growth broadly
across the firm. We will highlight a few examples from 2023:
Consumer & Community Banking (CCB) extended its #1
leadership positions and grew share year-over-year in retail
deposits, credit card sales and credit card outstandings (adding
close to 3.6 million net new customers to the franchise); the
Corporate & Investment Bank (CIB) maintained its #1 rank in both
Investment Banking and Markets and gained more than 100 basis
points of Investment Banking market share; Commercial Banking
(CB) added over 5,000 new relationships (excluding First Republic
Bank), roughly doubling the prior year’s achievement; and Asset &
Wealth Management (AWM) saw record client asset net inflows of
$490 billion, over 20% higher than its prior record.
In 2023, we continued to play a forceful and essential role in

advancing economic growth. In total, we extended credit and
raised capital totaling $2.3 trillion for our consumer and institutional
clients around the world. On a daily basis, we move nearly $10
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trillion in over 120 currencies and more than 160 countries, as well
as safeguard over $32 trillion in assets. By purchasing First
Republic Bank, we brought much-needed stability to the U.S.
banking system while allowing us to give a new, secure home to
over half a million First Republic customers.
As always, we hold fast to our commitment to corporate

responsibility, including helping to create a stronger, more inclusive
economy — from supporting work skills training programs around
the world to financing affordable housing and small businesses to
making investments in cities like Detroit that show how business
and government leaders can work together to solve problems.
We have achieved our decades-long consistency by adhering to

our key principles and strategies (see sidebar on Steadfast
Principles below), which allow us to drive good organic growth and
promote proper management of our capital (including dividends
and stock buybacks). The charts below show our performance
results and illustrate how we have grown our franchises, how we
compare with our competitors and how we look at our fortress
balance sheet. Please peruse them and the CEO letters in this
Annual Report, all of which provide specific details about our
businesses and our plans for the future.
STEADFAST PRINCIPLES WORTH REPEATING (AND ONE

NEW ONE)
Looking back on the past two+ decades — starting from my time

as Chairman and CEO of Bank One in 2000 — there is one
common theme: our unwavering dedication to help clients,
communities and countries throughout the world. It is clear that our
financial discipline, constant investment in innovation and ongoing
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development of our people have enabled us to achieve this

consistency and commitment. In addition, across the firm, we
uphold certain steadfast tenets that are worth repeating.
First, our work has very real human impact. While JPMorgan
Chase stock is owned by large institutions, pension plans, mutual
funds and directly by single investors, in almost all cases the
ultimate beneficiaries are individuals in our communities. More
than 100 million people in the United States own stocks; many, in
one way or another, own JPMorgan Chase stock. Frequently,
these shareholders are veterans, teachers, police officers,
firefighters, healthcare workers, retirees, or those saving for a
home, education or retirement. Often, our employees also bank
these shareholders, as well as their families and their companies.
Your management team goes to work every day recognizing the
enormous responsibility that we have to all of our shareholders.
Second, shareholder value can be built only if you maintain a

healthy and vibrant company, which means doing a good job of
taking care of your customers, employees and communities.
Conversely, how can you have a healthy company if you neglect
any of these stakeholders? As we have learned over the past few
years, there are myriad ways an institution can demonstrate its
compassion for its employees and its communities while still
strengthening shareholder value.
Third, while we don’t run the company worrying about the stock
price in the short run, in the long run we consider our stock price a
measure of our progress over time. This progress is a function of
continual investments in our people, systems and products, in
good and bad times, to build our capabilities. These important
investments will also drive our company’s future prospects and
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position it to grow and prosper for decades. Measured by stock

performance, our progress is exceptional. For example, whether
looking back 10 years or even farther to 2004, when the JPMorgan
Chase/Bank One merger took place, we have outperformed the
Standard & Poor’s 500 Index and the Standard & Poor’s Financials
Index.
Fourth, we are united behind basic principles and strategies (you

can see the principles for How We Do Business on our website
and our Purpose statement in my letter from last year) that have
helped build this company and made it thrive. These allow us to
maintain a fortress balance sheet, constantly invest and nurture
talent, fully satisfy regulators, continually improve risk, governance
and controls, and serve customers and clients while lifting up
communities worldwide. This philosophy is embedded in our
company culture and influences nearly every role in the firm.
Fifth, we strive to build enduring businesses, which rely on and

benefit from one another, but we are not a conglomerate. This
structure helps generate our superior returns. Nonetheless,
despite our best efforts, the walls that protect this company are not
particularly high — and we face extraordinary competition. I have
written about this reality extensively in the past and cover it again
in this letter. We recognize our strengths and vulnerabilities, and
we play our hand as best we can.
Sixth, and this is the new one, we must be a source of strength,

particularly in tough times, for our clients and the countries in
which we operate. We must take seriously our role as one of the
guardians of the world’s financial systems.
Seventh, we operate with a very important silent partner — the
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U.S. government — noting as my friend Warren Buffett points out

that his company’s success is predicated upon the extraordinary
conditions our country creates. He is right to say to his
shareholders that when they see the American flag, they all should
say thank you. We should, too. JPMorgan Chase is a healthy and
thriving company, and we always want to give back and pay our
fair share. We do pay our fair share — and we want it to be spent
well and have the greatest impact. To give you an idea of where
our taxes and fees go: In the last 10 years, we paid more than $46
billion in federal, state and local taxes in the United States and
over $22 billion in taxes outside of the United States. Additionally,
we paid the Federal Deposit Insurance Corporation over $10
billion so that it has the resources to cover failure in the American
banking sector. Our partner — the federal government — also
imposes significant regulations upon us, and it is imperative that
we meet all legal and regulatory requirements imposed on our
company.
Eighth and finally, we know the foundation of our success rests

with our people. They are the front line, both individually and as
teams, serving our customers and communities, building the
technology, making the strategic decisions, managing the risks,
determining our investments and driving innovation. However you
view the world — its complexity, risks and opportunities — a
company’s prosperity requires a great team of people with guts,
brains, integrity, enormous capabilities and high standards of
professional excellence to ensure its ongoing success.
I remain proud of our company’s resiliency and of what our

hundreds of thousands of employees around the world have
achieved, collectively and individually. Throughout these
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challenging past few years, we have never stopped doing all the
things we should be doing to serve our clients and our
communities. As you know, we are champions of banking’s
essential role in a community — its potential for bringing people
together, for enabling companies and individuals to attain their
goals, and for being a source of strength in difficult times. I often
remind our employees that the work we do matters and has
impact. United by our principles and purpose, we help people and
institutions finance and achieve their aspirations, lifting up
individuals, homeowners, small businesses, larger corporations,
schools, hospitals, cities and countries in all regions of the world.
What we have accomplished in the 20 years since the Bank One
and JPMorgan Chase merger is evidence of the importance of our
values.
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CELEBRATING THE 20TH ANNIVERSARY OF THE

BANK ONE/JPMORGAN CHASE MERGER
J.P. Morgan Chase
By 2004, J.P. Morgan Chase already represented the consolidation

of four of the 10 largest U.S. banks from 1990: The Chase
Manhattan Corp., Manufacturers Hanover, Chemical Banking
Corp. and, most recently, J.P. Morgan & Company. And some of
their predecessor companies stretched back into the 1800s, one
even into the late 1700s.
Bank One
Bank One had been even busier on the acquisition front,

especially across the United States. By 1998, then Banc One had
more than 1,300 branches in 12 states when it announced a
merger with First Chicago NBD, a Chicago-based bank created
just three years earlier by the merger of First Chicago and Detroit-
based NBD. Now headquartered in Chicago, the new Bank One
became the largest bank in the Midwest, second largest among
credit card companies and fourth largest in the United States. But
the merger didn’t go as planned, with Bank One issuing three
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different earnings warnings. In March 2000, Bank One reached

outside its executive ranks, and my tenure began as Chairman
and CEO, working to overhaul the company and help bring it back
to profitability and growth.
The story begins ... A merger 20 years ago helped transform two
giant banks
Fast forward to 2003, and another wave of consolidation was well

underway in U.S. banking. Most of the nation’s larger banks were
trying to position themselves to be an “endgame winner.” In the
biggest deal, Bank of America agreed to buy FleetBoston Financial
Corp. for more than $40 billion. Those two banks — already
amalgamations of several predecessor companies — touted the
breadth of their combined retail branch network.
But they were hardly alone. In 2003, some 215 deals were
announced among U.S. commercial banks and bank holding
companies for a total value of $66 billion, according to Thomson
Financial, which tracks merger data.
In July 2004, J.P. Morgan Chase and Bank One merged — as part
of a 225-year journey — to form this exceptional company of ours:
JPMorgan Chase. At its merger in 2004, the combined bank was
the fourth largest bank in the world by market capitalization. But
with patient groundwork over the years — fixing systems and
upgrading technology, managing the notable acquisitions of Bear
Stearns and Washington Mutual (WaMu) and continuing to
reinvest, including in our talent — we have made our company an
endgame winner.
In earlier years, banks worried about their survival. While the past
two decades have brought some virtually unprecedented
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challenges, including the great financial crisis and a pandemic

followed by a global shutdown, they did not stop us from
accomplishing extraordinary things. Our bank has now emerged
as the #1 bank by market capitalization.
Each of our businesses is among the best in the world, with

increased market share, strong financial results and an
unwavering focus on serving our clients, communities and
shareholders with distinction and dedication. The strengths that
are embedded in JPMorgan Chase — the knowledge and
cohesiveness of our people, our long-standing client relationships,
our technology and product capabilities, our presence in more than
100 countries and our unquestionable fortress balance sheet —
would be hard to replicate. Crucially, the strength of our company
has allowed us to always be there for clients, governments and
communities — in good times and in bad times — and this
strength has enabled us to continually invest in building our
businesses for the future.
You can see from the following charts what gains and
improvements we have achieved along the way.
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Read footnoted information here
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Within this letter, I discuss the following:
I. SUMMARY OF OUR 2023 RESULTS AND THE PRINCIPLES

THAT GUIDE US
• Celebrating the 20th anniversary of the Bank One/JPMorgan

Chase merger
• Steadfast principles worth repeating (and a new one)
• A timeline of accomplishments
• Financial performance
II. UPDATE ON SPECIFIC ISSUES FACING OUR COMPANY
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• The critical impact of artificial intelligence
• Our journey to the cloud
• Acquiring First Republic Bank and its customers
• Navigating in a complex and potentially dangerous world
• Our extensive community outreach efforts, including diversity,

equity and inclusion
• What we learned: A five-point action plan to move forward on the
climate challenge
• Powering economic growth in Florida
• Giving the bank regulatory and supervisory process a serious

review
• Protecting the essential role of market making (trading)
III. STAYING COMPETITIVE IN THE SHRINKING PUBLIC

MARKETS
• The pressure of quarterly earnings compounded by bad

accounting and bad decisions
• The hijacking of annual shareholder meetings
• The evolving influence of proxy advisors
• The benefits and risks of private credit
• A bank’s strength: Providing flexible capital
IV. MANAGEMENT LESSONS: THINKING, DECIDING AND

TAKING ACTION — DELIBERATELY AND WITH HEART
• Benefiting from the OODA loop
• Decision making and acting (have a process)
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• The secret sauce of leadership (have a heart)
V. A PIVOTAL MOMENT FOR AMERICA AND THE FREE

WESTERN WORLD: STRATEGY AND POLICY MATTER
• Coalescing the Western world — A uniquely American task
• Strengthening our position with a comprehensive, global economic

security strategy
• Providing strong leadership globally and effective policymaking

domestically
• Manager’s Journal: "A Politician's Dream Is A Businessman's
Nightmare"
• Out of the labyrinth, with focus and resolve

• We should have more faith in the amazing power of our freedoms
• How we can help lift up our low-income citizens and mend

America's torn social fabric
Update on Specific Issues Facing Our Company
Each year, I try to update you on some of the most important

issues facing our company. First and foremost may well be the
impact of artificial intelligence (AI).
While we do not know the full effect or the precise rate at which AI
will change our business — or how it will affect society at large —
we are completely convinced the consequences will be
extraordinary and possibly as transformational as some of the
major technological inventions of the past several hundred years:
Think the printing press, the steam engine, electricity, computing
and the Internet, among others.
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THE CRITICAL IMPACT OF ARTIFICIAL INTELLIGENCE
Since the firm first started using AI over a decade ago, and its first
mention in my 2017 letter to shareholders, we have grown our AI
organization materially. It now includes more than 2,000 AI/
machine learning (ML) experts and data scientists. We continue to
attract some of the best and brightest in this space and have an
exceptional firmwide AI/ML and Research department with deep
expertise.
We have been actively using predictive AI and ML for years — and

now have over 400 use cases in production in areas such as
marketing, fraud and risk — and they are increasingly driving real
business value across our businesses and functions. We're also
exploring the potential that generative AI (GenAI) can unlock
across a range of domains, most notably in software engineering,
customer service and operations, as well as in general employee
productivity. In the future, we envision GenAI helping us reimagine
entire business workflows. We will continue to experiment with
these AI and ML capabilities and implement solutions in a safe,
responsible way.
While we are investing more money in our AI capabilities, many of

these projects pay for themselves. Over time, we anticipate that
our use of AI has the potential to augment virtually every job, as
well as impact our workforce composition. It may reduce certain
job categories or roles, but it may create others as well. As we
have in the past, we will aggressively retrain and redeploy our
talent to make sure we are taking care of our employees if they are
affected by this trend.
Finally, as a global leader across businesses and regions, we have
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large amounts of extraordinarily rich data that, together with AI,

can fuel better insights and help us improve how we manage risk
and serve our customers. In addition to making sure our data is
high quality and easily accessible, we need to complete the
migration of our analytical data estate to the public cloud. These
new data platforms offer high-performance compute power, which
will unlock our ability to use our data in ways that are hard to
contemplate today.
Recognizing the importance of AI to our business, we created a

new position called Chief Data & Analytics Officer that sits on our
Operating Committee.
Elevating this new role to the Operating Committee level —

reporting directly to Daniel Pinto and me — reflects how critical
this function will be going forward and how seriously we expect AI
to influence our business. This will embed data and analytics into
our decision making at every level of the company. The primary
focus is not just on the technical aspects of AI but also on how all
management can — and should — use it. Each of our lines of
business has corresponding data and analytics roles so we can
share best practices, develop reusable solutions that solve
multiple business problems, and continuously learn and improve
as the future of AI unfolds.
Clearly, AI comes with many risks, which need to be rigorously

managed.
We have a robust, well-established risk and control framework that

helps us proactively stay in front of AI-related risks, particularly as
the regulatory landscape evolves. And we will, of course, continue
to work hard with our regulators, clients and subject matter experts
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to make sure we maintain the highest ethical standards and are

transparent in how AI helps us make decisions; e.g., to counter
bias among other things.
You may already be aware that there are bad actors using AI to try
to infiltrate companies’ systems to steal money and intellectual
property or simply to cause disruption and damage. For our part,
we incorporate AI into our toolset to counter these threats and
proactively detect and mitigate their efforts.
OUR JOURNEY TO THE CLOUD
Getting our technology to the cloud — whether the public cloud or

the private cloud — is essential to fully maximize all of our
capabilities, including the power of our data. The cloud offers many
benefits: 1) it accelerates the speed of delivery of new services; 2)
it simultaneously reduces the cost of compute power and enables,
when needed, an extraordinary amount of compute capability —
called burst computing; 3) it provides that compute capability
across all of our data; and 4) it allows us to be able to constantly
and quickly adopt new technologies because updated cloud
services are continually being added — more so in the public
cloud, where we benefit from the innovation that all cloud providers
create, than in the private cloud, where innovation is only our own.
Of course, we are learning a lot along the way. For example, we

know we should carefully pick which applications and which data
go to the public cloud versus the private cloud because of the
expense, security and capabilities required. In addition, it is critical
that we eventually use multiple clouds to avoid lock-in. And we
intend to maintain our own expertise so that we’re never reliant on
the expertise of others even if that requires additional money.
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We invested approximately $2 billion to build four new, modern,

private cloud-based, highly reliable and efficient data centers in the
United States (we have 32 data centers globally). To date, about
50% of our applications run a large part of their processing in the
public or private cloud. Approximately 70% of our data is now
running in the public or private cloud. By the end of 2024, we aim
to have 70% of applications and 75% of data moved to the public
or private cloud. The new data centers are around 30% more
efficient than our existing legacy data centers. Going to the public
cloud can provide 30% additional efficiency if done correctly
(efficiency improves when your data and applications have been
modified, or “refactored,” to enable new cloud services). We have
been constantly updating most of our global data centers, and by
the end of this year, we can start closing some that are larger,
older and less efficient.
ACQUIRING FIRST REPUBLIC BANK AND ITS CUSTOMERS
The purchase of First Republic Bank was not something that we

would have done just for ourselves. But the regulators relied on us
to step forward (we worked hand in hand with the Federal
Reserve, the Federal Deposit Insurance Corporation (FDIC) and
the U.S. Treasury), and the purchase of First Republic helped
stabilize and strengthen the U.S. financial system in a time of
crisis.
The acquisition of a major company entails a lot of complexity.

People tend to focus on the financial and economic outcomes,
which is a reasonable thing to do. And in the case of First
Republic, the numbers look rather good. We recorded an
accounting gain of $3 billion on the purchase, and we told the
world we expected to add more than $500 million to earnings
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annually, which we now believe will be closer to $2 billion.

However, these results mask some of the true costs. First,
approximately one-third of the incremental earning was simply
deploying excess capital and liquidity, which doesn’t require
purchasing a $300 billion bank — we simply could have bought
$300 billion of assets. Second, as soon as the deal was
announced, approximately 7,600 of our employees went from
working on tasks that would benefit the future of JPMorgan Chase
to working on the merger integration. Overall, the integration
involves effectively combining more than 165 systems (e.g.,
statement, deposit, accounting and human resources) and
consolidating policies, risk reporting, and other various rules and
procedures. We hope to have most of the integration done by the
middle of 2024.
Fortunately, we were very familiar and comfortable with all of the

assets we were acquiring from First Republic. What we didn’t take
on was First Republic’s excessive interest rate exposure — one of
the reasons it failed — which we effectively hedged within days of
the acquisition.
Our people did a great job of respectfully managing this transition,

knowing that circumstances were particularly tough for our new
colleagues, whom we tried to welcome with open arms. We did
everything we could to redeploy individuals whose jobs were lost
because of the merger (we directly hired over 5,000 people). Our
approach has always been to go into an acquisition knowing we
can learn things from other teams, and in this case, we did: First
Republic had done an outstanding job serving high-net-worth
clients and venture capitalists, and we are developing what is
effectively a new business for us following First Republic’s
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servicing model. We will serve these high-net-worth clients through

a single point of contact, supported by a concierge service model,
across our distribution channels — including more than 20 new
JPMorgan Chase branded branches.
NAVIGATING IN A COMPLEX AND POTENTIALLY

DANGEROUS WORLD
In the policy section, we talk about how we may be entering one of

the most treacherous geopolitical eras since World War II. And I
have written in the past about high levels of debt, fiscal stimulus,
ongoing deficit spending and the unknown effects of quantitative
tightening (which I am more worried about than most) so I won’t
repeat those views here. However, the impacts of these
geopolitical and economic forces are large and somewhat
unprecedented; they may not be fully understood until they have
completely played out over multiple years. In any case, JPMorgan
Chase must be prepared for the various potential impacts and
outcomes on our company and our people.
We remain wary of economic prognosticating.
While all companies essentially budget on a base case forecast,

we are very careful not to run our business that way. Instead, we
look at a range of potential outcomes for which we need to be
prepared. Geopolitical and economic forces have an unpredictable
timetable — they may unfold over months, or years, and are nearly
impossible to put into a one-year forecast. They also have an
unpredictable interplay: For example, the geopolitical situation may
end up having virtually no effect on the world’s economy or it could
potentially be its determinative factor.
We have ongoing concerns about persistent inflationary pressures
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and consider a wide range of outcomes to manage interest rate

exposure and other business risks.
Many key economic indicators today continue to be good and

possibly improving, including inflation. But when looking ahead to
tomorrow, conditions that will affect the future should be
considered. For example, there seems to be a large number of
persistent inflationary pressures, which may likely continue. All of
the following factors appear to be inflationary: ongoing fiscal
spending, remilitarization of the world, restructuring of global trade,
capital needs of the new green economy, and possibly higher
energy costs in the future (even though there currently is an
oversupply of gas and plentiful spare capacity in oil) due to a lack
of needed investment in the energy infrastructure. In the past,
fiscal deficits did not seem to be closely related to inflation. In the
1970s and early 1980s, there was a general understanding that
inflation was driven by “guns and butter”; i.e., fiscal deficits and the
increase to the money supply, both partially driven by the Vietnam
War, led to increased inflation, which went over 10%. The deficits
today are even larger and occurring in boom times — not as the
result of a recession — and they have been supported by
quantitative easing, which was never done before the great
financial crisis. Quantitative easing is a form of increasing the
money supply (though it has many offsets). I remain more
concerned about quantitative easing than most, and its reversal,
which has never been done before at this scale.
Equity values, by most measures, are at the high end of the

valuation range, and credit spreads are extremely tight. These
markets seem to be pricing in at a 70% to 80% chance of a soft
landing — modest growth along with declining inflation and interest
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rates. I believe the odds are a lot lower than that. In the meantime,
there seems to be an enormous focus, too much so, on monthly
inflation data and modest changes to interest rates. But the die
may be cast — interest rates looking out a year or two may be
predetermined by all of the factors I mentioned above. Small
changes in interest rates today may have less impact on inflation
in the future than many people believe.
Therefore, we are prepared for a very broad range of interest

rates, from 2% to 8% or even more, with equally wide-ranging
economic outcomes — from strong economic growth with
moderate inflation (in this case, higher interest rates would result
from higher demand for capital) to a recession with inflation; i.e.,
stagflation. Economically, the worst-case scenario would be
stagflation, which would not only come with higher interest rates
but also with higher credit losses, lower business volumes and
more difficult markets. Under these many different scenarios, our
company would continue to perform at least okay. Importantly,
being prepared means we can continue to help our clients no
matter what the future portends.
The mini banking crisis of 2023 is over, but beware of higher rates
and recession — not just for banks but for the whole economy.
When we purchased First Republic in May 2023 following the

failure of two other regional banks, Silicon Valley Bank (SVB) and
Signature Bank, we thought that the current banking crisis was
over. Only these three banks were offsides in having the toxic
combination of extreme interest rate exposure, large unrealized
losses in the held-to-maturity (HTM) portfolio and highly
concentrated deposits. Most of the other regional banks did not
have these problems. However, we stipulated that the crisis was
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over provided that interest rates didn’t go up dramatically and we

didn’t experience a serious recession. If long-end rates go up over
6% and this increase is accompanied by a recession, there will be
plenty of stress — not just in the banking system but with
leveraged companies and others. Remember, a simple 2
percentage point increase in rates essentially reduced the value of
most financial assets by 20%, and certain real estate assets,
specifically office real estate, may be worth even less due to the
effects of recession and higher vacancies. Also remember that
credit spreads tend to widen, sometimes dramatically, in a
recession.
Finally, we should also consider that rates have been extremely

low for a long time — it’s hard to know how many investors and
companies are truly prepared for a higher rate environment.
We seek to be engaged globally and carefully manage complex

countries and geopolitical issues.
JPMorgan Chase does business in more than 100 countries, and

we have people on the ground in over 60 countries. In almost all
those locations, we do research on their economy, their markets
and their companies; we bank their government institutions and
their companies; and we bank multinational corporations, including
the U.S. multinational corporations within their borders. This is a
critical role — not only in helping those countries grow and
improve but also in expanding the global economy.
Many of these countries are quite complex with different laws,

customs and regulations. We are occasionally asked why we bank
certain companies and even certain countries, particularly when
countries have some laws and customs that are counter to many
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of the values held in the United States. Here’s why:
• The U.S. government sets foreign policy. And when it does, we

salute. Wherever we do business, we follow the law of the United
States, as it applies in that country (in addition to the laws of the
country itself), in all respects. Think of trade rules, sanctions, anti-
money laundering and the Foreign Corrupt Practices Act, among
others. By and large, these things help improve those countries. In
most cases, the U.S. government does not want us to leave
because it agrees, generally, that the engagement of American
business enhances our relationships with other countries and
helps those countries themselves.
• Engagement makes the world a better place. We all should want

the world to continue to improve. Isolation and lack of engagement
do not accomplish that goal. While we believe that it makes sense
for the United States to push for constant improvement around the
world — from advocating for human rights to fighting corruption —
this is rarely accomplished through coercion, and, in fact, is
enhanced by engagement.
• We need to be prepared for emerging challenges and position

ourselves to understand them. We created a new role — Head of
Asia Pacific Policy and Strategic Competitiveness — to focus
specifically on key policy issues critical to the firm’s (and, in fact,
the country’s) competitiveness, such as trade restrictions, supply
chains and infrastructure. We also created a new strategic security
forum to focus on emerging and evolving risks, including trade
wars, pandemics, cybersecurity and actual wars, to name just a
few.
OUR EXTENSIVE COMMUNITY OUTREACH EFFORTS,
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INCLUDING DIVERSITY, EQUITY AND INCLUSION
JPMorgan Chase makes an extraordinary effort as part of our

“normal” day-to-day outreach to engage with individual clients,
small and midsized businesses, large and multinational firms,
government officials, regulators and the press in cities all around
the world. This dialogue is part of the normal course of business
but it is also part of building trust and putting down roots in a
community.
We believe that companies, and banks in particular, must earn the

trust of the communities and countries in which they operate. We
believe — and we are unashamed about this — that it is our
obligation to help lift up the communities and countries in which we
do business. We believe that doing so enhances business and the
general economic well-being of those communities and countries
and also enhances long-term shareholder value. JPMorgan Chase
thrives when communities thrive.
This approach is integral to what we do, in great scale, around the

world — and it works. We are quite clear that whether our efforts
are inspired by the goodness of our hearts (as philanthropy or
venture-type investing) or good business, we try to measure the
actual outcomes.
It’s also interesting to point out that many of our efforts were
spawned from our work around Advancing Black Pathways,
Military and Veterans Affairs, and our work in Detroit. While we’ve
banked Detroit for more than 90 years, our $200 million investment
in its economic recovery over the last decade demonstrated that
investing in communities is a smart business strategy. We are one
of the largest banks in Detroit, from consumer banking to
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investment banking, and it’s quite clear that not only did our efforts
help Detroit, but they also helped us gain market share. The extent
of Detroit’s remarkable recovery was recently highlighted when
Moody’s upgraded the city’s credit rating to investment grade — an
extraordinary achievement just over 10 years after the city filed the
largest municipal bankruptcy in U.S. history.
For JPMorgan Chase, Detroit was an incubator for developing

models that help us hone how we deploy our business resources,
philanthropic capital, skilled volunteerism, and low-cost loans and
equity investments, as well as how we identify top talent to drive
successful business and societal improvements. I hope that, as
shareholders, you are proud of our focus on promoting opportunity
for all, both within and outside our organization, which includes
economic opportunity. Some of our initiatives are listed below.
• Business Resource Groups. To deepen our culture of inclusion in

the workplace, we have 10 Business Resource Groups (BRG)
across the company to connect more than 160,000 participating
employees around common interests, as well as to foster
networking and camaraderie. Groups welcome anyone — allies
and those with shared affinities alike. For example, some of our
largest BRGs are Access Ability (employees with disabilities and
caregivers), Adelante (Hispanic and Latino employees), BOLD
(Black employees), NextGen (early career professionals), PRIDE
(LGBTQ+ employees) and Women on the Move.
• Women on the Move. At JPMorgan Chase, they sure are! Women

represent 28% of our firm’s senior leadership globally. In fact, our
major lines of business — CCB, AWM and CIB, which would be
among Fortune 1000 companies on their own — are all run by
women (one with a co-head who is male). More than 10 years ago,
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a handful of senior women at the company, on their own, started

this global, firmwide, internally focused organization called Women
on the Move. It was so successful that we expanded the initiative
beyond the company; it now empowers clients and consumers, as
well as women employees and their allies, to build their careers,
grow their businesses and improve their financial health. The
Women on the Move BRG has more than 70,000 employees
globally.
• Advancing Black Pathways. This comprehensive program, which

just reached the five-year mark, focuses on strengthening the
economic foundation of Black communities because we know that
opportunity is not always created equally. The program does so by,
among other accomplishments, helping to diversify our talent
pipeline, providing opportunities for Black individuals to enter the
workforce and gain valuable experience, and investing in the
financial success of Black Americans through a focus on financial
health, homeownership and entrepreneurship. An important part of
the program’s work is achieved through our investment in
Historically Black Colleges and Universities (HBCU). We now
partner with 18 schools across the United States to boost
recruitment connections, expand career pathways for Black
students and other students, and support their long-term
development and financial health. As a measure of the program’s
success, in four years we have made nearly 400 hires into
summer and full-time analyst and associate roles at the firm.
• Military and Veterans Affairs. This firmwide effort sponsors

recruitment, mentorship and development programs to support the
military members and veterans working at JPMorgan Chase. Back
in 2011, we joined with 10 other companies to launch the Veteran
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Jobs Mission (VJM), whose membership has since grown to more

than 300 companies representing various industries across the
United States and has hired over 900,000 veterans and military
spouses. In 2023, VJM announced the creation of its Advisory
Board, which is composed of 14 corporate leaders, to provide
strategic direction and oversight of VJM as it continues to expand
its commitment to support economic opportunities for veterans and
military spouses, including its goal to hire 2 million veterans and
200,000 military spouses by 2030. JPMorgan Chase alone has
hired in excess of 18,000 veterans since 2011 and currently
employs more than 3,100 military spouses.
• Creating opportunity for people with disabilities. The firm’s Office of

Disability Inclusion continues to lead strategy and initiatives aimed
at advancing economic opportunity for people with disabilities. In
2023, we joined lawmakers and business leaders in Washington,
D.C., to show support for passage of the Supplemental Security
Income (SSI) Savings Penalty Elimination Act. Modernizing the
SSI program, by updating asset limits for the first time in nearly 40
years, would allow millions of people with disabilities who receive
SSI benefits the opportunity to build their savings without putting
their essential benefits at risk. We also provided business
coaching to more than 370 entrepreneurs with disabilities.
• Virtual call centers. When we sought to expand our customer

service specialists program across the United States, we turned to
Detroit, launching our first virtual call center in 2022. Investments
in Detroit’s workforce development infrastructure helped us hire 90
virtual customer service specialists for a program that has
outperformed many of our traditional call centers around the world.
Following this success, we expanded our hiring efforts and this
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virtual program to Baltimore to create new jobs that jump-start

careers. And now we’re evaluating the possibility of expanding
even further.
• Entrepreneurs of Color Fund. A critical challenge we have seen in

so many communities is that traditional lending standards render
too many entrepreneurs — particularly entrepreneurs of color and
those serving these communities — ineligible for credit. In
response, we helped launch the Entrepreneurs of Color Fund
(EOCF) in Detroit, a lending program designed to help aspiring
small business owners gain access to critical resources needed for
growth that are often not equitably available — capital, technical
assistance and mentorship, among others. These challenges
aren’t unique to Detroit so we worked with community
development financial institutions to replicate the EOCF program
in 10 markets across the United States in 2023, deploying more
than 2,900 loans and $176 million in capital to underserved
entrepreneurs across the country.
• Senior business consultants. To help entrepreneurs and small

businesses make the transition from community lending to
accessing capital from traditional financial institutions, we created
a new job — senior business consultant — to provide support.
Senior business consultants in branches that focus on
underserved communities offer coaching and help business
owners with everything from navigating access to credit to
managing cash flow to generating effective marketing. Since 2020,
these consultants have mentored more than 5,500 business
owners, helping them improve their operations, grow revenue and
network with others in the local business community.
• AdvancingCities The organizing principles that define the business
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and community investments we make and how we best achieve an

overall impact in local economies were heavily influenced by our
experience in Detroit. Seeing Detroit’s comeback begin to take
shape several years ago, we created AdvancingCities to replicate
this model for large-scale investments to other cities around the
world. From San Francisco to Paris to Greater Washington, D.C.,
we’ve applied what we learned in Detroit to communities where
conditions are opportune for success and require deeper
investments — where community, civic and business leaders have
come together to solve problems and get results.
• JPMorgan Chase Service Corps. Ten years ago, we launched the

JPMorgan Chase Service Corps to strengthen the capacity-
building of nonprofit partners. We brought employees from around
the world to Detroit to assist with its recovery — from creating a
scoring model for a nonprofit to helping prioritize neighborhoods
for development funding to devising an implementation plan for an
integrated talent management system. Since that time, the Service
Corps has expanded, with more than 1,500 JPMorgan Chase
employees contributing 100,000 hours to support over 300
nonprofits globally.
• Community Centers/Branches and Community Managers. A local

bank branch, especially in a low-income neighborhood, can be
successful only when it fits the community’s needs. That is why
over the last several years we have shifted our approach to how
we offer access to financial health education, as well as low-cost
products and services to help build wealth. Since 2019, we have
opened 16 Community Center branches, often in areas with larger
Black, Hispanic or Latino populations, and have plans to open
three more by the end of 2024. These branches have more space
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to host grassroots community events, small business mentoring

sessions and financial health seminars, which have been well-
attended — to date, over 400,000 people have taken advantage of
the financial education seminars. In each of these Community
Center branches, we hired a Community Manager (who acts as a
local ambassador) to build relationships with community leaders,
nonprofits and small businesses. The Community Manager
concept and practice have become so successful that we have
also placed these managers in many of our traditional branches in
underserved communities. We now have 149 Community
Managers throughout our branch network.
• Work skills development. Detroit showed us how talent in

communities is often overlooked. We saw this in the early days of
our investment when we visited our partners at Focus: HOPE, a
training program designed to help Detroiters develop skills for
high-demand jobs. Quickly, it became clear that the training and
education system in Detroit was disconnected from employers and
their talent needs. By investing in programs like Focus: HOPE, we
have been able to help bridge local skills gaps by training people
for in-demand jobs in communities like Dallas, Miami and
Washington, D.C. Between 2019 and 2023, we supported more
than 2 million people through our extensive learning and career
programming around the world.
• Increasing our rural investment. We are proud to be the only bank

with branches in all 48 contiguous states, which include many rural
communities. Nearly 17 million consumers living in rural areas hold
over $100 billion in deposits with us and $175 billion in loans. We
are also a leading wholesale lender in these communities, helping
to fuel local economies through relationships with local companies,
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governments, hospitals and universities. Since 2019, we have

made material progress in extending our footprint to reach more
rural Americans, including expanding our branch network into 13
new states with large rural populations. Now we are raising the
bar. With our new strategy, we have a goal to have a branch
available to serve 50% of a state’s population within an acceptable
driving distance, including in heavily rural states such as Alabama
and Iowa. This focus is part of our recently announced plan to
build an additional 500 branches and hire 3,500 employees over
the next three years. Through this expansion, we will partner
across lines of business and our Corporate Responsibility
organization to help advance inclusive economic growth and bring
the full force of the firm to America’s heartland.
We’ve nearly completed our five-year, $30 billion Racial Equity

Commitment — it will now become a permanent part of our
business.
What began in 2020 as a five-year, $30 billion commitment is now

transforming into a consistent business practice for our lines of
business in support of Black, Hispanic, Latino and other
underserved communities. By the end of 2023, we reported over
$30 billion in progress toward our original goal. However, our focus
is not on how much money is deployed — but on long-term impact
and outcomes. And going forward, these programs will be
embedded in our business-as-usual operating system.
• Affordable rental housing. Through our Affordable Housing

Preservation program, we approved program funding to date of
approximately $21 billion in loans to incentivize the preservation of
over 190,000 affordable housing rental units across the United
States. Additionally, we financed approximately $5 billion for the
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construction and rehabilitation of affordable rental housing.
• Homeownership. In 2023, we expanded our $5,000 Chase

Homebuyer Grant program to include over 15,000 majority Black,
Hispanic and Latino communities — and in January 2024, we
increased our grant amount to $7,500 in select markets. Since our
grant program began in 2021, we have provided about 8,600
grants totaling $43 million. We also have provided home purchase
and refinance loans in 2023 worth over $4.6 billion for more than
14,000 Black, Hispanic and Latino households across the
economic spectrum.
• Small business. The Business Card Special Purpose Credit

Program, launched in January 2023, has provided over 10,900
cards, totaling over $43 million in available credit lines to
underserved entrepreneurs and communities across the United
States.
• Supplier diversity. In 2023, our firm spent approximately $2.3

billion directly with diverse suppliers — an increase of 10% over
2022. As a part of our racial equity commitment, over $450 million
was spent in 2023 with more than 190 Black-, Hispanic- and
Latino-owned businesses.
• Minority depository institutions and community development

financial institutions. To date, we have invested more than $110
million in equity in diverse financial institutions and provided over
$260 million in incremental financing to community development
financial institutions to support communities that lack access to
traditional financing. JPMorgan Chase also helped these
institutions build their capacity so they can provide a greater
number of critical services like mortgages and small business
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loans.
We’re thoughtfully continuing our diversity, equity and inclusion

efforts.
Of course, JPMorgan Chase will conform as the laws evolve. We

will scour our programs, our words and our actions to make sure
they comply.
That said, we think all the efforts mentioned above will remain
largely unchanged. And, in fact, around the world, cities and
communities where we do business applaud these efforts. We also
believe our initiatives make us a more inclusive company and lead
to more innovation, smarter decisions and better financial results
for us and for the economy overall.
We are often asked in particular about “equity” and what that word
means. To us, it means equal treatment, equal opportunity and
equal access … not equal outcomes. There is nothing wrong with
acknowledging and trying to bridge social and economic gaps,
whether they be around wealth or health. We would like to provide
a fair chance for everyone to succeed — regardless of their
background. And we want to make sure everyone who works at
our company feels welcome.
We want to articulate how we weigh in on social issues and what it

means for our customers.
Before I comment about culture issues, I have a confession to

make: I am a full-throated, red-blooded, patriotic, free-enterprise
(properly regulated, of course) and free-market capitalist. Our
company is frequently asked to take a position on an issue, rule or
legislation that might be considered “cultural.” When that happens,
we take a deep breath and study the matter. Many of the laws in
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question have many specific requirements, some of which you

would agree with but not others. But we are being asked to
support the entire law. In cases like these, we simply make our
own statement that reflects our educated view and values;
however, we do not give our voice to others.
We believe in the values of democracy, including freedom of

speech and expression, and are staunchly against discrimination
and hate. We have not turned away — and will not turn away —
customers because of their political or religious affiliations nor
would we tell customers how they should spend their money.
Our commitment to these ideals is also reflected in our employees.

The talent at our firm is a vibrant mix of cultures, beliefs and
backgrounds. We are, of course, fully committed to freedom of
speech. There are things that you can say that would be permitted
under freedom of speech but would not be allowed under our
Code of Conduct. For example, we do not allow intimidation,
threats or highly prejudicial behavior or speech. Our Code of
Conduct clearly stipulates that certain statements and behavior,
while allowed under freedom of speech, can lead to disciplinary
action at our company — from being reprimanded to being fired.
WHAT WE LEARNED: A FIVE-POINT ACTION PLAN TO MOVE

FORWARD ON THE CLIMATE CHALLENGE
In May 2023, we gathered with knowledgeable and influential

people from the energy industry writ large to the government and
financial services arena in Scottsdale, Arizona, for an action forum.
The goal was to explore various aspects of the climate challenge
and try to devise effective solutions that could help lead to
meaningful progress. The climate challenge is immense and
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complex. Addressing it requires more than making simplistic

statements and rules; rather, energy systems and global supply
chains need to be transformed across virtually all industries. And
there is also a deep need for new research and development.
Energy systems and supply chains provide the foundation of the
global economy and must be treated with care.
At the same time, the opportunity here is immense. The

investment required to meet climate goals — estimated at over $5
trillion annually — could generate economywide growth and
opportunity at a scale the world has not seen since the Industrial
Revolution.
The task for industry, policymakers and finance is to help formulate

solutions that support the transition to a low-carbon economy,
balancing affordable, reliable access to energy with generating
economic growth.
To find a way forward, we sought input from diverse stakeholders

in pursuit of a North Star. In Scottsdale and in discussions with
clients across industries about what’s needed to achieve a low-
carbon economy, these five action steps and reforms were top of
mind:
• Supportive government policy and leadership to advance the

transition. Policy that promotes favorable economic conditions to
make the transition viable is a critical first step for clients. This
includes government leadership via mandates, incentives or
subsidies to support jobs and investment in the transition; actions
on permitting and interconnection reform; and regulatory clarity
and certainty, especially around long-term investments. As one
vital example, current grid infrastructure is insufficient to
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accommodate the growth in renewables.
• Public/private partnerships in scaling bankable projects. Scaling

investments needs to happen both for commercially proven
technologies (e.g., wind and solar) and for emerging technologies
(e.g., green hydrogen, sustainable aviation fuel and carbon
capture). Developing “bankable” clean energy projects will require
the application of smart financial tools, as well as further policy
support. It will take public/private partnerships and innovation to
create catalytic forms of capital that can step into these gaps,
absorb first-mover risks and provide the necessary funding. The
cost of capital is too high for some companies — and public funds
ought to be deployed in a smart way that effectively attracts private
capital.
• Public education and engagement. Without question, clients told

us that public commitment to and investment in energy-related
infrastructure is one of the most important parts of combating the
climate crisis and running their businesses. Supporting the
buildout of energy-related infrastructure with speed and scale is
critical. Public acceptance of building and advancing the
infrastructure needed to meet climate goals is at the heart of
progress. While the energy transition is poised to deliver benefits
to communities across the world, securing acceptance and support
to build clean energy infrastructure at scale is challenging. Access
to job-creating renewable energy projects can help rural
communities thrive by advancing local economies. Ensuring public
support and social license to operate requires better engagement
strategies, including widespread stakeholder education about the
benefits of these technologies for local communities.
• Communication about concrete successes. Across industries,
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market participants need to do a better job of celebrating and

championing concrete successes and tangible milestones. This
includes highlighting success stories around emerging
technologies and the complex nature of the carbon transition.
Stakeholders also should better convey the benefits of clean
energy — across all technologies — to help combat
misinformation and foster a more informed dialogue.
• Work skills training. Businesses depend on healthy, thriving

communities so the carbon transition needs to work for everyone.
This includes helping to ensure that workers are trained in the
skills for the future, such as through improved engineering schools
and job training programs. Work across the entire supply chain is
essential to moving at pace. As one example, the U.S. Bureau of
Labor Statistics estimates we will need more than 70,000
additional electricians per year through 2031; it is currently unclear
how the market will meet that demand. If the deployment of heat
pumps and electric vehicle chargers accelerates, demand for
electricians will be even higher. A concerted focus to train
electricians can help the United States meet some of its climate
goals while providing well-paying jobs that do not require a four-
year college degree. Also, broadly speaking, businesses are in a
better position to make investments with confidence when labor
requirements across the value chain — from design and
manufacturing to installation — are satisfied.
We recently reconsidered certain memberships.
JPMorgan Chase recently exited Climate Action 100+ and the

Equator Principles. “Why?” we are asked. While we don’t
necessarily disagree with some of the principles many
organizations have, we make our own business decisions. We
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think we have some of the best-in-class environmental, social and

risk standards because we have invested in our own in-house
experts and matured our own risk management processes over
the years. As a result, we are going to go our own way and make
our own independent decisions, gathering the best learnings of
experts in the field, and, of course, we will follow all legal
requirements.
We are engaged but recognize our role: three more important

points.
First, everyone should understand that conquering the climate

problem needs proper government action, particularly around
taxes, permitting, grids, infrastructure building and proper
coordination of policies — we are not there yet. Second, there is
no known technology that can fill the gap between our
“aspirations” and the current trajectory of the world. We hope and
believe that this will be found (for example, through carbon
capture, improved batteries, hydrogen or other measures). This
new technology will also require proper government research and
development funding, as the effort cannot be accomplished by
private enterprise alone. And third, we are going to use the word
“commitment” much more reservedly in the future, clearly
differentiating between aspirations we are actively striving toward
and binding commitments.
For JPMorgan Chase to play the right role in tackling the climate
challenge, we have organized a special group around the green
economy and related infrastructure investment. This group will
coordinate and inform our work across all established industry
groups (from auto to real estate, energy, agriculture and others)
and includes hundreds of employees devoted to these efforts.
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POWERING ECONOMIC GROWTH IN FLORIDA
From Tallahassee to Miami and from Tampa to Palm Bay,

JPMorgan Chase has been committed to Florida for more than
130 years and has enjoyed being the bank for all communities.
Each year, we contribute billions of dollars to the economy, hire
and train local residents, help to revitalize neighborhoods and
remove barriers to opportunity for Floridians across the state. Our
partnerships with businesses, nonprofits, government entities and
community organizations have enabled us to drive sustainable
impact and help them achieve their goals. We couldn’t be more
proud to help make opportunity happen in Florida.
This year, we forged a relationship with Inter Miami CF, one of the
most recognizable sports teams in the world. Through this
partnership and the newly named Chase Stadium, we’re
continuing to contribute to South Florida and its local communities.
In Tampa, home to nearly 6,000 of our employees, we’re triggering
an additional $210 million in economic activity and creating over
660 local construction jobs through the renovation of our Highland
Oaks campus and downtown Tampa office. We’re proud that one-
third of all Floridians do business with us through deposits, credit
cards or a mortgage. Through each of our investments across the
state, we’re ensuring that residents have the resources and tools
they need to thrive.
Our support to government, higher education, healthcare and

nonprofit organizations:
• We serve over 150 government, higher education, healthcare and

nonprofit clients throughout the state, and over the last five years,
we have provided more than $20.2 billion in credit and capital to
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them.
• Our clients range from the city of Jacksonville to the Orlando

Utilities Commission, the University of South Florida, Broward
Health and the District School Board of Pasco County — a
decades-long client.
• We are the lead treasury bank for the Wounded Warrior Project,
one of the largest veteran service organizations in the United
States. Headquartered in Jacksonville, the organization caters to
wounded veterans and service members who served in the military
on or after 9/11.
Our support to investment and middle-market banking clients:
• Over the last five years, we have provided in excess of $318 billion
in credit and capital to local clients, such as utility, technology and
tourism companies.
• We have more than 12,500 large and midsized clients across the
state.
Our support to local financial firms:
• Over the last five years, we have provided more than $24 billion in
credit and capital for financial institutions, such as local banks,
insurance companies, asset managers and securities firms.
• We bank over 50 of Florida’s regional, midsized and community

banks, helping them play an essential role in maintaining the
state’s economy and serve local communities.
Our support to small business:
• At the end of 2023, balances for loans extended to Florida’s small

businesses totaled more than $1.2 billion — funds being used to
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help those businesses scale and grow, contribute to the economy

and create local jobs.
• Across the state, we have over 654,000 small business customers.
• In 2023, our bankers and senior business consultants spent more

than 375,000 hours advising and supporting Florida business
owners.
Our support to consumer banking needs:
• We operate 1,445 ATMs and 410 branches across the state.
• In 2023, we supported more than 6.1 million customers with

mortgages, auto loans and savings, checking and credit card
accounts, giving JPMorgan Chase one of the largest consumer
banking market shares in the state.
• We managed more than $70 billion in investment and annuity

assets for local clients.
Our business and community investments:
• Over the last five years, we have committed nearly $65 million in
philanthropic support, including:
• $3 million to The Miami Foundation’s Resilient 305: Building
Prosperity Collaborative to increase access to quality jobs and
develop small businesses through training, investments and
capacity-building.
• $1.6 million to the Community Justice Project, which empowers

community-based legal advocates to help delay displacement and
improve conditions for housing stability for renters across nine
Florida counties.
• In 2022, we committed $10 million over five years to Tech Equity
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Miami to advance equal access to tech skills, careers and

education, including:
• A $1 million investment to Florida Memorial University, South
Florida’s only HBCU, to help traditionally underresourced students
pursue a career in technology.
Our support as a local employer:
• We employ more than 14,000 residents throughout the state,

including nearly 1,900 veterans and over 660 people with a
criminal background who deserve a second chance.
• In Florida, the average salary of our employees is more than

$87,000 (plus a starting comprehensive annual benefits package
worth nearly $17,600) compared with the statewide per capita
income of nearly $40,300.
GIVING THE BANK REGULATORY AND SUPERVISORY

PROCESS A SERIOUS REVIEW
The Dodd-Frank Wall Street Reform and Consumer Protection Act

(Dodd-Frank) was finished 14 years ago, and we believe it
accomplished a lot of good things. But it’s been quite a while since
then, and we’re still debating some very basic issues. It’s time to
take a serious, hard, honest look at what has been done and what
can be improved.
It’s good to remember that the United States has the best financial
system in the world, with diversified, deep and experienced
institutions, from banks, pension plans, hedge funds and private
equity to individual investors. It has healthy public and private
markets, transparency, rule of law and deep research. The best
banking system in the world is a critical part of this, and, integrated
with the overall financial system, is foundational to the proper
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allocation of capital, innovation and the fueling of America’s growth

engine.
This is not about JPMorgan Chase — we believe we can manage

through whatever is thrown our way. This is about the impact on all
parts of the system — from smaller banks to larger regional banks
that may not have the resources to handle all of these regulatory
requirements. It’s also about the effect on the financial markets
and the economy from the rapidly growing shadow banking
system, as well as the ultimate impact on the customers, clients
and communities we serve. This is about what’s right for the
system.
The banking and financial system is innovative, dynamic and

constantly changing.
The banking system is not static: There are startup banks,

mergers, successful upstarts and fintech banks, and even Apple,
which effectively acts as a bank — it holds money, moves money,
lends money and so on. Nonbanks are competing with traditional
banks, and, in general, this dynamism and churn are good for
innovation and invention — with success and failure simply part of
the robust process. Innovation runs across payments systems,
budgeting, digital access, product extensions, risk and fraud
prevention, and other services. Different institutions play different
roles, and, importantly, small banks and big banks serve
completely different strategic functions. Large banks bank
multinational corporations around the world, make healthy
markets, and wield technology and a product set that are the best
in the world. A small bank simply cannot bank these same
multinational governments and safely move the amount of money
and securities that large banks do. Regional and community banks
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have exceptional local knowledge and presence and are critical in

serving thousands of towns and certain geographies.
It is also important to recognize that the banking system as we

know it is shrinking relative to private markets and fintech, which
are growing and becoming increasingly competitive. And
remember that many of these new players do not have the same
transparency or need to abide by the extensive rules and
regulations as traditional banks, even if they offer similar products
— this often gives them significant advantage.
To deal with this fluid environment, banks of all sizes develop their
own strategies, whether to specialize, expand geographically or
embark on mergers and acquisitions. There are certain banking
services where economies of scale are a competitive advantage,
but not all banks need to become bigger to gain this benefit (there
are many highly successful banks that are smaller). What is clear
is that banks should be allowed to pursue their individual
strategies, including mergers and acquisitions, as they see fit.
Overall, this process should be allowed to happen — it’s part of the
natural and healthy course of capitalism — and it can be done
without harming the American taxpayer or economy.
While we all want a strong banking and financial system, we

should step back and assess how all the regulatory steps we have
taken measure up against the goals we all share. Since Dodd-
Frank was signed into law in 2010, thousands of rules and
reporting requirements written by 10+ different regulatory bodies in
the United States alone have been added. And it would probably
be an understatement to say that some are duplicative,
inconsistent, procyclical, contradictory, extremely costly, and
unnecessarily painful for both banks and regulators. Many of the
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rules have unintended consequences that are not desirable and

have negative impacts, such as increasing the cost of credit for
consumers (hurting lower-income Americans the most).
The whole process, including the Basel III endgame, could be

much more productive, streamlined, economical, efficient and safe.
Both regulators and banks should want the same thing — a

healthy banking system, serving its clients and striving for
continuous improvement. We all should also want the enormous
benefits that would come from good collaboration between
regulators and bank management teams and boards.
Over time, these relationships have deteriorated, and, again, are

increasingly less constructive. There is little real collaboration
between practitioners — the banks — and regulators, who
generally have not been practitioners in business. While we
acknowledge the dedication of regulators who work with banks on
a daily basis, management teams across the industry are putting
in a disproportionate amount of time addressing requests for extra
details, documentation and processes that extend far beyond the
actual rules — and distract both regulators and management from
more critical work. We should be more focused on the truly
important risks for the safety of the system. And unfortunately,
without collaboration and sufficient analysis, it is hard to be
confident that regulation will accomplish desired outcomes without
undesirable consequences. Instead of constantly improving the
system, we may be making it worse. A few additional points:
• The Basel III endgame disadvantages American banks. The Basel

III endgame has been 10 years in the making, and it still has not
been completed. In my view, many of the rules are flawed and
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poorly calibrated. If the Basel III endgame were implemented in its

current form, it would hamper American banks: As proposed, it
would increase our firm’s required capital by 25%, making our
requirement 30% higher than it would be under the equivalent
European Union proposal. That means for every loan and asset
financed in the United States by a major American bank, that bank
would have to hold 30% more capital than any international
competitor. The proposed regulations would also damage market
making (see the following section). There are many other flaws but
suffice it to say that much of the work being done today to analyze
the effects should have been done before the proposed
rulemaking.
One of the single most important lessons from the great financial
crisis is that there is enormous value to having a bank that is well-
managed and has diverse revenue sources. Yet regulation since
then both punishes consolidation and diversification — and
punishes performance — through many features of the GSIB
surcharge.
• Built over many years, the framework is now full of duplication.

The following is only a partial list: American gold-plating and
conceptual inconsistencies among Comprehensive Capital
Analysis and Review (CCAR), recovery and resolution plans,
liquidity requirements, global systemically important bank (GSIB)
requirements, and safety and soundness principles. The many
overlapping rules contribute to the bureaucracy that generates an
extraordinary amount of make-work (an 80,000-page CCAR and
shockingly another, coincidentally, 80,000-page recovery and
resolution plan).
• The new rules do virtually nothing to fix what caused the failure of
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SVB and First Republic. For example, they don’t improve certain
liquidity requirements, limit HTM accounting or reduce allowable
interest rate exposure.
• The current regulatory approach to liquidity might simply run

counter to the stated intent. Regulations should recognize the
value and importance of lending and borrowing against good
collateral and using central bank resources, such as the discount
window. Adhering to current liquidity requirements permanently
ties up good liquidity in a way that makes the system more fragile
and more risky.
• It is not clear what the full intent of the Basel III endgame was – it
will have unintended consequences. Without real analysis of
expected outcomes, additional regulation will likely reduce the
number of banks offering certain services and increase costs for all
market participants and activity, including loans, market making
and hedging (by farmers, airlines and countries, among others).
And new rules might even increase consolidation as companies
race to achieve economies of scale in certain products and
services.
Unfortunately, some recent regulations are ending up in court. You

can imagine that no one wants to sue their regulators. Banks
would not sue if they did not think they were right — or if they
thought they had any other recourse — which they effectively do
not. This is definitely not what anyone should want. A more
constructive relationship with regulators would reduce confusion
and uncertainty and would lead to better outcomes for banks, their
shareholders, and their clients, customers and communities.
Collaboration between banks and regulators could improve the
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use of resources and create better outcomes.
True collaboration could dramatically improve the banking system.

For example:
• Redirect enormous resources from things that don’t matter to

things that do. As mentioned, it takes 80,000 pages to describe a
CCAR test and 80,000 pages to detail recovery and resolution.
The talent and resources at the banks and regulators could be
better used elsewhere. Such overload is distracting and takes your
eye off the ball on real, emerging risks, including China, trade,
payment systems and cybersecurity, among others.
• Reduce bureaucratic processes that provoke a tendency to herd

mentality. For example, CCAR is just a point-in-time stress test,
and it can lull you into a false sense of security — for reference,
we do more than 100 stress tests each week. On interest rate
exposure, focusing on the documentation of details may stop you
from thinking about big interest rate exposure. Sometimes
analyzing “what ifs” and fat tail risks is better than excessive and
rigid models and documentations.
• Examine risks outside the regulatory system that are rarely

analyzed and largely unaddressed. These risks include data and
privacy, as well as consumer banking and payment systems, which
are growing fast in the unregulated market. In addition, there are
potential risks from private credit markets (which I talk about later
in this section).
• Let’s imagine what’s possible with real collaboration. Working

together, we can improve how the FDIC manages failing
institutions, how to limit contagion and restore confidence to
depositors, how liquidity requirements can create more flexible
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funding for banks under stress, how the banking and Federal
Reserve’s payment system can become more interoperable, how
clearinghouse risk can be reduced, how stress tests can protect
the system from a wider variety of outcomes, how costs and
therefore consumer costs can be reduced (not increased), how
anti-money laundering requirements can be simplified and
improved at the same time, and how financial products can be
brought to the unbanked.
We can fix the housing and mortgage markets. For example,
mortgage regulations around origination, servicing and
securitization could be simplified, without increasing risk, in a way
that would reduce the average mortgage by 70 or 80 basis points.
The Urban Institute estimates that a reduction like this would
increase mortgage originations by 1 million per year and help
lower-income households, in particular, buy their first home,
thereby starting them on the best way to build household net
worth.
There are many more things that can be improved — and we

really should start working on them.
We need a detailed review and probably a complete revamp.
I know this might be wishful thinking, but now would be a good

time to step back and have a thorough and candid review of the
thousands of new rules passed since Dodd-Frank. After this
review, we should ask what is it that we really want: Do we want to
try to eliminate the possibility of bank runs? Do we want to change
and create liquidity rules that would essentially back most
uninsured deposits? Do we want the mortgage business and
leveraged lending business to be inside or outside the banking
system? Do we want products that are inside and outside the
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banking system to be regulated the same way? Do we want to

reasonably give smaller banks a leg up in purchasing a failing
bank? And while Dodd-Frank did some good things, shouldn’t we
take a look at the huge overlapping jurisdictions of various
regulators? This overlap creates difficulties, not only for banks, but
for the regulators, too. Any and all of this is achievable, and, I
believe, could be accomplished with simpler rules and guidelines
and without stifling our critical banking system.
PROTECTING THE ESSENTIAL ROLE OF MARKET MAKING

(TRADING)
Before we discuss market making and financial markets, readers

should understand that market making occurs in almost all
businesses. There are healthy markets in farm animals, foreign
products, commodities, energy, logistics, healthcare and so on.
Healthy markets increase customer choice and reduce cost. They
almost always involve holding inventory and taking some risk,
which is simply a part of the process. America’s financial markets
are the biggest in the world — U.S. public debt and equity markets
total $137 trillion, constituting the biggest “market” in the world,
and are larger than America’s gross domestic product (GDP) of
$27 trillion.
Market participants are not “Wall Street.” They are large and small,
mainly sophisticated, global investors (pension plans, mutual
funds, governments and individuals) representing retirees,
veterans, individuals, unions, federal workers and others. They all
benefit from our efficient, low-cost and transparent markets.
Some regulators seem to think that market making is a

speculative, hedge fund-like activity — and this thinking is what
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might be leading them to constantly increase capital requirements.

The proposed capital rules could fundamentally alter market-
making activities that are critical to a thriving economy, particularly
in difficult markets when market making is even more important.
The new rules would raise capital requirements by 50% for major
banks — which could undermine market stability, make banking
services costlier and less accessible, and push even more activity
to a less regulated banking system.
Our financial system and markets are the best in the world and
benefit ALL participants; exceptionally good market making in the
secondary market makes our primary markets the best in the
world.
We should recognize that the United States has the biggest,

deepest and most liquid capital markets in the world. For these
markets to function, it is critical for transparency and liquidity to be
in the secondary market. Market making provides this, promoting
the flow of capital to real economy investments and supporting all
sectors of the economy, including companies, state and local
governments, universities, hospitals, pension plans and overall job
creation. Without market making in the secondary market, it would
be extremely difficult for companies to raise capital through the
primary market — equity and debt offerings — which have totaled
approximately $3.6 trillion on average over the past few years. The
incredible strength of these markets enables companies of all
sizes to grow and expand especially during times of volatility and
stress. It also enables consumers to access cheaper credit and
governments (local, state and federal) to reduce their borrowing
costs.
It takes enormous resources to properly support the Markets
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business.
JPMorgan Chase spends $700 million per year in extensive

research coverage of nearly 5,200 companies across 83 countries.
This massive effort continuously educates investors and decision
makers around the world and often leads to improved governance
and management. It also critically complements the firm’s market-
making activities and further promotes transparency, enabling
investors to make thoughtful choices around investing in capital
markets.
I would also like our shareholders to know that our market making
is backed by approximately $7 billion in support expenses,
including over $2 billion in technology spend alone each year. This
investment allows us to maintain global trading systems and
constantly improve upon risk management and efficiency.
JPMorgan Chase deploys approximately $70 billion in capital to

maintain our Markets franchise. This capital supports $500 billion
in securities inventory (largely hedged) — and this inventory allows
us to buy and sell $2 trillion (notional) in securities daily for our
clients.
Market making entails risk but is not particularly speculative.
The main objective of market makers is to continuously quote

prices and diligently manage an inventory to transact at those
prices, which includes assuming certain risks to support heavy
volumes and orderly trading. Market makers have a moral
obligation to try to make markets in good times and in bad. Part of
our brand promise is to stand ready as the willing buyer and seller.
In this, we have never failed. In addition, in most cases regarding
government debt, where we serve as a government securities
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dealer, we are legally obligated to make markets. This constant

visibility into prices provided by market makers fosters investor
confidence, keeps fees low and promotes economic growth by
attracting more investors.
Many large market participants — for example, hedge funds and

high-frequency traders, among others — have no obligation to
make markets. In fact, many of these market participants often
“step out” of the markets and dramatically reduce liquidity
specifically when market conditions are difficult.
Market making is not particularly speculative since market makers

generally hedge their positions, as you will see from some real life
examples of the economics and risks. We earn revenue of
approximately $100 million on a typical day. In the average year,
the total is nearly $30 billion. On our $2 trillion in notional daily
trading, this amounts to only one hundredth of a cent charged to
the investor for these services — an extraordinarily low cost
compared with any other market in the world.
Now let’s take a look at the actual risk and results versus the
hypothetical risk and results. The hypothetical global market
shock of the CCAR stress test has us losing $18 billion in a single
day and never recovering any of it. Let’s compare that to actual
losses under real, actual market stress.
Now consider these historical data points: First, over the last 10
years, the firm’s market-making business has never had a
quarterly loss and has lost money on only 30 trading days.
These loss days represent only 1% of total trading days, and the
average loss on those days was $90 million. Second, when
markets completely collapsed during the COVID-19 pandemic
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(from March 2 through March 31, 2020, the stock market fell 16%,
and bond spreads gapped out dramatically), J.P. Morgan’s market-
making activities made money every day prior to the Federal
Reserve’s major interventions, which stabilized the markets.
During that entire month, we lost money on only two days but
made $2.5 billion in Markets revenue for the month. And third, in
the worst quarter ever in the markets following the 2008 failure of
Lehman Brothers, we lost $1.7 billion, but we made $5.6 billion in
Markets revenue for the full year. The firm as a whole did not lose
money in any quarter that year. In 2009, there was a complete
recovery in Markets, and we made $22 billion in Markets revenue.
You can see that our actual performance under extreme stress
isn’t even close to the hypothetical losses of the stress test.
Another major fallacy is that derivatives are objects of financial

destruction. In reality, derivatives are an essential part of managing
financial risk and are used by investors, corporations, farmers,
businesses, countries, governments and others to manage their
risks. And more than 85% of derivatives are fairly basic forms of
foreign exchange or interest rate swaps.
One last fallacy is that the repo markets are all about speculation.
While it’s true that repo is used by certain investors to leverage up
their positions, about 75% of repo is essential to normal money
market functioning, i.e., is done by broker-dealers financing their
actual inventory positions, money market funds investing their
cash backed by highly rated collateral and clients hedging their
positions.
Market makers add confidence, liquidity and transparency to U.S.

capital markets — market making helps stabilize markets and can
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reduce volatility.
In addition, more liquidity, not less liquidity, will be needed to

maintain market stability. Large banks keep an inventory of
securities they can deploy in times of stress to help soothe
markets; however, with the implementation of new regulations,
banks now hold 70% as much inventory in securities as they did
before the 2008 financial crisis, while the total size of the market
has almost tripled. Higher capital requirements will accelerate this
trend even further, impacting banks’ ability to deliver support to
clients and markets in times when it is needed the most.
Washington’s Basel III endgame proposal damages market

making, hurts Americans and drives activity to less transparent,
less regulated markets.
If this proposal is enacted as drafted:
• Everyday consumer goods could be impacted. Households

contending with inflation could also feel the effects of higher capital
requirements on market-making activities when they shop. From
beverage companies that need to manage aluminum costs to
farms that need to protect against environmental risks, if the cost
of hedging those risks increases, it could be reflected in what
consumers pay for everything from a can of soda to meat
products.
• Mortgages and small business loans will be more expensive.

Consumers seeking a mortgage — including first-time homebuyers
and historically underserved, low- to moderate-income borrowers
with smaller down payments — will face higher interest rates or
will have a tougher time accessing one. This will occur not only
because the cost of originating and holding these loans is higher
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but also because the cost of securitizing them will rise for banks,
nonbanks and government agencies. Not only that, but the
proposal will likely lead to reductions in the size of unfunded credit
card lines, which will put pressure on FICO scores and thereby
make it more difficult for some people to access other forms of
retail credit such as mortgages. Again, this will have the greatest
impact on low- to moderate-income borrowers who rely most
heavily on credit cards for day-to-day spending and to build their
credit history. It could even be argued that existing regulations go
too far and that there is an opportunity to help underserved
communities by dialing down regulations that lead to higher
borrowing costs. This should be studied and the pros and cons
analyzed. The same can be said for small business loans, which
will become more expensive and less accessible.
• Saving for retirement or college will be harder. The cost of

products that families count on to save for retirement or college will
go up as a result of this proposal. Asset managers, money market
funds and pension funds all buy, sell and safekeep securities and
other financial instruments for American investors. Under the
proposed rules, the cost of banking products used on behalf of
clients each day — including brokerage, advisory, clearing and
custody services — will go up and feed through to customers. That
will lead to lower returns on retirement accounts, college funds and
other long-term savings.
• Government infrastructure projects and corporate development will

become more expensive. Federal, state and local governments, as
well as corporations and other institutions, rely on large banks for
access to U.S. capital markets to fund development. If accessing
capital markets becomes more expensive, it will have a ripple
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effect on the hiring of American workers, investment in research

and development, and funding to build hospitals, roads and
bridges, including the planned infrastructure projects from the
Inflation Reduction Act (IRA).
More market activity will move to unregulated institutions, out of

sight from regulators and without the same level of consumer
protections that Americans expect from their banks. Other market
participants that don’t have holistic client relationships are less
likely to provide liquidity to help stabilize markets.
In volatile times, banks have been able to intermediate to help

their clients and to work with the regulators. With new regulations,
they may be less able to do so. There have been several times in
the past few years where banks had ample liquidity and capital but
were unable to rapidly increase their intermediation in the markets
due to very rigid liquidity and capital requirements. Finally, the
proposed rules increase the chance that the Federal Reserve will
have to step in again — and this is not something they should
want to do on a regular basis but only in an extreme emergency.
Staying Competitive in the Shrinking Public

Markets
In previous letters, I have described the diminishing role of public

companies in the American financial system. From their peak in
1996 at 7,300, U.S. public companies now total 4,300 — the total
should have grown dramatically, not shrunk. Meanwhile, the
number of private U.S. companies backed by private equity firms
— which does not include the rising number of companies owned
by sovereign wealth funds and family offices — has grown from
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1,900 to 11,200 over the last two decades. This trend is serious
and may very well increase with more regulation and litigation
coming. Along with a frank assessment of the regulation
landscape, we really need to consider: Is this the outcome we
want?
There are good reasons for private markets, and some good
outcomes result from them. For example, companies can stay
private longer if they wish and raise more and different types of
capital without going to the public markets. However, taking a
wider view, I fear we may be driving companies from the public
markets. The reasons are complex and may include factors such
as intensified reporting requirements (including investors’ growing
needs for environmental, social and governance information),
higher litigation expenses, costly regulations, cookie-cutter board
governance, shareholder activism, less compensation flexibility,
less capital flexibility, heightened public scrutiny and the relentless
pressure of quarterly earnings.
Along with the universal proxy — which makes it easier to put

poorly qualified directors on a board — the pressures to retreat
from the public market are mounting. In addition, corporate
governance principles are becoming more and more templated
and formulaic, a negative trend. For example, proxy advisors may
automatically judge directors unfavorably if they have a long
tenure on the board, without a fair assessment of their actual
contributions or experience. Another example is the constant battle
by some proxy advisors who try to split the chairman and CEO role
when there is no evidence this makes a company better off — in
fact, today, lead directors generally hold most of the authorities
previously assigned to the chairman. The governance of major
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corporations is evolving away from guidance by governance

principles that focus on a company’s relationship to long-term
economic value toward a bureaucratic compliance exercise. Good
corporate governance is critical, and a little common sense would
go a long way.
THE PRESSURE OF QUARTERLY EARNINGS COMPOUNDED

BY BAD ACCOUNTING AND BAD DECISIONS
There is something very positive about detailed and disciplined

quarterly financial and operating reporting. But company CEOs
and boards of directors should resist the undue pressure of
quarterly earnings, and it is clearly somewhat their fault when they
don’t. However, it is naïve to think that the pressure doesn’t exist
because companies that “disappoint” can face extensive criticism,
particularly those with a new or young CEO. It’s possible for
companies to take short-term actions to increase earnings, such
as selling more product cheaply at the end of a quarter, cutting
certain investments that may be terrific but can show accounting
losses in the first year or two, or just deploying more aggressive
accounting methods at times. Once shortcuts like this begin,
people all over the company understand that it is okay to “stretch”
to meet your numbers. This could put you on a treadmill to ruin.
Obviously, a company should not resort to these tactics, but it does
happen in the public markets — and it’s probably less likely in the
private markets.
THE HIJACKING OF ANNUAL SHAREHOLDER MEETINGS
One of the reasons it is less desirable to be a public company is

because of the spiraling frivolousness of the annual shareholder
meeting, which has devolved into mostly a showcase of
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grandstanding and competing special interest groups. We should

treat shareholders with tremendous respect — and we do. At
JPMorgan Chase, we are constantly talking with our investors —
our directors, our lead director and our corporate governance
experts visit most of our major investors whether they be direct
owners or asset managers who manage the money for others.
Meeting with your shareholders and investors is critical, but the
annual shareholder meeting itself has become ineffective. We
should try to come up with a far more constructive alternative.
THE UNDUE INFLUENCE OF PROXY ADVISORS
There are essentially two main proxy advisors in the United States.
One is called Institutional Shareholder Services (ISS), and the
second is called Glass Lewis. These proxy advisors started out
providing reams of data from companies to help their institutional
investor clients vote on proxy matters (information on executive
compensation, stock returns, detail on directors, policies and so
on). However, they soon also began to provide advice on how
shareholders should vote on proxy matters. And, in fact,
institutional investors generally execute their voting on an ISS or
Glass Lewis platform, which often includes a clear statement of the
advisory service’s position.
I should also point out, because it may be relevant, that ISS is

owned by Deutsche Boerse, a German company, and Glass Lewis
is owned by Peloton Capital, a Canadian private equity firm. I
question whether American corporate governance should be
determined by for-profit international institutions that may have
their own strong feelings about what constitutes good corporate
governance.
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While asset managers and institutional investors have a fiduciary

responsibility to make their own decisions, it is increasingly clear
that proxy advisors have undue influence.
Asset managers (who manage money on behalf of others) and

institutional investors (e.g., pension plans and endowments) may
rely on a variety of information sources to support their valuation
decision-making process. While data and recommendations may
form pieces of the information mosaic, their votes should ultimately
be based on an independent application of their own voting
guidelines and policies. To the extent they use recommendations
from proxy advisors in their decision-making processes, they
should disclose that they do so and should be satisfied that the
information upon which they are relying is accurate and relevant.
However, many companies would argue that this information is
frequently not balanced, not representative of the full view and not
accurate. In addition, companies complain that they often cannot
get the data corrected, and, therefore, a vote may go uncorrected.
Almost all asset managers receive proxy advisor data and

recommendations; while some asset managers vote completely
independently of this information, the majority do not. Most asset
managers have formed corporate governance or stewardship
committees that are responsible for their voting, and these
committee positions are often held not by portfolio managers and
research analysts (i.e., the people buying and analyzing the
individual securities) but by stewardship experts. While it is good
to have stewardship experts, the reality is that many of these
committees default large portions of what they do to proxy
advisors and, more troubling, make it harder for actual portfolio
managers to override this decision making.
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Some have argued that it’s too hard and too expensive to review
the large number of proxies and proxy proposals — this is both
lazy and wrong. If issues are important to a company, they should
be important to the shareholder — for the most part, only a handful
of proposals are important to companies.
We are making enhancements to J.P. Morgan Asset

Management’s proxy voting processes to amplify the role of
portfolio managers and to address the perception of asset
managers’ reliance on third-party advisor voting recommendations.
Enhancements to the firm’s internal proxy voting process will

include:
• More portfolio manager participation in proxy committee decision

making. The firm has significantly expanded the representation of
portfolio managers on its North American Proxy Committee in an
effort to increase the diversity of viewpoints represented on the
committee. As part of this change, and in recognition that portfolio
managers, as fiduciaries, may differ in their views on how to vote
on particular proposals depending on a mandate’s investment
strategy and guidelines, we are broadening our capabilities to
support voting results that may vary across our platform.
• Diminished role of proxy advisor recommendations. J.P. Morgan

Asset Management makes its own independent proxy voting
decisions (based on deep fundamental research) and stands
behind the depth and rigor of its processes and historical
information advantage. In most cases, the firm will only use proxy
advisory firms for research, data and technical mechanics of vote
transmission and not for outsourced recommendations. By the end
of 2024, J.P. Morgan Asset Management generally will have
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eliminated third-party proxy advisor voting recommendations from

its internally developed voting systems. Additionally, the firm will
work with third-party proxy voting advisors to remove their voting
recommendations from research reports they provide to J.P.
Morgan Asset Management by the 2025 proxy season.
• Other enhancements. We are working to give a company and its

management even greater access to the ultimate decision makers;
to raise critical issues to a company as early as possible in a
constructive and proactive way; and to be willing to tell companies
how we have voted once our decision is made rather than waiting
until votes are finally counted.
Taken together, these steps are designed to respond to a growing

perception (and, I believe, reality) that the asset management
industry generally places undue reliance on proxy advisors in how
proxies are voted. We believe these actions will strengthen our
relationships with our clients and with companies while helping to
build trust between shareholders, investors and companies.
THE BENEFITS AND RISKS OF PRIVATE CREDIT
I have already mentioned some of the benefits of private credit,

and I’ll now mention some more. Many people in the private credit
arena are very smart and creative and want to help the companies
they invest in navigate through market shoals. They can move
quickly, discreetly and flexibly. Most generally understand that bad
accounting drives bad decisions, and their goal is to make the right
decisions for the future of the company.
On the other hand, not all players are that good. And problems in
the private credit market caused by the bad players can leak onto
the good ones, even though private credit money is locked up for
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years. If investors feel mistreated, they will cry foul, and the
government will respond by putting a laser focus on the business.
It’s a reasonable assumption that at some point regulations will
focus on the private markets as they do on the public markets.
This scrutiny will include a look at how private credit values its
assets, which isn’t as transparent as public market valuations. In
addition, private market loans commonly lack liquidity in the
secondary market and are not generally supported by in-depth
market research.
New financial products that grow extremely rapidly often become

an area of unexpected risk in the markets. Frequently, the
weaknesses of new products, in this case private credit loans, may
only be seen and exposed in bad markets, which private credit
loans have not yet faced. When credit spreads gap out, when
interest rates go up and when some leveraged companies suffer in
the recession, we will find out how those loans survive stress
testing. In addition, they can create a little bit of a “credit
crunch” for borrowers since it might be hard for private creditors
to roll over loans under those conditions. Under stress conditions,
private creditors would have to charge exorbitant prices that
companies simply cannot afford in order to book the new loan at
par. Banks are in a slightly different position.
A BANK’S STRENGTH: PROVIDING FLEXIBLE CAPITAL
Banks generally try to be there for their borrowers in difficult times

— striving to roll over loans, renegotiate terms and raise additional
capital. Banks do this for multiple reasons: They normally feel an
obligation to help their clients, they have long-term relationships
and they can commonly earn other sources of revenue from client-
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driven transactions. Banks can also flex their capital and lending
base as needed by their clients. This is because a bank can and
should make decisions to help companies through good times and
bad, seeking to retain them as long-term clients across many
areas of the bank. They can and do take “losses” that help the
client maintain the franchise. But an asset manager must act as a
“fiduciary” of other people’s money and cannot lend based on a
moral obligation or potential future relationship.
Recently, we have been witnessing a convergence between the

public and private markets. But it’s too soon to say how this
ultimately will play out, particularly if we go through a recessionary
cycle.
Management Lessons: Thinking, Deciding and

Taking Action – Deliberately and with Heart
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I always enjoy sharing what I’ve learned from watching others,

reading and experiencing through my own journey.
BENEFITING FROM THE OODA LOOP
The military, which often operates in extreme intensity of life and

death and in the fog and uncertainty of war, uses the term “OODA
loop” (Observe, Orient, Decide, Act — repeat), a strategic process
of constant review, analysis, decision making and action. One
cannot overemphasize the importance of observation and a full
assessment — the failure to do so leads to some of the greatest
mistakes, not only in war but also in business and government.
A full assessment is critical.
To properly manage any business situation, you need to perform a

full and complete assessment of it. In business, you have to
understand your competitors, their distribution, their economics,
their innovations, and their strengths and weaknesses. You also
need to understand customers and their changing preferences,
along with your own costs, your people and their skills. Then
there’s knowing how other factors fit in, like technology, risk,
motivations … hope you get the point. For countries, you need a
thorough grasp of their economies, strengths and weaknesses,
population and education, access to raw materials, laws and
regulations, history and culture. Research, data and analytics
should be at a very detailed level and constantly reassessed. Only
after you complete this diligent study can you start to make plans
with a high degree of success.
Get on the road – it builds knowledge and culture.
I have frequently wondered about all the nonstop road trips, client
meetings, briefings, greetings, bus trips, and visits to call centers,
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operating centers and branches, regulators and government

officials, among others: Did they make a difference? The answer is
absolutely yes because they enabled a process of constant
learning, assessment and modification of best practices — gaining
insights from employees to clients to competitors. Employees will
tell you what you are doing well or poorly if you simply ask them,
and they know you want to hear the real answer. Curiosity is a
form of humility — acknowledging that you don’t know everything.
Responding to curiosity allows other people to speak freely. Facts
and details matter and inform a deeper and deeper analysis that
allows you to continually revise and update your plans. This, of
course, also means that you are constantly admitting prior
mistakes.
You need to shed sacred cows, seek out blind spots and challenge
the status quo.
Very often companies or individuals develop narratives based

upon beliefs that are very hard to dislodge but are often wrong —
and they can lead to terrible mistakes. A few examples will suffice.
Stripe, Inc. built a payments business by working with developers
— something we never would have imagined but might have
figured out if we had tried to seek out what others were doing in
this area. Branches were being closed, both at Bank One and
Chase, because the assumption was that they would not be
needed in the future. We underinvested for years in the wealth
management business because we were always focused on the
value of deposits versus investments. Question everything.
Use your brains to figure out the truth — not to justify what you
already think.
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It’s often hard to change your own attitudes and beliefs, especially
those you may have held on to for some time. But you must be
open to it. When you learn something that is different from what
you thought, it may affect many conclusions you have, not just
one. Try not to allow yourself to become rigid or “weaponized,”
where other employees or interest groups jazz you up so much
that you become a weapon on their behalf. This makes it much
harder to see things clearly for yourself. When people disagree
with you, seek out where they may be partially right. This opens
the door for a deeper understanding and avoids binary thinking.
It's hard to see certain long-term trends, but you must try.
There is too much emphasis on short-term, monthly data and too

little on long-term trends and on what might happen in the future
that would influence long-term outcomes. For example, today
there is tremendous interest in monthly inflation data, although it
seems to me that every long-term trend I see increases inflation
relative to the last 20 years. Huge fiscal spending, the trillions
needed each year for the green economy, the remilitarization of
the world and the restructuring of global trade — all are
inflationary. I’m not sure models could pick this up. And you must
use judgment if you want to evaluate impacts like these.
Also, a block of time as short as one year is an artificial framework

for judging the impact of long-term trends that could easily play out
over years. A helpful exercise is to think “future back,” in which you
imagine different future outcomes, including the ones you want,
and then work backward to events that are happening today (or
that might happen or that you cause to happen), closely examining
the connections between those events and your projected or
desired outcomes. Those connections inform your risk and R&D
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planning. Similarly, when companies compare the attributes of

their products and services with their competitors, they usually
only consider where they are versus their competitors. But nothing
is static — they should consider where their competitors will be in
the future. Conditions are always changing, crises are always
emerging. When analyzing the playing field, it is better to assume
that your competitors are strong and are already in the process of
improving and innovating. This minimizes the chance of arrogance
leading to complacency.
DECISION MAKING AND ACTING (HAVE A PROCESS)
There is a time for an individual to decide and act.
Sometimes you should take the time to measure twice and cut
once. And then sometimes making a quick decision is better than
delaying. You should try to distinguish between the two. For
example, with decisions that are hard to reverse, it’s usually better
to go slow. With other decisions where you can test, learn, probe
and change direction, it’s often better to go fast. It’s been my
experience that it’s hard for some people to actually decide and
act. This could be from analysis paralysis, lack of “perfect”
information, fear of failure or the feeling that full consensus is
needed before a decision can be reached. But whatever it is, it can
slow down and possibly seriously damage a company.
To get people to think like decision makers and take a strong point
of view, we like to ask, “What would you do if you were king or
queen for a day?” It helps shift the direction to individual decision
making. We also ask questions like, “What would you wish for if
you knew X was going to happen?” (for example, higher interest
rates). Decision making takes a mix of courage, grit and guts.
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One exercise that I find useful (and sometimes painful) is to draw

up a list of important decisions that need to be made — the ones I
often avoid confronting. So I take time every Sunday to think about
these tough issues and almost always make progress. Progress
doesn’t always mean that you come to the final conclusion —
sometimes it’s just a very rational next step that can put you on a
path to the final decision.
Try to have a good decision-making process.
Try to give yourself the time to decide. Make sure you speak with
the right people and make sure the right people are in the room.
Information should be fully shared. People should be made very
comfortable with open debate. Quite often, the “right” answer is
simply waiting to be found — you don’t have to guess.
Crowdsourcing, compromise, consensus and committees have

benefits and risks.
There are huge benefits to crowdsourcing intelligence. It is a form

of full assessment, a strategy for getting the best ideas and
challenging the status quo. We should do this for almost every
major decision. It is perfectly fine on some occasions to
compromise and gain consensus, particularly on decisions that are
not critical and can easily be reversed. Often people spend too
much time debating issues that are simply not that important; it’s
better to decide and move on. Also, before you compromise, you
should know exactly what you want to achieve and the
consequences of any tradeoffs. However, sometimes compromise
and consensus cannot work and only lead to a feel-good decision
that is probably wrong — this could be the road to ruin.
The use of committees can be good when done properly. For
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example, if our risk committees could do a full assessment and

crowdsource all potential risks, that would lead to better decision
making. I will give one very personal and painful example, which is
when we had a major trading scandal, called The London Whale.
The scandal was not caused by the complexity of the trade but
rather the failure to go to the proper Risk committee for a thorough
review, which should have happened but didn’t. I have no doubt
that had the trade been raised there, the flaws would have been
exposed immediately, thereby dramatically reducing or eliminating
the problem. On the other hand, the opposite can happen when a
committee, with everyone staring at each other, devolves into
herd-like behavior with people looking for confirmation and ending
up with a compromise that is a poor choice.
Good leadership involves great observation and the ability to act,

but there is more …
THE SECRET SAUCE OF LEADERSHIP (HAVE A HEART)
You need to earn trust and respect with your employees.
You can be great at assessment, you can be brilliant and you may
often be willing to act. But all of that is not good enough for
“complete” leadership. To become a true leader, you need to be
trusted and you must earn your respect, every day. People have to
know that you do not have ulterior motives and that you’re trying to
do the right thing — not trying to burnish your personal reputation.
Good people want to work for people they respect, and they will
not respect people who take all the credit and share all the blame.
People need to know that even when you make mistakes, you’re
willing to admit them and take corrective action. And there is more
…
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The importance of vision, communication and inspiration.
The reason I’ve always hesitated to talk about “vision” is because

often it is the basic BS of corporate speak — that somehow if you
impart your vision to people, they will take the mountain. What it
really is all about is this: After you’ve done your full assessment
and decision making, you can then continuously educate, explain,
train, simplify, propel and fight. But this only works if people know
you are in the trenches with them, if they understand the mission
and if they are there side by side with your effort.
We know that bureaucracy can lead to politics, corporate stasis

and terrible decisions. So you can communicate your vision about
how to fight bureaucracy by telling stories about the silly things we
do — but with a smile — and then by showing people that you will
actually fix the problems.
Finally, your vision needs to be clear, coherent and consistent.

Within an organization, people very quickly pick up the pattern of
management saying one thing but doing another. Because if words
and actions are inconsistent (for example, and I could give many,
when we say we want employees to be treated with respect, but
we allow a jerk to be their boss), confidence in leadership will be
eroded.
Heart cannot be overstated.
Heart matters. And it makes a difference when people know and

see that you actually care. One example: Many years ago when I
was new to JPMorgan Chase, I learned that the company’s
security guards had been outsourced — to save money. Since
after outsourcing, when the same guards continued coming to
work every day at the same salary, I wondered, “How could this
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be?” (FYI, this was brought to my attention by the head of the

Service Employees International Union, who came to see me over
the objection of my management team.) The reason we were
saving money is because the healthcare benefits were cut in half
for the guards and their family members (currently worth
approximately $15,000 a year), and the savings were split with us.
This was a heartless thing to do — and the second I found out, I
reversed the decision. JPMorgan Chase’s success will not be built
off the backs of our guards — it will be the result of fair treatment
of all of our employees — and we’re thankful that many of those
guards are still with our company today.
You know heart and soul when you see it in effect on sports teams
or with “the boys in the boat” — it’s a beautiful thing to watch. It’s
not as obvious, but it happens in business, too.
It’s essential to build trust with your customers, constituencies and,

yes, even competitors.
Of course, I’m not bringing this up as a matter of corporate

governance or a corporation’s purpose: A business should, over
the long run, try to maximize shareholder value. It is completely
obvious that running a decent business —treating everyone
ethically and earning trust and respect in all your communities —
is not only fundamental to shareholder value but also to a healthy
society.
A Pivotal Moment for America and the Free Western

World: Strategy and Policy Matter
In past years, I have written extensively about public policy issues.

It is important to engage in these conversations, particularly
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around domestic economic policy because policy matters. While

JPMorgan Chase can execute specific plans to improve outcomes
for customers and communities, there is no replacement for
effective government policies that add to the general well-being of
the country. A stronger and more prosperous country will make us
a stronger company.
As CEO of this company, every year I visit numerous countries

around the globe. I meet with foreign government leaders,
presidents and prime ministers, business leaders, and civic and
academic experts, which allows me to learn a significant amount
about how public policy is executed around the world. It also
reinforces some of the critical values and virtues that are essential
to a healthy country.
Every time I see the American flag, it reminds me of the values

and virtues of this country and its founding principles conceived in
liberty and dedicated to the notion that all men and women are
created equal. Talk with someone who has recently become a
naturalized citizen or watch a ceremony where groups of people
take the oath to America, and you will see extraordinary joy and
newfound pride. They now live free, with individual rights protected
by the Constitution and with their life and the well-being of their
family and community protected by the U.S. military. As
Americans, we have much to be grateful for and much to defend.
If you read the newspaper from virtually any day of any year since
World War II, there is abundant coverage on wars — hot and cold
— inflation, recession, polarized politics, terrorist attacks, migration
and starvation. As appalling as these events have been, the world
was generally on a path to becoming stronger and safer. When
terrible events happen, we tend to overestimate the effect they will
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have on the global economy. Recent events, however, may very

well be creating risks that could eclipse anything since World War
II — we should not take them lightly.
February 24, 2022 is another day in history that will live in infamy.
On that day, 190,000 Russian soldiers invaded a free and
democratic European country — importantly, somewhat protected
by the threat of nuclear blackmail. Russia’s invasion of Ukraine
and the subsequent abhorrent attack on Israel and ongoing
violence in the Middle East should have punctured many
assumptions about the direction of future safety and security,
bringing us to this pivotal time in history. America and the free
Western world can no longer maintain a false sense of security
based on the illusion that dictatorships and oppressive nations
won’t use their economic and military powers to advance their
aims — particularly against what they perceive as weak,
incompetent and disorganized Western democracies. In a troubled
world, we are reminded that national security is and always will be
paramount, even if its importance seems to recede in tranquil
times.
The fallout from these events should also lay to rest the idea that
America can stand alone. Of course, U.S. leaders must always put
America first, but global peace and order are vital to American
interests. Only America has the full capability to lead and coalesce
the Western world, though we must do so respectfully and in
partnership with our allies. Without cohesiveness and unity with
our allies, autocratic forces will divide and conquer the bickering
democracies. America needs to lead with its strengths — not only
its military but also its economic, diplomatic and moral forces. And
now we must do so as America’s leadership is being challenged
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around the world. There is nothing more important.
Policy and strategy matter, and it’s important to be engaged.
In our increasingly complex world, there is a vital interrelationship

between domestic and foreign economic policy, particularly around
trade, investment, national security and other issues. And, of
course, while American voters and leadership set U.S. foreign
policy, being a constructive part of the global conversation has
become more important than ever.
If you doubt how important public policy is for the health of a

country, you need to look no further than the recent history of
Greece, Ireland or Singapore. Each of these countries, starting
from deeply challenging places, implemented effective government
and policies that have done a great job of lifting up their people
when many thought it wasn’t possible. Sweden is another great
example of a country with good broad-based policies that have
succeeded at precisely what we all may want — a dynamic,
innovative, free-market economy (Sweden actually has fewer
government-owned enterprises than America) and safety nets that
work. Conversely, you need to look no further than North Korea or
Venezuela to see the complete destruction and havoc that terrible
public policies (often in the name of the people) can cultivate.
Strategy by its nature must be comprehensive. In the rest of this

section, I try to answer the question: What must we do to ensure
that the world stays safe, not only for America but for freedom and
democracy? A comprehensive strategy entails four important
pillars, and we must succeed at each:
1. Maintain American leadership (including military).
2. Achieve long-term economic success with our allies.
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3. Strengthen our nation domestically.
4. Deepen focus and resolve on addressing our most pressing

challenges.
COALESCING THE WESTERN WORLD — A UNIQUELY

AMERICAN TASK
Only America has the full capabilities of military might, economic

power and the principles that most people around the world yearn
for — based on “liberty and justice for all” and the proposition that
all people are created equal. America remains the bastion of
freedom and the arsenal of democracy.
There is no alternative to American leadership.
In the free and democratic Western world, and, in fact, for many
other countries, there is no real or good alternative to America.
The only other potential superpower is China. Other nations know
they can rely on the founding principles of America. If we reach out
our hand, most nations will happily take that hand. America is still
the most prosperous nation on the planet, which not only can
guarantee our military strength but also positions us to help our
allies develop and grow their nations (though we should minimize
the “our way or the highway” type of behavior). This leadership is
needed today to help Ukraine stay free in its battle with Russia.
Most of the world wants American leadership.
America continues to be the envy of much of the world, and as

we’ve seen with the challenges at our borders, there is a reason
people want to come here and not to autocratic nations. If you
opened America’s borders to the rest of the world, I have little
doubt that hundreds of millions of people would want to move
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here. By contrast, not many would want to emigrate to autocratic

nations. Also, I have little doubt that if most investors across the
globe could only invest in one country, they would choose the
United States. Beyond our country’s borders, people and nations
around the world understand the role that America has played in
promoting world peace — known as Pax Americana. For the most
part, Pax Americana has kept the world relatively peaceful since
World War II and helped lead to enormous global economic
prosperity, which has helped lift 1.3 billion people out of poverty.
Modern America does not engage in economic coercion or foreign

wars to steal land or treasure. The fact that some of our foreign
excursions might have been misguided does not negate this. We
helped rebuild Europe and Japan after the devastation of World
War II, and we, with our allies, have helped create global
institutions to maintain peace. We are still trusted.
First and foremost, the Western world needs unquestioned military

might — peace through strength.
“We know only too well that war comes not when the forces of
freedom are strong, but when they are weak,” said Ronald Reagan
in 1980.
So far, the Western world has done a good job in strengthening

military alliances in response to the war in Ukraine. Ukraine is
essentially the front line that needs immediate support. Providing
that support is the best way to counter autocratic forces that would
seek to weaken the Western world, particularly America. But the
ongoing wars in Ukraine and the Middle East could become far
worse and spread in unpredictable ways. Most important, the
specter of nuclear weapons — probably still the greatest threat to
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mankind — hovers as the ultimate decider, which should strike

deep fear in all our hearts. The best protection starts with an
unyielding resolve to do whatever we need to do to maintain the
strongest military on the planet — a commitment that is well within
our economic capability.
American leadership requires not only the military but also the full
“symphony of power.”
Former Secretary of Defense Robert Gates, in his book Exercise

of Power, writes extensively in the first chapter about “the
symphony of power.” He makes the critical point that America has
often overused and misused military power and has massively
underused other muscles — diplomacy, intelligence,
communication (explaining to the world the benefits of democracy
and free enterprise) and comprehensive economic policy.
America has the most extensive group of partners, friends and

allies — both military and economic — that the world has probably
ever seen. We should put this to better use.
The American public ought to hear more about why this is so

important.
International isolationism has run through American foreign policy

throughout our history, frequently with good reason. The chant,
“Don’t get involved in foreign wars” was often right. That said, the
American public should remember that even after the
Revolutionary War, we did, in fact, have British and French armies
on our soil. The sinking of American merchant and passenger
ships during World War I and the surprise attack on Pearl Harbor
in World War II brought isolationism to a close for a time. America
is never far from being dragged into terrible conflicts. Global wars
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come to our shores whether we like it or not — we need to stay

engaged.
In perilous periods of history when our allies and other

democracies were under serious assault, great American leaders
have inspired the American people — through words and actions
— to stand up to help and defend them. Staying on the sidelines
during battles of autocracy and democracy, between dictatorship
and freedom, is simply not an option for America today. Ukraine is
the front line of democracy. If the war goes badly for Ukraine, you
may see the splintering of Pax Americana, which would be a
disaster for the whole free world. Ukraine’s struggle is our struggle,
and ensuring their victory is ensuring America first. It is imperative
that our national leaders explain to the American people what is at
stake and make a powerful case – with energy, consistency and
clarity – for our strong enduring commitment to Ukraine’s survival
for as long as it takes (and it could take years).
One last point: Ukraine needs our help immediately, but it’s
important to understand that much of the money that America is
directing to Ukraine is for purchasing weapons and equipment,
most of which will be built in America. Not only is our aid helping
Ukraine, but it is going directly to American manufacturers, and it
is helping the country rebuild our military industrial capacity for the
next generation.
STRENGTHENING OUR POSITION WITH A COMPREHENSIVE,

GLOBAL ECONOMIC SECURITY STRATEGY
Sustaining America’s economic strength is a bedrock for our long-

term military strength. There are many things we need to do to
strengthen the U.S. economy, and I talk about that later in this
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section. This discussion is about foreign economic policies – the

economic battlefield.
The whole Western world is rethinking and reimagining its military

strategies and alliances. We need to do the same for our economic
strategies and alliances, but we should be guided by a
comprehensive global strategy that deals with critical issues. Done
properly, such a strategy would help strengthen, coalesce and
possibly be the glue that holds together Western democratic
alliances over decades.
Foreign economic policy involves trade and investment, export

controls, secure and resilient supply chains, and the execution of
sanctions and any related industrial policies. It must also include
development finance — think of the “Belt and Road” efforts in
China — which are critical to most developing nations. This
framework should tell us not only how to deal with our allies but
also how to work with nonaligned nations around the world. These
strategies should not be aimed against any one country (such as
China) but rather be focused on keeping the world safe for
democracy and free enterprise.
Economic national security is paramount — both for the United

States and for our allies.
It is a valid point that the Western world — both government and

business — essentially underestimated the growing strength and
potential threat of China. It’s also true that China has been
comprehensively and strategically focused on these economic
issues, all while we slept. But let’s not cry over spilled milk — let’s
just fix it.
We missed the potential threat from three vantage points. The first
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is companies’ overreliance on China as the sole link in their supply

chain, which can create vulnerabilities and reduces resiliency. But
to the extent this involves everyday items, like clothes, sneakers,
vaccine compounds and consumer goods, this dependency is not
as critical or complex and will eventually be sorted out.
The second is the most critical. The United States cannot rely on
any potential adversaries for materials essential to our national
security — think rare earths, 5G and semiconductors, penicillin
and materials critical to essential pharmaceuticals, among others.
We also cannot be sharing vital technologies that can enhance an
adversary’s military capabilities. The United States should properly
and narrowly define these issues and then act unilaterally, if
necessary, to fix them.
The third is also complex, which is countering unfair competition or

“mercantilist” behavior in critical industries; think electric vehicles,
renewable energy and AI, among others. Examples of this would
be where a state, any state, uses government powers, capital,
subsidies or other means to dominate critical industries and deeply
damage the economic position of other nations. Weakening a
country economically can render it a virtual “vassal state,” reliant
on potential adversaries for essential goods and services, which
also weakens it militarily. We cannot cede our important resources
and capabilities to potential adversaries.
All these issues can be resolved, though they will take time and
need devoted effort.
Every nation will have different national security issues. For

example, Europe in general and countries like India, Japan and
Korea need reliable, affordable and secure energy; many nations
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would put food security as their top concern. This means that we
must work with our allies to accomplish our own goals and to help
them accomplish theirs. We have extraordinary common interests
in our joint security: We must hang together — because if we
don’t, we will assuredly hang separately.
We already engage in trade — improving it is good economics and

great geopolitics.
We must have a better understanding of trade. As a nation, we

refuse to get into genuine trade discussions, but this ignores the
complete and obvious truth — we already have trade relationships
with all these countries. Approximately 92% of the world’s
consumers live outside the United States. Increased trade allows
our workers and farmers to access those markets. We should
negotiate trade agreements that can achieve more, economically,
for ourselves and our allies, as well as meet all of our national
security needs. While it is appropriate to use trade to continue to
nudge allies in the right direction around human rights and climate,
this objective should be subordinated to our national interests of
long-term security.
Negotiating must be done in concert with our allied nations so as

not to cause a fissure in economic relations. This is critical —
strong economic bonds will help ensure strong military alliances.
The Inflation Reduction Act has much good in it (more on this
later), but it angered many of our allies. To them, the bill was by
America and for America, and, subsequently, they felt a need to
match it so their businesses would not be disadvantaged. The
terms of the legislation could have been better negotiated with our
allies in mind, strengthening our economic ties with the free world.
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We should also immediately re-enter, if possible, the prior

negotiated Trans-Pacific Partnership agreement. Not only is it
good for the economy, but it also could be a brilliant, strategic,
economic security move — an economic alliance that binds us
with 11 other important countries (including Australia, Chile, Japan,
Malaysia, Mexico, Singapore and Vietnam). Geopolitically and
strategically, this might be one of the most important moves to
counter China. While this is a challenging step, our political
leaders need to explain and lead — and not be afraid of dealing
with the tough issues. We also need to acknowledge that there
have been real negative job impacts as a result of trade, which are
usually concentrated around certain areas and businesses. So any
new trade policy should be combined with a greatly enhanced
Trade Adjustment Assistance program, which provides retraining,
income assistance and relocation for those workers directly
impacted by trade.
Trade is realpolitik, and the recent cancellation of future liquified

natural gas (LNG) projects is a good example of this fact. The
projects were delayed mainly for political reasons — to pacify
those who believe that gas is bad and that oil and gas projects
should simply be stopped. This is not only wrong but also
enormously naïve. One of the best ways to reduce CO2 for the
next few decades is to use gas to replace coal. When oil and gas
prices skyrocketed last winter, nations around the world — wealthy
and very climate-conscious nations like France, Germany and the
Netherlands, as well as lower-income nations like Indonesia, the
Philippines and Vietnam that could not afford the higher cost —
started to turn back to their coal plants. This highlights the
importance of safe, secure and affordable energy. Second, the
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export of LNG is a great economic boon for the United States. But
most important is the realpolitik goal: Our allied nations that need
secure and affordable energy resources, including critical nations
like Japan, Korea and most of our European allies, would like to be
able to depend on the United States for energy. This now puts
them in a difficult position — they may have to look elsewhere for
such supplies, tuning to Iran, Qatar, the United Arab Emirates or
maybe even Russia. We need to minimize anything that can tear
at our economic bonds with our allies.
The strength of our domestic production of energy gives us a

“power advantage” — cheaper and more reliable energy, which
creates economic and geopolitical advantages.
Industrial policy is now necessary, but it should be carefully

constructed and limited.
In some cases, industrial policy (using government resources to

subsidize investments to help make businesses more competitive)
may be the only solution for quickly building up the industries we
need (rare earths and semiconductors, among others) to
guarantee resilient national security. The IRA and CHIPS Act are
good examples of this and government has to get it right.
Such policy can also be used to help combat unfair competitive

policies of nations that are using state capitalism and state control
to dominate critical industries. However, when crafting industrial
policy, the function of government needs to be narrowly defined
and kept simple; i.e., governmental jurisdiction should be limited to
very specific products and probably to what we know works, such
as tax credits and, to a lesser extent, loan guarantees. And
industrial policy should include twin provisions: 1) strict limitations
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on political interference, like social policies, and 2) specific

permitting requirements, which, if not drastically improved, will
badly inhibit our ability to make investments and allow
infrastructure to be built. Adding social policy, politics and matters
other than simple tax credits dramatically reduces the economic
efficiency of industrial policy and creates conditions for corporate
America to feed at the trough of government largess. We should
quickly address how we can improve on already executed
legislation. We do not want to look back and have great regrets
about how so much of this policy work failed.
There are those who argue that the U.S. government needs much
more far-reaching industrial policy to be able to micromanage and
accomplish its many ambitious objectives. To those I say, read the
next section about how ineffective so many government policies
have been.
We should be tough, but we should engage with China.
Over the last 20 years, China has been executing a more

comprehensive economic strategy than we have. The country’s
leaders have successfully grown their nation and, depending on
how you measure it, have the first or second largest economy in
the world. That said, many question the current economic focus of
China’s leadership as they don’t have everything figured out. While
China has become the largest trading partner to many countries
around the world, its own GDP per person is $13,000. And the
country continues to be beset by many economic and domestic
issues.
China has its own national security concerns. The country is

located in a very politically complex part of the world, and many of
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China’s actions have caused its neighbors (e.g., Japan, Korea,

Philippines, among others) to start to re-arm and, in fact, draw
closer to the United States. It also surprises many Americans to
hear that while our country is 100% energy sufficient, China needs
to import 10 million barrels of oil a day. It is clear that China’s new
leadership has set a different course, with a much more intense
focus on national security, military capability and internal
development. That is their right, and we simply need to adjust to it.
America still has an enormously strong hand — plenty of food,

water and energy; peaceful neighbors; and what remains the most
prosperous and dynamic economy the world has ever seen, with a
per person GDP of over $80,000 a year. Most important, our
nation is blessed with the benefit of true freedom and liberty. See
the sidebar on the amazing power of freedom later in this section.
While we may always have a complex relationship with China

(made all the more complicated and serious by ongoing wars), the
country’s vast size and importance to so many other nations
requires us to stay engaged — thoughtfully and without fear. At the
same time, we need to build and execute our own long-term,
comprehensive economic security strategy to keep our position
safe and secure. I believe that respectful, strong and consistent
engagement would be best for both our countries and the rest of
the world.
We need to strengthen and rebuild the international order — we

may need a new Bretton Woods.
The international rules-based order established by the Western

world after World War II is clearly under attack by outside forces,
somewhat weakened by its own failures and inability to keep up
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with the increasingly complex world. This international order relies

on a web of military alliances, trade agreements (e.g., World Trade
Organization), development finance (e.g., International Monetary
Fund and the World Bank) and related global tax and investment
policies and diplomacy organizations (e.g., United Nations), which
have evolved into a confusing and overlapping regime of policies.
You can now add to it the new issues of cyber warfare, digital trade
and privacy, and global taxes, among others.
It might be a good idea to convene a group of like-minded leaders

to build and improve upon what already exists. The time may be
right for a reimagined Bretton Woods — and by this, I mean
revitalizing our global architecture. Since too many parts of the
world have been neglected, any new system has to take into
account and properly address the needs of all nations, including
areas of concentrated poverty.
While we hope the wars in Ukraine and in the Middle East will end
eventually (and, we hope, successfully from the standpoint of our
allies), these other critical economic battles could possibly
continue throughout our lifetime. If the Western world is slowly split
apart over the next few decades, it will likely be the result of our
failure to effectively address crucial global economic challenges.
PROVIDING STRONG LEADERSHIP GLOBALLY AND

EFFECTIVE POLICY MAKING DOMESTICALLY
When you travel around the United States and talk with people of
all types and persuasions, there is a rather common refrain;
namely, why are we helping foreign nations with the safety of their
borders and economies when we are not doing a particularly good
job of protecting our own? While there is no moral equivalency in
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these arguments, they are understandable. It is clear that many

Americans feel we need to do a better job here at home before we
can focus over there. We can understand why some people living
in this country, who have been neglected for decades, ask how
their government can find the money for Ukraine and other parts of
the world but not for them. It is a reasonable question.
From my point of view, our highly charged, emotional and political

domestic issues are centered around 1) immigration and lack of
border security and 2) the fraying of the American dream,
particularly for low-income and rural Americans who feel left
behind amid the growing wealth and prosperity of others around
them. Please read the sidebar below, which I believe explains the
legitimate frustration of some of our citizens. And I agree with
them.
In the sidebar, I also explain how two policies (a large expansion of

the Earned Income Tax Credit and focus on work skills and job
outcomes at high schools, community colleges and colleges)
would not only dramatically increase both the income and
employment opportunities for many of those left behind but would
also have the virtue of actually growing the workforce. The
combined effect of all of this would be quite a boon to our GDP.
I believe that many affected Americans are not angry at

hardworking, law-abiding immigrants and, in fact, acknowledge the
critical role immigrants continue to play in building this wonderful
country. Rather, they are angry that America has not implemented
proper border control and immigration policies. It is astounding that
many in Congress know what to do and want to do it but are
simply unable to pass legislation because of partisan politics.
Congress did come close on a few occasions — and I hope they
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keep trying.
Deliberate policies meant to drive healthy growth are needed.
For over two decades, since 2000, America has grown at an

anemic rate of 2%. We should have strived for and achieved 3%
growth. Had we done so, GDP per person today would be $16,000
higher, which would, in turn, have paid for better healthcare,
childcare, education and other services. Importantly, the best way
to handle our excess deficit and debt issues is to maximize
economic growth.
Growth policies include (the list could be very long so I’ll just
mention a few):
• Consistent tax policies, conducive to both employment and capital

investment. Capital investment is the primary driver of innovation,
productivity and, therefore, growth in America. Tax policies change
too frequently, which causes uncertainty and complicates long-
term capital investment decision making (I won’t bore you with the
details here). A bipartisan committee of Congress is probably
required to fix this — and the sooner the better.
• Well-conceived regulations (and related laws). This requires an

ongoing concerted effort to streamline regulations to cost-
effectively drive better outcomes for the United States. The last
thing we need is a constant pile-on of politically driven, fragmented
policies. Please read the sidebar, an editorial in The Wall Street
Journal by George McGovern, one of the most liberal presidential
nominees in our lifetime, in which he clearly lays out the
complexity, risks and costs that businesses, large and small, face
every day. While he acknowledges the worthiness of the goals of
many regulations, he points out their negatives. He also calls out
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the “blame-shifting and scapegoating and the endless exposure to

frivolous claims and high legal fees.” Not only is this state of affairs
demoralizing, but it also reduces employment, capital investment
and the formation of new businesses, as well as cause
unnecessary bankruptcies. Estimates of the regulatory costs for
America are approximately $19,000 per worker, dwarfing the
regulatory burdens in other countries. We all want sensible
regulations that make us a better and safer nation – but this
number is astounding. We should be able to accomplish our goals
while sharply reducing needless and wasteful expenses. And
remember, it’s discouraging not only to companies but to all
citizens who have to deal with it on a daily basis.
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• View Text Version

WALL STREET JOURNAL
June 1, 1992
(Copyright © I992, Dow Jones & Co., Inc.)
Manager's Journal: A Politician's Dream Is a Businessman's

Nightmare
By George McGovern
Wisdom too often never comes, and so one ought not to reject it
merely because it comes late.
— Justice Felix Frankfurter
It's been 11 years since I left the U.S. Senate, after serving 24
years in high public office. After leaving a career in politics, I
devoted much of my time to public lectures that took me into every
state in the union and much of Europe, Asia, the Middle East and
Latin America.
In 1988, I invested most of the earnings from this lecture circuit

acquiring the leasehold on Connecticut's Stratford Inn. Hotels, inns
and restaurants have always held a special fascination for me. The
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Stratford Inn promised the realization of a longtime dream to own a

combination hotel, restaurant and public conference facility —
complete with an experienced manager and staff.
In retrospect, I wish I had known more about the hazards and

difficulties of such a business, especially during a recession of the
kind that hit New England just as I was acquiring the inn's 43-year
leasehold. I also wish that during the years I was in public office, I
had had this firsthand experience about the difficulties business
people face every day. That knowledge would have made me a
better U.S. senator and a more understanding presidential
contender.
Today we are much closer to a general acknowledgment that

government must encourage business to expand and grow. Bill
Clinton, Paul Tsongas, Bob Kerrey and others have, I believe,
changed the debate of our party. We intuitively know that to create
job opportunities we need entrepreneurs who will risk their capital
against an expected payoff. Too often, however, public policy does
not consider whether we are choking off those opportunities.
My own business perspective has been limited to that small hotel

and restaurant in Stratford, Conn., with an especially difficult lease
and a severe recession. But my business associates and I also
lived with federal, state and local rules that were all passed with
the objective of helping employees, protecting the environment,
raising tax dollars for schools, protecting our customers from fire
hazards, etc. While I never have doubted the worthiness of any of
these goals, the concept that most often eludes legislators is: "Can
we make consumers pay the higher prices for the increased
operating costs that accompany public regulation and government
reporting requirements with reams of red tape." It is a simple
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concern that is nonetheless often ignored by legislators.
For example, the papers today are filled with stories about
businesses dropping health coverage for employees. We provided
a substantial package for our staff at the Stratford Inn. However,
were we operating today, those costs would exceed $150,000 a
year for health care on top of salaries and other benefits. There
would have been no reasonable way for us to absorb or pass on
these costs.
Some of the escalation in the cost of health care is attributed to

patients suing doctors. While one cannot assess the merit of all
these claims, I've also witnessed firsthand the explosion in blame-
shifting and scapegoating for every negative experience in life.
Today, despite bankruptcy, we are still dealing with litigation from

individuals who fell in or near our restaurant. Despite these
injuries, not every misstep is the fault of someone else. Not every
such incident should be viewed as a lawsuit instead of an
unfortunate accident. And while the business owner may prevail in
the end, the endless exposure to frivolous claims and high legal
fees is frightening.
Our Connecticut hotel, along with many others, went bankrupt for
a variety of reasons, the general economy in the Northeast being a
significant cause. But that reason masks the variety of other
challenges we faced that drive operating costs and financing
charges beyond what a small business can handle.
It is clear that some businesses have products that can be priced

at almost any level. The price of raw materials (e.g., steel and
glass) and life-saving drugs and medical care are not easily
substituted by consumers. It is only competition or antitrust that
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tempers price increases. Consumers may delay purchases, but

they have little choice when faced with higher prices.
In services, however, consumers do have a choice when faced

with higher prices. You may have to stay in a hotel while on
vacation, but you can stay fewer days. You can eat in restaurants
fewer times per month, or forgo a number of services from car
washes to shoeshines. Every such decision eventually results in
job losses for someone. And often these are the people without
the skills to help themselves — the people I've spent a lifetime
trying to help.
In short, "one-size-fits-all" rules for business ignore the reality of

the marketplace. And setting thresholds for regulatory guidelines
at artificial levels — e.g., 50 employees or more, $500,000 in sales
— takes no account of other realities, such as profit margins, labor
intensive vs. capital intensive businesses, and local market
economics.
The problem we face as legislators is: Where do we set the bar so

that it is not too high to clear? I don't have the answer. I do know
that we need to start raising these questions more often.
---
Mr. McGovern. the 1972 Democratic presidential candidate, is

president of the Middle-Eastern Policy Council in Washington.
(See related letters: "Letters to the Editor: A Politician's Dream Is a

Businessman's Nightmare" •· WSJ July 2, 1922)
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520-4331 P.O. BOX 300 PRINCETON, NJ 08543-0300. DO NOT EDIT OR
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• Timely permits on projects large and small. There is virtually no

industry — from agriculture and construction to transportation,
technology, and oil and gas — or business, large or small, that isn’t
disadvantaged by the tedious process and the length of time it
takes to get approvals for permits to get things done. This includes
federal, state and local requirements. These bottlenecks also
make investment far more costly and slow. Timely permits would
improve infrastructure and save lives, not endanger them.
• Proper federal government budgeting and fiscal management. The

staggering inability of the government to draft and pass a proper
budget causes deep and unnecessary damage to our growth.
Some people estimate that the waste alone (due to improper
payments, overlapping programs, and fragmented and duplicative
contracts, among other things) could cost the nation hundreds of
billions of dollars annually. This uncertainty filters through virtually
every part of the American economy and should not be accepted.
We can all forgo a little self-interest to do what is right for our

country.
Those of us who have benefited the most from this country bear
even greater responsibility to do this. It’s perfectly understandable
that institutions, including businesses, unions and industries, lobby
in Washington, D.C., to protect themselves — in good ways and
bad — but we should more regularly put national interests ahead
of self-interests. It’s good to want to ensure well-paying jobs and
healthy industries. But it is not good when it reduces competition,
stops the deployment of enhanced technology, harms efficiency,
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creates fake jobs or builds bridges to nowhere or damages the

general health of the economy. Doing the right thing, the right way
– which is achievable – would be better for everyone. As former
President John F. Kennedy said, “Ask not what your country can
do for you — ask what you can do for your country.”
Celebrate American exceptionalism.
We can safely say that America is an exceptional nation built and

grounded on principles — principles of freedom of speech,
freedom of religion, free enterprise (capitalism), and the freedom
and empowerment brought to us by our democracy through the
power to elect our leaders and of our Constitution, which makes
these individual freedoms sacrosanct. Much of the world yearns to
be here because of those principles — the right to life, liberty and
the pursuit of happiness. We should extol those virtues while
recognizing that America has never been a perfect nation, like all
other nations. We can acknowledge our flaws and strive to
constantly correct them, without denigrating our nation.
Let’s celebrate the shared sense of sacrifice that gives us all

strength.
There were very few positives from the pandemic, but I’m
mentioning one, which, unfortunately, didn’t last, but reflected the
best of us. In New York City, at 7 p.m. every evening, people
throughout the city would open their windows, shouting and
screaming and banging pots and pans to show gratitude to the
essential workers — sanitation workers, police, firefighters,
emergency responders, nurses and doctors. Of course, these
workers were always essential, but I was hoping that spirit and
civility would become deeply embedded and have longer lasting
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effects in our society.
I can understand when an individual for conscientious reasons

chooses not to do work that helps our military. But I cannot
understand when an entire company takes that position. How can
we have a sense of shared sacrifice, when America is home to 18
million veterans who were willing to risk their lives for America’s
safety, and yet some companies are not even willing to use their
fingertips to help?
For example, back in 1969 the cancellation of the Reserve

Officers’ Training Corps programs by the country’s most
prestigious universities and colleges likely fueled the great divide –
between elites and others in our country – that persists today. Our
strength as a nation is best served when the best students and the
best soldiers are brought together and we would all benefit from
more civility and better teaching around basic virtues like hard
work, shared sacrifice, justice, rationality and more respect for the
enduring values of American freedom and free enterprise.
Resist being “weaponized.”
We can start by trying to understand other people’s and other

voters’ points of views, even around deeply emotional topics. We
can stop insulting whole classes of voters. We can stop name
calling. We can stop blame-shifting and scapegoating. We can
stop being petty. Politicians can cease insulting, baiting and
belittling each other, which diminishes them and the voter. It has
also become too acceptable for some politicians to say one thing
in private and deliver a completely different message in public. It
would also be nice to see some cabinet members from the
opposing party. We should also stop degrading and demonizing
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American business and American institutions, which are the best

in the world, because it erodes confidence in our very country.
Social media could do more.
There is no question that social media has some real negative

effects, from the manipulation of elections to the increasingly
documented negative effects on the mental health of children.
These are issues impacting our individual and collective spheres,
and it’s time for social media companies to take more action to
remedy these challenges — and swiftly. Rapid advances in
technology will not only make these existing issues harder to
address, but they will likely create new ones. The current state of
the online information landscape has wide-ranging implications on
trust in institutions, information integrity and more — and it bears
on institutions like ours, where platform policy has increasingly
widespread implications for concerns about fraud, security and
other issue spaces.
A range of tools and approaches is required to address this

complex and important situation — and there are several
measures that platform companies can immediately enact,
voluntarily, while strengthening and improving their business
models. One common sense and modest step would be for social
media companies to further empower platform users’ control over
what they see and how it is presented, leveraging existing tools
and features — like the alternative feed algorithm settings some
offer today. I believe many users (not just parents) would
appreciate a greater ability to more carefully curate their feeds; for
example, prioritizing educational content for their children.
Platforms could also consider enhanced authentication measures;
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i.e., having users identify themselves to the platform or to a trusted

third party. This would have the virtue of increasing individual
accountability and reducing imposters, bots and possibly foreign
political actors on platforms. It would have immediate benefits for
users who prefer content from authenticated sources that take
responsibility for their postings. There are clear competing values
that need to be balanced in such an approach, including those
related to our cherished right to free speech, individual privacy and
inclusion (for example, roughly 850 million people globally don’t
have a way to easily authenticate themselves today). There are
also legitimate questions as to whether authentication would be
used as a tool to chill or block speech or quash bona fide political
dissenters, and real work needs to be done to identify policy and
technical solutions that balance such risks and benefits.
I offer these approaches as a starting place, understanding that it's

crucial to continue honest conversation across sectors about the
immediate, incremental improvements we can make to our online
public square, considering the high stakes involved in how
information is created and shared.
Effective measures will require time, money, learning and

improvement, all in service of significantly enhancing the well-
being, quality, and civility of our experiences online and in the
world around us.
Healthy collaboration with business is needed.
Companies big and small create jobs, pay for employee healthcare
and benefits, and build bridges, roads and hospitals. The people
who work for and run these companies care deeply about their
country — they are patriots, and they want to see people and
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communities succeed and prosper.
Unfortunately, the message America hears is that the federal

government does not value business — that business is the
problem and not part of the solution. There are fewer individuals in
government who have any significant experience in starting or
running a company, which is apparent every day in the political
rhetoric that demonizes businesses and free enterprise and that
damages confidence in American’s institutions. The relationship
between business and government, in fact, might improve if there
were more people from the business sector working in
government. Inexperience with business is also evident from the
regular lack of transparency or curiosity from regulators as they
develop economic policies with potentially seismic consequences
for the economy.
When I travel around the country, I experience a very different

perspective on the street and at the local level — I see that many
governors, mayors and city council members understand they are
not facing big challenges alone. They stand shoulder to shoulder
with our company, even when some of their constituents disagree
or are skeptical about big banks. These government officials know
they need partners who have the same stake in helping successful
communities thrive and who care about building a prosperous
future as much as they do. For example, in fewer than 10 years,
Detroit saw one of the greatest turnarounds because of a vibrant
collaboration between government and business. And businesses
know they cannot succeed if individuals, families, towns and cities
are not flourishing. We obviously don’t agree on everything, but
there is a shared belief that we must work together. We can and
should be full partners in developing solutions to our big problems.
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The federal government, regardless of which party is in charge,

needs to earn back trust through competence and effective
policymaking.
The world is becoming more complex, more technologically

competent and faster. Unfortunately the government simply is not
built to innovate, compete and move quickly, as in the competitive
business world. This may be the reason why government is
becoming less effective. We need to take action on this because
the loss of trust in government is damaging to society. We should
be brutally honest about the staggering number of policies,
systems and operations that are underperforming: Too many
ineffective public schools do not give students the skills they need
to land a well-paying job; we have over 25 million uninsured
Americans, soaring healthcare costs and too many bad outcomes;
we are unable to plan, permit and build infrastructure efficiently;
our litigation system is capricious and wasteful; progress on
immigration policies and reform is frustrating; lack of efficient
mortgage markets and an affordable housing policy keep housing
out of reach for many Americans; problems plague the Department
of Veterans Affairs, the Federal Aviation Administration and the
Internal Revenue Service; public universities don’t take
responsibility for their costs and are often funded by excessive
student lending; underinvestment in the electric grid results in high
costs and unreliable service; highly inefficient U.S. merchant
shipping and ports; and we have unfunded pension plans and no
action on deficit spending, Social Security and Medicare. I’ll stop
here. This should be unacceptable to all of us.
We need to find a way to bring more varied expertise and

accountability to government.
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We should be more ambitious in striving for excellence in

government. I acknowledge that some of the best and the brightest
are in government and the military today. Yet we should return to a
government that seeks out more of the best and the brightest
people from every background, including the private sector, to
benefit from their knowledge and experience. Government also
needs to leverage the expertise of business to address problems
that it cannot solve on its own. And to be fair, business could use
its influence to do less to further its own interest and more to
enhance the nation as a whole.
We need good government. And there are some things only

governments can do, such as oversee the military and justice
systems. And while most innovation happens through the private
sector, there are certain types of foundational innovations that can
only be advanced by the government, such as basic research that
simply cannot be funded by business. The Democrats want the
government to do even more and the Republicans even less — I
think we should spend more time trying to do even better. But no
one, not even my most liberal Democratic friends, thinks that
sending the government another trillion a year would be a wise
use of money.
OUT OF THE LABYRINTH, WITH FOCUS AND RESOLVE
Even America, the most prosperous nation on the planet with its
vast resources, needs to focus its resources on the complex and
difficult tasks ahead.
I hope to never read a book about How the West Was Lost,
summarized as follows: The failure to save Ukraine and find peace
in the Middle East led to more bickering among the allies and
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weakened military alliances. This accelerated a division within the

Western world, splitting countries into different economic spheres
and with each nation trying to protect its economy, trade and
energy sources. America’s economy weakened, eventually leading
to the loss of its reserve currency status. Besotted by populism
and partisanship and crippled by bureaucracy and lack of
willpower, America failed to focus on what it needed to do to lead
and save the Western world. The enemy was within — we just
didn’t see it in time.
Paraphrasing what Winston Churchill was thought to have said:

America, after it had exhausted all other possibilities, would do the
right thing.
What I want and hope to see is a book about How the West Was
Won. As the wars in Ukraine and the Middle East dragged on and
as the fears of the Western world mounted, America rose to the
challenge as it had in other turbulent times in history. America
coalesced with its allies to form the alliances necessary to keep
the world safe for freedom and democracy.
I remain with a deep and abiding faith in the strength of the

enduring values of America.
WE SHOULD HAVE MORE FAITH IN THE AMAZING POWER OF

OUR FREEDOMS
The heart and soul of the dynamism of America is human freedom

— freedom of speech, freedom of religion, free enterprise
(capitalism), and the freedom and empowerment brought to us by
our democracy through the right to elect our leaders. Free people
are at liberty to move around as they see fit, work as they see fit,
dream as they see fit, and invest in themselves and in the pursuit
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of happiness as they see fit. This freedom that people enjoy,

accompanied by the freedom of capital, is what drives the
dynamism — economic and social — of this great country.
Our civil liberties depend upon the rule of law, property rights,
including intellectual property, and restrictions on government
encroachment upon these freedoms. Our Constitution and Bill of
Rights secure our individual freedoms and reserve all rights to the
individual other than those important but limited authorities given
to the government.
The issue of individual rights is not all or none or freedom versus

no freedom. There are, of course, terrible examples where
individual rights were trampled upon, and the results were
devastating — both for the individual and for the economy — in
East Germany, Iran, North Korea, Russia, Venezuela, to name a
few. And there are many countries that protect individual rights and
are on a spectrum closer to American values. Think of Europe, for
example. But even in some countries that have some of these
rights, a lack of dynamism — often due to bureaucracy, weak
institutions and government, and corruption — is palpable and has
clearly led to less innovation, lower growth and, in general, a lower
standard of living.
Freedom must necessarily be joined with the principle of striving

toward equal opportunity. Equal opportunity is what allows
individuals to rise to the best of their ability — it also means
unequal outcomes. Equal opportunity is the foundation for fairness
and meritocracy. The fight for equality, which is a good moral goal,
should not damage the rights of the individual and their liberties.
Democracy and freedom are cojoined — together, they make
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freedom more durable. Democracy also has a self-correcting

element — every four years you get to throw out leadership if you
don’t like them (which you do not see in autocracies). But we all
know that democracy can be sloppy: Maintaining an effective
democracy is hard work. Democracy fosters open debate and
compromise, which lead to better decisions over time (whether in
government or in business). Intelligence is effectively
“crowdsourced” with constant feedback. Good public policy comes
from good debate and analytics, guided by reason coupled with a
firm understanding of what you would like the outcomes to be and
complemented with an honest assessment of what is really
happening.
Even democracies can become stagnant, bureaucratic and self-

perpetuating. Good government does many admirable things, but
admitting to mistakes is often not one of them. It takes civically
engaged citizens and a strong free press to bring sunlight to
issues and keep a nation strong.
Autocratic societies by their nature subjugate the individual to the

state. By definition they are not meritocracies — they are more
about “who you know,” and they exist to perpetuate the existing
ruling class. Their decisions are based on a completely different
calculation, and their decision-making process does not encourage
and, therefore, benefit from open debate. Democracy means that it
is immoral to subjugate individual freedoms to state actors other
than to protect the existence of the nation itself.
There are values that many of us hold dear, such as religion,

family and country. But none may be more important than the
freedoms that allow us to choose to live our life as we see fit. We
should do more to applaud the virtue and amazing power of our
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freedoms.
HOW WE CAN HELP LIFT UP OUR LOW-INCOME CITIZENS

AND MEND AMERICA’S TORN SOCIAL FABRIC
To fix problems, we must first acknowledge them. Despite decades

of government programs and all the moralizing that surrounds
them, we have not done a particularly good job lifting up our low-
income fellow citizens. I may be wrong, but I do believe this is
tearing at the social fabric of America and is among the root
causes of the fraying of the American dream.
The gap between low-wage and well-paid workers has been

growing dramatically. From 1979 to 2019, the wage growth of the
top 10% was nearly 10 times that of the bottom 10% — which,
basically, had not increased at all. The growth of low-income
workers’ annualized real wages after the pandemic was, for the
first time in decades, higher than the top 60%, but that’s not
enough. The net worth for the bottom 25% of households is
$20,800, and the net worth for the bottom 10% is essentially $0.
This makes it increasingly difficult for low-wage workers to support
their families. Of the 160 million Americans working today,
approximately 40 million are paid less than $15 per hour.
Low-income individuals bear far greater burdens than the rest of

us. Nearly 40% of Americans don’t have $400 in savings to deal
with unexpected expenses, such as medical bills or car repairs,
which leads to financial distress. More than 25 million Americans
don’t have medical insurance at all; of these, one in five are in a
family with income below the federal poverty level. People who live
in low-income neighborhoods also tend to have worse health
outcomes, including higher rates of mental health issues,
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depression and suicide, and a lower life expectancy — as many as

20 years. Finally, low-income Americans generally experience
higher unemployment and more crime.
No one can claim that the promise of equal opportunity is being

offered to all Americans through our education systems. Students
in the lowest socioeconomic bracket are 50% less likely to attend
college than those in the highest socioeconomic groups. Many
inner city schools graduate under 50% of their students — and
even those who graduate may not be well-prepared for the
workforce. In addition, boys growing up in the bottom 10% of
family income are 20 times more likely to be incarcerated. Those
who do run afoul of our justice system generally do not get the
second chance that many of them deserve. Their exclusion from
the workforce is not only unfair to them but also results in an
estimated $87 billion average annual cost to the economy.
Too many policies that are wrong — affecting housing and

mortgage markets, healthcare, immigration, regulation, education
and student lending, to name a few — are jeopardizing the
opportunity for American citizens to succeed. The people who
suffer the most, throughout all of this, are not high-income
individuals. I strongly believe that these outcomes are destroying
the concept of “fair” in America and are driving populism and
diminishing, if not eliminating, trust — not only in government but
in all our institutions. Simply put, the social needs of far too many
of our citizens are not being met. We should never accept these
outcomes — we must fix them.
There are two policy changes that I believe can have a dramatic
effect on jobs, growth and equality — and they go a long way
toward repairing the frayed American dream. Let’s start by treating
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all jobs with respect. Even starter jobs, which are the first rung on
the ladder of opportunity, bring dignity and create better social
outcomes in terms of health, higher household formation and lower
crime. Of these two policy changes, one would better utilize
existing resources, and the other would cost some money. But
both would significantly change outcomes for low-income
Americans.
The free one is so blindingly obvious that it’s almost embarrassing

to propose. Our schools (high schools, community colleges and
perhaps even four-year colleges) should take responsibility for
outcomes — they should be judged on the quality and income
level of the jobs that their graduates and even non-graduates
attain. This means providing graduating students and other
individuals with work skills (in fields such as advanced
manufacturing, cyber, data science and technology, healthcare and
so on) that will lead to better paying jobs. These schools should
work with local businesses to replicate effective programs that are
in place — because that is where the actual jobs are now. This
would be good for growth and, as there are so many examples of
successful programs, we already know what to do. With nearly 9
million job openings and just under 6 million unemployed workers
in the United States, job skills training has never been needed
more. We already spend a tremendous amount of money on
education — just not the right way.
The second step is related to the first: Get more income to low-
paid workers. While this one would cost money, it is to me a
complete no-brainer since it is an expansion of an existing
program, the Earned Income Tax Credit (EITC), which many
Democrats and Republicans already agree upon. Today, the EITC
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supplements low- to moderate-income working individuals and

couples, particularly with children and people living in rural areas.
For example, a single mother with two children earning $9 an hour
(approximately $20,000 a year) could receive a tax credit of more
than $6,000 at year-end. Workers without children receive a very
small tax credit (96% of all EITC dollars were received by families
with children). This should be dramatically expanded, including
eliminating the child requirement from the calculation altogether.
We should convert the EITC to make it more like a negative
income payroll tax, paid monthly. Any tax credit income should not
be offset by any other benefits these individuals already receive
(we have to eliminate benefit “cliffs” that disincentivize work).
An increase in the EITC to a maximum of $10,000 would cost tens

of billions a year, but I have little doubt that these policy changes
would do more than anything else to lift up low-income families
and their communities. Well-paying jobs have been shown to
reduce crime, increase household formation, improve health and
reduce addiction. Both of these policies would have the virtue of
increasing the number of people in the workforce. I also have little
doubt that this would add to GDP.
We should attack all our other problems as well, but these two
policy changes alone would dramatically improve our low-income
neighborhoods, broadly strengthen the economy and give more
opportunity to deserving citizens. It would restore the American
Dream for many.
In Closing
It’s been 20 years since the Bank One-JPMorgan Chase merger
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— and it’s been an extraordinary journey. I can’t even begin to

express my heartfelt appreciation and respect for the tremendous
character and capabilities of the management team who got us
through the good times and the bad times to where we stand
today. And I recognize that we all stand on the shoulders of many
others who came before us in building this exceptional company of
ours.
I would also like to express my deep gratitude to the 300,000+

employees, and their families, of JPMorgan Chase. Through these
annual letters, I hope shareholders and all readers have gained a
deeper understanding of what it takes to be an “endgame winner”
in a rapidly changing world. More important, I hope you are as
proud of what we all have achieved — as a business, as a bank
and as a community investor — as I am. Thank you for your
partnership.
Finally, we sincerely hope to see the world on the path to peace

and prosperity.
Jamie Dimon
Chairman and Chief Executive Officer
April 8, 2024
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Jamie Dimon's Letter to Shareholders, Annual Report 2023 | JPMorgan... about:reader?url=https%3A%2F%2F1.800.gay%3A443%2Fhttps%2Freports.jpmorganchase.com%2Fin...

Letter to Shareholders from Jamie

Dear Fellow Shareholders,

Across the globe, 2023 was yet another year of significant

As these events unfold, America’s global leadership role is being

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essential freedoms, including free enterprise, is paramount. We

In spite of the unsettling landscape, including last year’s regional

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billion, with return on tangible common equity (ROTCE) of 21%,

Throughout the year, we demonstrated the power of our

In 2023, we continued to play a forceful and essential role in

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As always, we hold fast to our commitment to corporate

We have achieved our decades-long consistency by adhering to

STEADFAST PRINCIPLES WORTH REPEATING (AND ONE

Looking back on the past two+ decades — starting from my time

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development of our people have enabled us to achieve this

Second, shareholder value can be built only if you maintain a

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position it to grow and prosper for decades. Measured by stock

Fourth, we are united behind basic principles and strategies (you

Fifth, we strive to build enduring businesses, which rely on and

Sixth, and this is the new one, we must be a source of strength,

Seventh, we operate with a very important silent partner — the

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U.S. government — noting as my friend Warren Buffett points out

Eighth and finally, we know the foundation of our success rests

I remain proud of our company’s resiliency and of what our

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CELEBRATING THE 20TH ANNIVERSARY OF THE

J.P. Morgan Chase

By 2004, J.P. Morgan Chase already represented the consolidation

Bank One had been even busier on the acquisition front,

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different earnings warnings. In March 2000, Bank One reached

Fast forward to 2003, and another wave of consolidation was well

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challenges, including the great financial crisis and a pandemic

Each of our businesses is among the best in the world, with

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Read footnoted information here

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Read footnoted information here

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Read footnoted information here

Within this letter, I discuss the following:

I. SUMMARY OF OUR 2023 RESULTS AND THE PRINCIPLES

• Celebrating the 20th anniversary of the Bank One/JPMorgan

II. UPDATE ON SPECIFIC ISSUES FACING OUR COMPANY

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• The critical impact of artificial intelligence

• Our journey to the cloud

• Acquiring First Republic Bank and its customers