00:00 Speaker A
cyber, you know, we’ve been talking about cyber risk for a long time. In fact, I think I said in the Chairman’s letter, it’s our largest risk. Every industry is different. So in context, I think JPMorgan is very well protected. We spend a lot of money, we’ve got top experts, we’re in constant contact with the government, we’re constantly updating things.
00:13 Speaker A
And I put and but AI has made it worse. It’s made it harder. Of course, we read about mythos, which we’re testing now and looking at. and it does create, you know, additional vulnerabilities and maybe down the road, you know, better ways to strengthen yourself too.
00:23 Speaker A
But the cyber risk isn’t isolated to banks, you know, it’s like you can look at any almost any industry and also banks of course are attached to exchanges and all these other things that create uh other layers of risk which, you know, we work with a lot of people to protect themselves. So,
00:34 Speaker A
it is a complex one, and it’s a full-time job and we’re doing it all the time and uh while we’re trying to get the benefits of AI, we also are very cognitive of the risk of cyber. I think the government is aware of it too.
00:43 Speaker A
And remember you have cyber criminals, you have cyber states, you have cyber, uh, everywhere, and that’s why that’s why you have to be quite careful.
00:52 Speaker A
Private credit, leverage lending is like 1.7 trillion. I owe bonds and what something like 1.7 trillion. Bank syndicated leverage loans like 1.7 trillion, investment grade debts 13 trillion, mortgage debts like 13 trillion. And there’s a lot of other stuff out there.
01:07 Speaker A
And I pointed out that yeah, I think there’s been some weakening and underwriting and not not just by private credit, elsewhere. And there will be a credit cycle one day and I think when there’s a credit cycle, losses will be worse than people expect relative to the scenario.
01:18 Speaker A
I don’t think it’s systemic. It almost can’t be systemic at that size relative to anything else, but, you know, when recessions happen and values go down and people refight higher rates, there’ll be stress and strain in the system and, you know, are people prepared for that?
01:29 Speaker A
I can’t speak for other banks, but these are, most of these things are, you know, are that on top of you have to have very large losses in private credit before at least it looks like banks are going to get hit or something like that. So, it doesn’t mean you won’t feel some stress and
01:42 Speaker A
strain and you might have to do something about it, but uh, not particularly worried about it.
01:46 Speaker A
I I what I’m I’d be more worried about when there’s a credit cycle, how’s that going to filter through the whole system? That that to me is a bigger issue. But I also pointed out, corporations in general, the debt’s not too high.
01:58 Speaker A
Consumers in general, debt’s not too high. Most of the excess debt is in, you know, government debt at this point. So there are positives and negatives you look at what’s going to happen if there’s a cycle. And of course we always worry about what happens if there’s a cycle and
02:08 Speaker A
like I said, I think it’ll be worse than people expect. And you can go look at what happens in other cycles to you know, various credit uh and industries, etc. The other the other thing which almost always happens is that there’s a industry which surprises people.
02:20 Speaker A
If you go back to the year 2000, people are surprised there was utilities and telecom, you know, grandma stocks that got hit. Things change. And you go to 08, it was media companies and newspapers, Warren Buffett stocks.
02:30 Speaker A
Things change. This time, you know, you have all the two years going about software, which we’ll see, you know, it might be software, might not. Um, but something always happens that people don’t expect in credit. I’m not talking about, I’m not
02:39 Speaker A
forecasting anything. I’m simply saying for JP Morgan, we have to be prepared for a recession. And that, you know, you can have stagflation. You know, you see people mentioning that we have to be prepared for stagflation. You know, obviously if you have stagflation and higher rates for longer and credit spreads gap out, that will put a lot of stress and strain on leveraged companies as they refinance.
02:54 Speaker A
You know, and those get fixed. Sometimes people put in more capital to credit, sometimes they reduce their capex plans. You know, it doesn’t it’s not an immediate disaster overnight, but it would put a lot more stress and strain on people. I pointed out that if there’s a credit cycle,
03:06 Speaker A
I do expect it will be worse than people think relative to the scenario. It’s not a disaster. We’re used to credit cycles. We’ll be big boys about it. you know, but asset price will go down, credit spreads will go down, people may get a little nervous about some of those things. We don’t think it’s systemic. You know, that’s more I put in the category of traditional recessionary behavior.