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The turmoil from the mid-March banking crisis seems to have calmed down in early April.

To get a better understanding of what’s going on and how concerned we should be, it can be helpful to hear an insider’s point of view.

It just so happens that the nation’s preeminent banker, Jamie Dimon, at the country’s largest bank, JP Morgan, discussed the matter in his latest letter sent last week to shareholders.

I’ve found Dimon’s communications to be refreshingly plain-spoken for a big-deal financial person, and he has the respect of his peers, as he was Treasury Secretary Janet Yellen’s first call when problems surfaced in mid-March.

Here are key points on the current banking crisis from the JP Morgan Annual Report, penned by Dimon, that provide a degree of comfort that the March tempest is unlikely to be a precursor to a 2008-style tsunami:

  • The current crisis was the result of regulatory shortcomings and risk-management failures at a handful of banks
  • The most prominent risks were hiding in plain sight, including interest rate exposure and uninsured deposits
  • The current crisis is not yet over, and there will be repercussions from it for years to come (tighter regulation likely will follow)
  • However, recent events are nothing like what occurred in the 2008 global financial crisis (which barely affected smaller banks)
  • Back then, the trigger was $1 trillion of consumer mortgages that went bad, held by many financial institutions, and included the accelerant of enormous leverage (excess debt)
  • Today’s crisis involves far fewer players and fewer issues that need to be resolved

If you’re interested in hearing his take on the recent bank issues, you can watch Dimon’s CNN interview.

From my perspective, to be confident that a banking crises has been resolved, we typically need to see three conditions met:

  1. Government support
  2. Resolution of failed entities
  3. Passage of time (with no additional failures)

We have seen significant government support through a new Federal Reserve lending program and the swift resolution of three of the failed entities – Silvergate Bank, Signature Bank, and Silicon Valley Bank. Also a large foreign bank, Credit Suisse, was taken over by its main competitor, UBS, following governmental intervention.

As for the third condition: if summer arrives without additional failures, I’ll feel comfortable calling “all clear”.

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