JP Morgan Chase 2010 Annual Report Download - page 7

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As we enter 2011, we find ourselves having
weathered an epic storm – not just the global
financial crisis itself but its eect on the
global financial system and our industry.
As a nation, we may have averted disaster
thanks to a great collective eort, but many
challenges remain. A lot of work has been
done – some of which has been excellent and
necessary. Other aspects are less satisfactory
and even potentially harmful, and we need
to face and fix them in a thorough, balanced,
intelligent manner. Suce it to say that a
good deal of work remains to be done.
In our meetings with shareholders, we often
are asked the following tough questions:
• WhatwillbethefalloutfromtheEuropean
sovereign exposures and the geopolitical
risks,particularlyintheMiddleEast?
• Howarewegoingtodealwithallthe
litigation around mortgages, municipali-
ties, Bear Stearns, the bankruptcies of
LehmanBrothers,WashingtonMutual
(WaMu)andothers?
• WilltheAmericaneconomyrecoverinthe
shortrun?Howwillabnormalmonetary
policies and looming fiscal deficits aect
us?DoesAmericahavethecapacityin
the long run to deal eectively with other
important problems it faces, including
immigration, our energy policy, the
environment, our education and health
systems, our infrastructure and our still-
unbalancedtradeandcapitalows?
• Willtheroleofbankschangeinthisnew
environment?Willtheybeabletogrow
protably?WillAmericanbanksbeableto
freely compete with increasingly formi-
dable foreign banks, some of which are the
beneciariesofpowerfulstatesupport?
• Howwillthemortgageandmortgage-
relatedissuesendup?Howmuchwillthey
costus?Andhowwilltheyberesolved?
Charlie Scharf deals with some of these
questions in his letter later in this Annual
Report. These issues are extremely complex
and will take years to resolve. There is
plenty of misinformation and a number
of misconceptions around mortgages, and
your company is going to make a dedicated
eort to describe in detail what we do, how
we do it, what the right things to do are,
what the mistakes we made are and how
we will rectify them. I will not go into the
details in this letter, but, rest assured, we
are fully engaged on this issue of mort-
gages, and you will be hearing more from
us about it in the future.
In thinking about the answers to the ques-
tions posed, it would be naive to be blindly
and irrationally optimistic – or to be blindly
andirrationallypessimistic.Wecannotpredict
the future with any real certainty, but we can
oer our shareholders some insight into how
we think about these issues, what they mean
for the company and how we manage through
them. Remember, our goal is not to guess the
future; our goal is to be prepared to thrive
under widely variable conditions.
We Face the Future in a Strong Position
Our businesses and management team are
among the best in the industry. It is di-
cult to replicate our franchises and the
intelligence embedded in our expertise, in
our systems and in the experience of our
people. Our fortress balance sheet provides
us with strong and growing capital – and we
always are thinking far ahead about the best
ways to deploy it.
Webelievewehavetheforesightand
fortitude to use our capital wisely. Our first
priority was to restore a decent dividend –
this is what our shareholders wanted (if it
were up to me personally, I would reinvest
I. THE POST-CRISIS ENVIRONMENT: HOW WE VIEW
THE SIGNIFICANT CHALLENGES AHEAD