Treasury Secretary Scott Bessent, Federal Chair Jerome Powell, and many economists agree that certain changes could help banks and broker-dealers hold more Treasuries in times of market stress. Dimon went further, however, calling for sweeping reform of capital requirements, which the industry has long argued are onerous and stunt consumer lending. The current framework, he said, contains deep flaws. 

“And remember, it’s not relief to the banks,” Dimon said during JPMorgan’s first-quarter earnings call Friday. “It’s relief to the markets.”

Capital requirements aim to ensure banks, especially those deemed “too big to fail,” can survive if they sustain heavy losses. JPMorgan was one of only a few major lenders that didn’t need a controversial government bailout in 2008—but Dimon took the money anyway at the insistence of then-Treasury Secretary Henry Paulson. 

The Treasury market helps the global economy go-round, and Wall Street is watching closely for signs the Fed may be forced to intervene. Many suspect bond market turmoil is what truly forced President Donald Trump to announce a 90-day pause on his sweeping “reciprocal tariffs,” but the fixed-income selling spree is not over. A confounding spike in yields, which rise as bond prices fall, has persisted as investors sour on Treasuries, long considered some of the world’s safest assets.

The Trump administration has been clear it wants to see a lower yield on the 10-year Treasury, the benchmark for interest rates on mortgages, car loans, and other common types of borrowing throughout the economy. It spiked as high as 4.59% on Friday, however, up over 30 basis points from Wednesday’s low and more than 70 points from where it began its climb on Monday.

“The textbook would be saying that when the stock market is going down, long-term interest rates should also be going down,” Torsten Sløk, chief economist at private equity giant Apollo, wrote in a note Friday. “But this is not what is happening at the moment.”

Why banks can’t step in

One of the culprits for this “murder mystery,” as Sløk told Fortune earlier this week, could be the so-called “basis trade,” when hedge funds borrow heavily to take advantage of tiny price discrepancies between Treasuries and futures linked to those bonds. In normal times, they profit handsomely, and, in turn, help keep money markets humming.

During periods of extreme volatility, however, hedge funds can be forced to unwind the $800 billion trade, which spells trouble if the market struggles to absorb a massive increase in the supply of Treasuries. Foreign selling could exacerbate the problem, and that appeared to be at play on Thursday and Friday as the dollar fell. 

Big banks and broker-dealers can’t step in, however, because of restrictions like the supplementary leverage ratio. As the name implies, this measure curbs the amount of borrowed funds lenders can use to make investments. 

“These limitations have, of course, become more tight after the financial crisis in 2008,” Sløk said, “and that’s why the Wall Street banks are working less as shock absorbers in the current environment.”

U.S. debt is the dominant form of collateral in so-called repo markets, a crucial part of the financial system that allows banks and companies to meet their commitments with short-term loans. In short, the Fed doesn’t want the Treasury market to seize up like it did in 2008, which is why Dimon and other critics of current capital requirements say these regulations need to be fixed.

“When you have a lot of volatile markets and very wide spreads and low liquidity in Treasuries,” Dimon said, “it affects all other capital markets. That’s the reason to do it, not as a favor to the banks themselves.”

Such changes would not be without precedent. During the COVID-19 pandemic, the Fed exempted Treasuries and bank reserves from the calculation of the supplementary leverage ratio, allowing banks to snap up more U.S. debt.

Bessent has indicated he wants to make that change permanent as part of a broader deregulatory push. Even though the Fed recently lost a bitter fight with big banks, particularly JPMorgan, over bumping up capital requirements, Powell has said he agrees. Several academics are also in favor of a slight adjustment, which they say can be made without undermining the foundations of the Dodd-Frank reforms instituted after the financial crisis.

Regardless, the Fed still had to buy $1.6 trillion of Treasuries to stabilize money markets at the onset of the pandemic. Dimon said the central bank will again be forced to take similar action eventually. 

“There will be a kerfuffle in the Treasury markets because of all the rules and regulations,” he said.

Dimon hopeful for change under Trump

Dimon was not just referring to small changes in the supplementary leverage ratio, however. Fixing several different types of capital requirements, he said, could free up “hundreds of billions of dollars” for JPMorgan to lend across the banking system.

Banks have been very successful at pushing back on the Fed’s efforts to fully implement Basel III, a set of international standards developed after the 2008 crash to prevent the collapse of so-called “globally systemic banks.” After huge blowback from the industry, the Fed scrapped a proposal last year that would have raised capital requirements by 19%. The central bank’s top regulator later stepped down, allowing Trump to appoint Michelle Bowman, who voted against the more stringent regulations, to the role.

On Friday’s earnings call, Dimon, who has been credited with convincing Trump to scale back his tariffs, was asked whether he thought there was a better chance of bank-friendly reforms with the current administration than under Biden.

“I think there’s a deep recognition of the flaws in the system,” he said, “and fortunately, they’re going to take a good look at it.”