Why Jamie Dimon doesn’t expect a double dip

October 19, 2010, 11:00 AM UTC

Is there a new era in banking? J.P. Morgan Chase’s CEO discusses what’s changed — and what hasn’t.

It’s been an intense couple of years for J.P. Morgan Chase CEO Jamie Dimon — from the collapse of Wall Street to the industry’s real estate foreclosure paperwork woes. Though it’s fair to say his company survived the crisis better than any other financial services firm, things have changed forever for the head of the world’s second-largest bank. Duff McDonald, author of Last Man Standing: The Ascent of Jamie Dimon and J.P. Morgan Chase, sat down with Dimon on September 24 to get his worldview. (Asked after the interview to comment on JPM’s halting of foreclosures, Dimon referred Fortune to a company spokesperson, who said, “We believe the information in the loan documents is correct, but if we find any mistakes, we will rectify them.”) Edited excerpts:

Where are you on the odds of a double dip in the economy? You basically ruled one out earlier this year, but things have not been on an upward trajectory since.

I don’t think we’ll have one, but no one knows. The American economy may be stronger than people think. At the root of my optimism is the sense that the embedded strengths of this country — a lot of which reside in its business — are still here. We work hard, we are innovative, we adapt quickly. It will surprise people when America gets its mojo back.

What’s the biggest threat?

Did you read that book This Time It’s Different: Eight Centuries of Financial Folly, by Reinhart and Rogoff? It’s very academic, but one of the things that is noticeable in history is that a lot of policy can work at counter-purposes. We have seen that over and over in central-bank policy, trade policy, even foreign-exchange policy. The biggest risk just might be us.

Speaking of policy, Elizabeth Warren has invoked your name specifically in her indictments of Wall Street fat cats. As of September, she is running the Consumer Finance Protection Bureau. Are you excited to work with her?

She called me the day it was announced. I was in Russia, or I would have called her myself. My job is to work with the regulators, do a good job of it, and always try to do a great job for consumers. I want her effort to be a success. The things she has said about me? I don’t take them personally.

One of her zingers came in response to your remark that financial crises happen every 10 years or so, and that’s life. And she wasn’t the only one. Were you surprised at the anger in response to it?

I think I can clarify that. I was making a point that you need to be prepared for bad weather. I wasn’t arguing that it’s a good thing, I was merely saying we shouldn’t be all that surprised when it arrives. Someone converted that into “There’s nothing we can do about it, so people need to suck it up and deal with it.”

I completely agree with the point that we don’t have to accept it. A lot of these things are fixable. My guess is that 1,000 years from now, when they look back at how we managed crises, it’s going to look a lot like doctors bleeding their patients. Tools for dealing with interrelated economic issues and crises will grow far more sophisticated.

You said recently that our regulatory system has been strengthened but not simplified. What would you have done differently?

We have always acknowledged that a lot of things should be fixed, like having a systemic regulator, moving derivatives into clearinghouses, and having stronger capital and liquidity standards. I think they did a lot of that. But if you look at the system, we have more regulators and they have more overlap. I would have had a simple but stronger and more effective “bank regulator” and eliminated some of that overlap. And I would have made jurisdictions clearer.

You also have said that the new financial regulation “is not that big a deal.” Did you get off easy?

I prefaced that by saying there might be unintended consequences of legislation that we might not be able to predict. But the ones we know about, I said we could handle them. Perhaps saying it was “not a big deal” was a poor word choice. What I meant was that if you own this company — I was speaking to a room of investors — that we can still do a great job for customers and shareholders. I was only speaking about J.P. Morgan Chase (JPM). I think the effects of this legislation might be much worse for some competitors and much better for some others. Foreign banks, for example, might be in a much better position when it comes to things like how we calculate risk-weighted assets.

A lot of ink has been spilled on your supposed love affair and subsequent falling-out with Obama. What’s the reality?

We were neither in love nor have we fallen out. I still talk to the folks in the administration. I don’t agree with everything they have done. I don’t disagree with everything they’ve done. He may have close relations, but I am not one of them.

You once mentioned entering politics in some fashion after your time at J.P. Morgan Chase. What’s your thinking on that now?

I never said entering politics specifically. I said serving my country. I always had regrets about never having served in the military. But I didn’t mean now, and I didn’t mean any particular job. As for politics, that opportunity may have very well passed me by. But I’m a big boy — I can deal with it.

People have taken joy in the fact that you had to slash millions off the price of your Chicago home to sell it.

I haven’t sold it yet — I still have to close! If that makes people happy, that’s sad. But I am sympathetic if anyone who lost money in real estate feels a little better that I did as well. Misery wants company.

According to press reports, J.P. Morgan Chase is about to abandon plans to build a huge new headquarters in London’s Canary Wharf. Is it really because you’re annoyed by British tax treatment of the big banks?

We are still negotiating over our future location. I thought the whole tax issue was gross and unfair, but it doesn’t have anything to do with it. We will always be in the U.K. But it did focus us on the fact we have a lot of eggs in that one basket, and that maybe we need to be thinking a little more about geographic diversification. I can’t tell you what will happen, because we are negotiating. But we will take the best deal, pure and simple.

Financial services reform seems to still be struggling to figure out just what kinds of risk taking institutions can engage in. Paul Volcker and a lot of other people think deposit-taking banks like J.P. Morgan Chase shouldn’t be speculating at all but should stick to making loans. What’s the right balance?

The recognition of this crisis is that certain institutions that can be very vulnerable in downturns if they take on too much risk aren’t going to just hurt their shareholders. They are going to hurt the system and, by extension, the taxpayer. That’s why we support a resolution mechanism and we’ve always held more capital.

But financial services companies take risks. You can’t do that without accepting that sometimes people are going to make mistakes. I don’t quibble with the issue about pure proprietary trading. But I do quibble with how one defines market making vs. taking a proprietary position. I don’t consider making loans to be somehow holier than other aspects. We provide capital and principal to a lot of people. But just what risks we take should be our judgment call, provided we avoid taking extensive risk.

Isn’t that how we got in the fix we’re in today? A bunch of so-called brilliant finance CEOs did just that?

Some did. But some didn’t.

Fortune contributor Duff McDonald’s book on Jamie Dimon is now available in paperback.