JP Morgan Chase 2009 Annual Report Download - page 38

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ica’s long-term success. Combined, big and
small businesses spend $1.5 trillion per year
on capital expenditures and $300 billion on
research and development. It is estimated that
more than 70% of the capital expenditures are
made by large companies.
The productivity of our workers and the huge
economies of scale of our corporations (gener-
ated from years of investing and innovating)
are what ultimately drive our economy and
income growth. Employees at large companies
share in that productivity: Compensation and
benefits for employees at large companies are
substantially higher than at small firms.*
It is estimated that large enterprises and large
foreign multinationals active in the United
States have accounted for the majority of U.S.
productivity growth since 1995.
Companies such as Ford, Boeing, Pzer, Cater-
pillar, Apple, Microsoft and Google are exem-
plars of initiative and innovation worldwide.
Cutting-edge companies like Hewlett-Packard
underpin vibrant networks of small and mid-
size suppliers and vendors. Academic research
shows that these investments abroad actually
create more jobs in the United States.
Large companies such as the ones mentioned
above need banking partners with large
enough balance sheets to finance transactions
around the world. And it’s not just multina-
tional corporations that rely on such scale:
States and municipalities also depend on
the capital that a firm like JPMorgan Chase
can provide. To be sure, smaller banks play a
vital role in our nation’s economy but cannot
always provide the type of service, capital,
breadth of products and speed of execution
that clients need. Only large banks have the
scale and resources to connect markets around
the globe, in places like China, India, Brazil,
South Africa and Russia; to execute diverse
and large-scale transactions; to oer a range of
products and services, from loan underwriting
and risk management to local lines of credit;
to process terabytes of financial data; and to
provide financing in the billions.
U.S. banks actually are less consolidated than
those in the rest of the world, and our financial
system is less dominated by large banks than
that of almost any other nation. For example, in
2007, the three largest U.S. banks held 34% of
total U.S. bank assets – the second-lowest gure
among Organisation for Economic Co-operation
and Development (OECD) nations, just ahead
of Luxembourg; the average for the rest of the
OECD nations was more than double, at 69%.
Not only is our banking system not particu-
larly concentrated, but our large banks are not
relatively large compared with the size of the
U.S. economy. The arguments that “big is bad”
and that “too consolidated is bad” are refuted by
many examples of countries with large, consoli-
dated banking systems that did not have prob-
lems at all (e.g., Canada).
Capping the size of America’s largest banks
won’t change the needs of big business. Instead,
it will force these companies to turn to foreign
banks that won’t face the same restrictions.
JPMorgan Chase’s capabilities, size and diver-
sity were essential to withstanding the financial
crisis in 2008 and emerging as a stronger firm.
Everyone needs to be responsible
America was built on the principles of rugged
individualism and self-responsibility. We need
to continue to foster a sense of responsibility in
all participants in the economy. Bad outcomes
are not always someone else’s fault – we need
to cultivate an environment where consumers,
lenders, borrowers, businesses and investors all
take responsibility for their actions and don’t
look for someone else to blame. We have to stop
slipping into a cacophony of finger-pointing
and blame. And while bad actors always should
be punished, we also should note that not all
who got into trouble were irresponsible. We
fully acknowledge, for example, that many indi-
viduals found themselves in a dicult position
that was caused by a medical condition or loss
of employment beyond their control, and they
should be treated fairly and respectfully.
The crisis of the past couple of years has had
far-reaching consequences, among them the
declining public image of banks and bankers.
* The U.S. Bureau of Labor
Statistics shows that
employees of large firms (with
500 or more employees) have
average hourly earnings ($25/
hour, including wages and
salaries) 46% higher than
employees of small firms (with
fewer than 50 employees).
Similarly, large firms provide
88% of their employees access
to medical benefits compared
with 55% at small firms.