In mid July, Jamie Dimon cautioned that the explosion in private credit could trigger the next financial crisis. The JPMorgan CEO and America’s most respected banker cited the wild lending sprees two decades ago where the likes of Lehman Bros. and Bear Stearns funded highly indebted weaklings, a misadventure that sank those firms and ignited the Global Financial Crisis. Dimon’s comments followed earlier his warnings in May that “I think credit risk is bad,” noting that the surge in non-bank lending “hasn’t been tested in a downturn,” implying that if a recession hits, a deluge of defaults could accelerate the economy’s decline.
Yet on both occasions, Dimon emphasized that JPMorgan’s moving heavily into the field that he views as so fraught with risk for others, stating in May that, “There’s a huge opportunity for this company.” In fact, Dimon recently dedicated $50 billion in the investment bank’s capital towards providing debt financing for clients doing acquisitions and other deals, effectively starting a private credit operation inside JPMorgan.
