JPMorgan's Dimon Calls For Bank 'Euthanasia'

JPMorgan Chase CEO Jamie Dimon on large bank failure: "If people knew these companies could go bankrupt, it would increase market discipline."

J.P. Morgan Chase CEO Jamie Dimon said Friday that a special bankruptcy process is needed to handle failures of the nation's global financial institutions.

"Think of it as euthanasia," Dimon told those attending the Stanford Institute for Economic Policy Research's 2010 economic outlook conference.

Like other corporate bankruptcies, such a process would wipe out shareholders and put the unsecured creditors at risk of not getting fully repaid. But the special bankruptcy proceeding would not put the financial system into "cardiac arrest," which is how Dimon described the financial crisis that intensified with the 2008 bankruptcy of Lehman Brothers.

"If people knew these companies could go bankrupt, it would increase market discipline," Dimon said.

Dimon also said he hopes a financial regulation bill passes this year since it would help eliminate some of the market uncertainty surrounding the outlook for the financial industry.

"Banks recognize, almost all of them, that the regulatory system failed and that we need to simplify it and strengthen it," Dimon said. "We agree with most of the proposals out there, I'd say 70 or 80 percent.

"We may be right about the other 30 percent, and we are entitled to be part of the conversation," said Dimon, whose bank became one of California's largest with the 2008 purchase of Washington Mutual's failed banking operations.

Dimon also offered some insight into how his business customers are faring. No surprise that large companies are in excellent shape, given their access to the capital markets and international markets.

But he said things are also looking up for small and mid-sized businesses banking with Chase.

"We think the middle-market companies are in better shape than most people think," he said, adding that the bank has seen small-business credit demand rise 20 percent to 30 percent in the last two months.Dimon also took the opportunity to defend big business.

"America's business is what creates all the wealth, making everything else possible," Dimon said, noting that big business creates economies of scale that benefit shareholders and customers.

"If we didn't have economies of scale that comes with large businesses, we'd still be living in tents and hunting buffalo," Dimon said.