WSJ What’s News - Why Jamie Dimon Says Private Credit Is Dangerous But Still Invests in It

Episode Date: July 14, 2025

P.M. Edition for July 14. Private credit may be Wall Street’s hottest trend, but JPMorgan Chase CEO Jamie Dimon has said that it’s a recipe for a financial crisis. So why is the bank investing $50 billion in private credit anyway? Alexander Saeedy, who covers banks and finance for the Journal, explains. Plus, businesses are looking for new ways—some legal, some not—to avoid President Trump’s tariffs. WSJ reporter Corinne Ramey joins to discuss how they’re doing it and why, for the first time, the Justice Department is cracking down on tariff cheaters. And President Trump puts pressure on Russia by threatening 100% tariffs and a deal with NATO to provide weapons to Ukraine. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

President Trump raises pressure on Russia with a 100 percent tariff threat and a weapons deal for Ukraine. Plus, battling tariff cheaters turns into a new front in Trump's trade war. The Justice Department has said that it plans to prioritize tariff and customs cases. And this is brand new. We haven't seen this before in terms of this being a white collar priority for the Justice Department. And why Jamie Dimon is warning that Wall Street's hottest trend is a recipe for a financial

crisis. It's Monday, July 14th. I'm Alex O'Sulliv for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. President Trump has threatened to increase economic pressure on Moscow if there's no peace deal with Ukraine in 50 days, underscoring his growing anger with Russian President Vladimir Putin. Speaking from the White House during a meeting with NATO Secretary General Mark Rutte, Trump said,

We are very unhappy, I am, with Russia. But we'll discuss that maybe a different day. But we're very, very unhappy with them and we're going to be doing very severe tariffs if we don't have a deal in 50 days. Tariffs at about 100 percent, you'd call them secondary tariffs, you know what that means. Commerce Secretary Howard Lutnick later said Trump could choose to impose either tariffs or sanctions on countries that do business with Russia. In the meeting with Ruta, Trump said the U.S. has reached a deal with the North Atlantic

Treaty Organization that would send weapons and air defenses to Ukraine within days. The decision to sell American weapons to NATO countries for use in Ukraine is a major policy shift for the US, which during the Biden administration donated arms to Kiev. Trump said that the shipment of weapons going to Ukraine in the coming days includes Patriot missile defense systems from some European countries. The US will then replenish supplies for the countries who donate. Like Newton's third law of motion, for every action there is an equal and opposite reaction. And so it follows that after President Trump's announcement of sweeping tariffs, importers

started to look for ways to avoid them. WSJ reporter Corinne Raimi covers courts and has found that trade lawyers say clients are inundating them with questions about the line between lawful loopholes and fraud. Corinne, what were companies' reactions to this tariff news? Why are they trying to skirt these tariffs? I had one lawyer tell me that companies are going through sort of the stages of grief after these tariff announcements, that at first they would be like, why me? And then eventually get to the point of, what do I do about it?

And so I think companies now are at that, what do I do about it phase. Some companies have said if they have to pay tariffs as high as some that have been named or threatened, that it could put them out of business. One complicating factor is that President Trump keeps changing deadlines and amounts and other details about these tariffs. So it's fairly chaotic for folks who are navigating this. How are these companies, along with the trade lawyers that are advising them, working on avoiding the tariffs?

So there are several adjustments that companies can make to change the amount of tariffs that they pay. They could classify their product differently because different classifications of products have different tariff amounts. They could change the product's value and they could also change what country a product is coming from. And to perhaps state the obvious, you can do this in legal ways and you can do this in illegal ways. If you lie about what country your product is coming from, that's illegal. If you make changes to your supply chain where your product is actually coming from another country, that's different.

And what does the Justice Department have to say about these illegal cases, as you say? So the Justice Department has said that it plans to prioritize tariff and customs cases. And this is brand new. We haven't seen this before in terms of this being a white collar priority for the Justice Department. They've really backed off a lot of other areas, say foreign bribery and similar. And so for them to affirmatively say we're going after this, that's meaningful. That was WSJ Reporter Corinne Ramey.

Thanks so much, Corinne. Thanks for having me. Investors didn't flinch at the latest tariff threats, with major U.S. indexes posting modest gains. The Nasdaq closed at a record high, adding about 0.3 percent. The Dow rose 0.2 percent, and the S&P 500 inched up about 0.1 percent. The Supreme Court has allowed the Trump administration to begin mass layoffs at the Education Department, halting a lower court ruling that had blocked the White House's plans indefinitely.

The order clears the way for Education Secretary Linda McMahon to weaken the department from within. She has said she's leading the agency's final mission while acknowledging that eliminating it altogether would require the approval of Congress, something that political observers say is unlikely. The unsigned order from the court's six-justice conservative majority didn't elaborate on its reasoning, which is typical in such cases. The three liberal justices dissented. Coming up, why JP Morgan Chase is investing billions of dollars in a market that its CEO compared to the craze that sparked the 2008 financial crisis. That's after the break.

Private credit has grown fast over the past two decades, up more than 100-fold since 2006 to nearly $700 billion last year. But Jamie Dimon, the CEO of JPMorgan Chase, isn't all that excited about it. Earlier this year, he said that Wall Street's hottest trend is a recipe for a financial crisis. And yet, even the bank he leads is getting in on the private credit action. Alexander Saidi, who covers banks and finance for the journal, is here to tell us more. So Alex, in February, Diamond said the private credit boom reminded him of the craze in subprime

mortgages that sparked the 2008 financial crisis. Bold words. What is the risk here? What exactly is he talking about? What he sees is a boom in a market. So in this case, we're talking about loans to companies, mostly that are sub-investment grade or junk-rated. So there's been a huge amount of capital raised to lend money to these types of companies. And as more money has been raised, there's been more and more competition for deals.

So the profile of the average company that's borrowing from these markets has gotten steadily worse over time. And Diamond believes he's seeing a lot of the same signs and symptoms of a crisis in the hot activity around private credit these days. Then also there's the fact that now that we're kind of late in the cycle, a lot of institutions are now chasing to get in on it before it's too late. Ironically, that also includes his own institution,

J.P. Morgan. Right, because just hours before this speech where Diamond compared the private credit boom to the 2008 financial crisis, J.P. Morgan had announced that it was investing $50 billion in private credit. So why are they moving ahead with this anyway? What's going on here is a structural change in how companies access loans, how they borrow

money. The main thing that's shifted is that a number of private investment funds are becoming increasingly important channelers of financing for corporate America. So as these funds have gotten more and more popular, they've actually been taking business away from banks like JP Morgan. And they've realized they need to do something to respond to this because their clients want these sort of private, more bespoke, a little bit riskier financial products that banks just weren't really set up to give.

The regulators don't like them taking these more esoteric risks, especially in sub-investment grade credit. However, the idea is JP Morgan thinks we can do this responsibly. We as a bank can ride through it because we're experts in this. We have a lot of money. So whatever happens, we think we're going to be OK. This is not the first time that JP Morgan has gone into private credit.

The first time was after the 2008 financial crisis. But now they're kind of dipping their toes back in. What's different this time around? What's different this time around is that they're actually using the bank itself to do these loans as opposed to creating its own private lending fund, which is the structure you're seeing in most of Wall Street right now.

They've experimented with that model in the past. It didn't really work out. So now that it's in the bank, they have a little bit more control over how the strategy works and time will tell how successful the strategy is. But they are committed to the bank as the place where their new private loans will be coming from. And that's a bit unique and we'll see how it goes. That was WSJ Reporter Alexander Saidi.

Thanks Alex. Thank you. In most homes, traditional landline telephones are a relic of the past. In the business world though, landlines are alive and well. For more, I'm joined by WSJ Enterprise Technology reporter Isabel Busquette. Isabel, businesses from hotels and hospitals to restaurants and corporate offices all still rely on landlines. Why? There's a few different reasons and it varies a little bit from industry to industry, but landlines are still more reliable in emergencies.

In a lot of jurisdictions, hotels are actually legally mandated to have these in every single room, hospitals as well, anywhere where people are staying overnight. And even if it's not legally mandated, if there's patchy cell service and someone needs to call 911, hotels can be liable if they don't have them.

In other industries, like in finance, for example, a lot of calls have to be monitored and logged and recorded. And sometimes it's more seamless to do that on a landline than it is on a cell phone or a smartphone. Some companies also feel like it creates more of a separation between work and personal usage. It's hard to scroll Instagram from like a plastic handset. What are communications companies doing to make sure that this critical system, as you

say, continues to function? It's important to note landlines have developed over the years. In the old days, they would be just using these antiquated copper wires. Now they can send data over IP or internet protocol and networks, so they've gotten a lot more reliable. The AT&Ts and Cisco's of the world, they're also trying to make them better and better. Cisco in particular is embedding some AI into their phones. They have an AI feature that does background noise reduction. The market is worth about $1.3 billion globally. It's not the biggest market in the world, obviously, but for these companies, it's

important. Joining me from not a landline was WSJ reporter Isabel Busquette. Thank you, Isabel. Thanks again. And finally, former New York Governor Andrew Cuomo plans to mount a competitive campaign in the general election for mayor of New York City after his surprise loss in the Democratic primary to Zoran Mamdani. Cuomo's name will appear on the general election ballot under the independent Fight and Deliver Party he created as a backup plan in the event he lost the primary.

The general election will be a rematch between Cuomo and Mamdani and will also feature Mayor Eric Adams, who's running as an independent. Curtis Liyue, the Republican nominee, and independent Jim Walden will also be on the ballot. And that's what's news for this Monday afternoon. Today's show is produced by Anthony Bansi and Pierre Bienamé, with supervising producer Michael Kosmides. I'm Alex Zosala for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.