FORTUNE -- Jamie Dimon, the CEO of America's biggest bank, says it's time to stop worrying about the Fed. After all, he's not worried.
In his annual letter to shareholders, which was released on Wednesday afternoon, the CEO of JPMorgan Chase (JPM) said there is "little question" that the Federal Reserve's signature stimulus program boosted the economy and hastened the recovery. What's more, he says the Fed's exit from QE, which is expected to happen this year, isn't likely to reverse that.
That's not a universally held view, particularly on Wall Street. Last year, Warren Buffett said he was worried about what will happen when the Fed unwinds its stimulus. Others have predicted accelerated inflation, sharply rising interest rates, another financial crisis, and a stock market collapse. Even the Fed itself has been testing banks to see how they would do if interest rates were to increase at a rapid clip.
Instead, Dimon says the end of quantitative easing is a good thing and will most likely be uneventful. The Fed's bond buying has ballooned its balance sheet to $4.5 trillion, up from $1 billion before the crisis. While large, Dimon says in his letter that that's still not a very big percentage of the overall $90 trillion in financial assets within the global economy. However, the markets that the Fed would be selling into -- the Treasury and mortgage-bond markets -- are considerably smaller, more like $16 trillion and $10 trillion, respectively.
Dimon does think interest rates will rise, perhaps to 5% on the 10-year Treasury bond, which is double where it is today. But he says that it is unlikely to slow the economy. Companies already have a lot of cash. And a stronger economy means they only will be generating more of it. So he doesn't think the higher borrowing costs will affect them much.
Dimon does observe, as others have, that bank lending hasn't jumped nearly as much as you would expect, given the low interest rates. He argues that that is at least partly the result of increased banking regulation. The flip side of that, though, is all those new regulations are likely to continue to hold back lending, and therefore inflation, when QE is over.
As in past years, Dimon also uses his annual letter to gripe about bank regulations, claiming the new rules will drive up the cost that borrowers will have to pay for certain loans. And he also says that the stricter rules the U.S. has for its largest banks, like JPMorgan, could put American banks at a competitive disadvantage. But all-in-all Dimon admits in his letter that regulations have made the banking system and the economy better off.
Dimon also has a book recomdation: The Better Angels of Our Nature by Harvard professor Steven Pinker, which the CEO says shows that the world, over time, has become a less cruel and better place. No word on whether he has read Michael Lewis's Flashboys.
Greed, stupidity, and slack government oversight fueled the mortgage bubble. The same thing seems to be happening today, but this time with leveraged loans and junk bonds.
By Cyrus Sanati
FORTUNE -- The growing leveraged loan bubble received a big boost of hot air this week thanks to Wall Street's "friends" down in Washington.
The Federal Reserve, under intense pressure from members of Congress (on both sides of the aisle), MOREApr 10, 2014 5:00 AM ET
The Federal Reserve specifically cited "too big to fail" as a reason for the stricter rules.
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U.S. bank regulators on Tuesday officially upped the amount of excess assets the nation's eight largest banks must hold to cover potentially bad loans or soured investments. In a memo, the Federal Reserve estimated that MOREStephen Gandel, senior editor - Apr 8, 2014 5:15 PM ET
With Jeremy Stein's departure, the Federal Reserve loses a big supporter of winding down stimulus.
FORTUNE -- One less taperer is in the house.
One of the Federal Reserve's more vocal advocates of the need to reduce monetary stimulus is leaving the U.S. central bank.
On Thursday, Jeremy Stein announced that he plans to leave the Fed in late May to return to Harvard University, where he teaches economics.
Stein has been a Fed governor since May 2012. He joined the MOREStephen Gandel, senior editor - Apr 3, 2014 11:47 AM ET
Critics love to call out monetary policy as one of the prime causes of the financial crisis. But the data just don't back that up.
FORTUNE -- When it comes to financial crisis bogeymen, Alan Greenspan is often thought of as public enemy, let's say, No. 3.
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The Fed approves the capital plans of 25 others. Goldman and Bank of America were forced to resubmit.
FORTUNE -- The Federal Reserve approved the capital plans of 25 of the nation's 30 largest banks on Wednesday as part of the final leg of its annual required stress tests.
Citigroup was the most notable bank among those that had their capital plans rejected. The Fed said it was troubled by Citi's inability to MOREStephen Gandel, senior editor - Mar 26, 2014 4:00 PM ET
We know, you're shocked. Economists at the San Francisco Fed said the central bank is very unlikely to lose money on its $4 trillion portfolio.
FORTUNE -- The Federal Reserve says it's fit enough to weather economic stress as well.
Last week, the Fed released the results of its annual stress test of the nation's largest banks. Nearly all of the banks came out with a clean bill of health. Monday, the MOREStephen Gandel, senior editor - Mar 24, 2014 3:59 PM ET
The money manager argues that the Fed's interventions have ruined the very recovery it was supposed to stimulate and that the market is poised to disappoint investors.
FORTUNE -- If you hate the Federal Reserve, you have a new hero.
A few weeks ago, Jeremy Grantham, the co-founder of money management firm GMO, called newly appointed Federal Reserve chairman Janet Yellen "ignorant" in the New York Times. He also said the reason MOREStephen Gandel, senior editor - Mar 24, 2014 5:00 AM ET
Federal Reserve says 29 of the nation's 30 largest banks could survive a severe economic meltdown.
FORTUNE -- The nation's largest banks passed the Federal Reserve's stress test with their best grade ever.
Of the 30 banks tested by the Fed, 29 were deemed strong enough to weather a severe economic meltdown without any assistance from the government. Collectively the banks cleared the test by a wider margin than a year ago. MOREStephen Gandel, senior editor - Mar 20, 2014 4:24 PM ET
The central bank's latest policy statement shows we need to look at much more than the standard unemployment rate to understand the health of the job market.
FORTUNE -- The Janet Yellen-era Fed has officially begun -- with a bit of a curveball.
The markets got what it expected from the Fed in one sense -- another round of $10 billion in tapering of the central bank's "quantitative easing" bond buying program, MOREChristopher Matthews - Mar 19, 2014 4:26 PM ET
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