Capital Crisis Nearly Done, Recession Just Getting Started

Jamie Dimon, the chairman and CEO of JPMorgan Chase & Co told bank investors this week that a recession in the U.S. is just getting started and could be deeper and worse than capital markets crisis the country has experienced since August.

While the current credit market crunch may soon be over, the U.S. economy could still face a deep and extended recession, Dimon said.

Dimon suggested that the slump in mortgage and corporate loan markets could bottom out this year, but the economy may face a longer-term challenge even as financial markets begin to function again. The "slower burn" of a recession may rival the severity of the 1982 contraction, he said.

Dimon said the capital markets crisis is possibly 75% done based on the observation that most lenders and structured finance investors have taken their losses and raised additional capital. Dimon added that there are still problems yet to be recognized and there has been little new asset generation.

As for the impact of the recession, Dimon said the outcome couldn't be predicted. The longer and deeper it runs, the more de-leveraging banks will do and the more losses they will take.

Source: CoStar