JPMorgan Chase & Co. (NYSE:JPM)
December 07, 2011 12:25 pm ET
James Dimon - Chairman, Chief Executive Officer, Member of Executive Committee, Member of Operating Committee and Member of Stock Committee
Richard Ramsden - Goldman Sachs Group Inc., Research Division
Richard Ramsden - Goldman Sachs Group Inc., Research Division
So next up we have Jamie Dimon from JPMorgan. Obviously, he needs no introduction. Jamie has helped build JPMorgan into one of the most successful financial companies in the world today, and he has delivered on his strategy in a variety of very challenging market environments. To give us his thoughts on 2012 and beyond, as well as to talk about the JPMorgan story in particular, it's a great deal of pleasure to have Jamie Dimon here. Thanks.
Richard, thank you very much. And welcome, everybody. Listen, I have 39 pages, which I'm going to cover in 25 minutes to leave plenty of time for Q&A. So a lot of the information in these pages is really for you to have and read at your leisure.
Let me just start with this, this interesting landscape, which is not just about JPMorgan, but a lot of investors come to me all the time, they say, "You know, why do you buy a bank stock?" You've got regulatory, Durbin derivatives, Volcker, capital G-SIFI, another 240 rules coming; mortgage-related issues, including putbacks from litigation; European exposures, which are obviously scaring people; an interesting environment which is not conducive to earnings spread, that Investment Banking profitability may be forever changed, and obviously economy and loan growth themselves are not doing right. But I hope you feel, when you get through this, like I do. I think the opportunities in the future is just as good in the past. And I'm going to try to answer -- I'm sorry. I'm going to try to answer each and every one of the questions that are on this pages that are important. But I always look at the view from the point of view of the customers, consumers, Middle Market, large companies, investors are still going to need a banker or trader to give him equity, debt, capital or mortgage research advice, et cetera. And there will be huge growth over the next 10 years, so I'll give you, actually, some numbers on it. And obviously, there's always new technology, new products et cetera.
JPMorgan has had real underlying growth. I won't go to the franchises. I'm not trying to sell you stock here because we're going to be buying some. But I think these are great franchises. And we've had real growth. In fact, I'm thinking about the next time we do a press release, the earnings, instead of saying, the earnings of JPMorgan are X, Y or Z, I want to do something the press doesn't write about, small business lending up 70%, right in the headline, We hired 4,000 -- almost 4,000 vets this year, Middle Market lending up 18% year-to-date. Those are the numbers. And deposits were up in almost in single business.
We -- I'm going to take you through specific growth opportunities that we have, and we have this battle ship balance sheet, okay? Plenty of capital under almost any measure. I'm going to give you a few comments later on CCAR, et cetera. We have huge benefits from diversification, from funding, and we're going to spend a lot of time in 2012, necessarily focused on just building the businesses and navigating through the regulatory issues we got to deal with. But they're not all negatives. We just got to get through them in a very intelligent way. When I say navigate, what that really means is we're going be -- we're going to deal with every asset, every liability, every risk-weighted asset. We'll manage this stuff to a detail that I think will shock people, including some of the regulators.
I'm going to give you a quick overview of growth opportunities, talk about regulatory issues, then the topics that I think were the ones you guys all mention in your research reports, and then a few comments in the fourth quarter looking forward.
This page, Page 4, just shows you at the bottom the things we're not going to talk about. So we're not going to talk about we're building commodities business. Investment bank is growing in emerging markets. Asset management, we bought a company called Gávea, or growing asset management, I'm not going to talk about those. I'm going to talk about only the ones at the top. They're usually initiatives we've disclosed before in the past, and these are the ones that I'm going to do particularly quickly.
Branch build. We've mentioned to shareholders we are going to grow maybe 250 or 300 branches a year, we're going to cut that back a little bit, not a lot, so call it 175, we're still studying this. The principal reason for that is that there's been a lot of regulatory change. Durbin and some of these things simply make certain branches unprofitable. So it's not that we're going to stop. We're going to redesign. Some will be smaller. We've got to -- we have to meet our CCRA requirements. We're going to bring in more technology. But the fact is these branches still earn a lot of money. The breakeven to earning a profit is about 3 years. The average branch when it's fully mature makes $1 million. And it's also critical for credit cards, small business, mortgage and middle market and private banking. You can't build those businesses without branches. So when we look at the value of the branch system, it's still very high, it's going to change a little bit, and we're going to modify a little bit how we grow them.
Next page is our economics of retail banking. I think the most important about retail banking is it costs us about $300 to $350 to deliver a checking account. Remember for that, you'd get some great services, mostly free. This is something that the Durbin Amendment didn't quite understand. Those free services are 24/7 call centers, free fraud protection for the most part, online bill pay, checks, credit cards, ATMs, all these services. Debit cards are free to consumer, access to branches and advice, et cetera. What happened here is that we lost $1 billion of revenue, and we're going to have modify a little bit how we price these products. We're not going to charge for the debit card. We really didn't think it was the right thing to do. But obviously, we have to modify the package a little bit to get paid fairly on these products and services.
We don't think we're going to get back all the debit -- Durbin stuff right away, okay? Because it's hard to do unlike some of the things you have in a credit card. But over time, we're going to do a better job in sales and service, probably have different standards to get to free, more -- maybe more deposits, et cetera. Remember, only about 15% to 30% of the checking accounts don't already have free. So you have to look at different segments and how you're going to price it, et cetera. Maybe one of the points to keep in mind is we're making less money. We're telling you, going forward, a little bit of NIM, this spread. We're not going to change the business because of that, because we kind of expect it'll normalize over many years. So the franchise has huge value, and I can see all of it in profit in 2012 and 2013. And obviously, in the retail business we have to be compliant with all the new demands of the CFPB, which we'll be trying to do.
Next page, Chase Private Client. I won't go through this here, but we're opening 750 branches next year -- actually not new branches, but when you walk into a Chase branch, there is going to be an area for private clients, that's for investment, annuities. We think it's a huge business. You can look at these number yourselves, you've tested it. We're going to 750. We think this one opportunity can add something like -- I thought it was $500 million to $1 billion of profit, maybe 5 to 7 years out. So we're rolling this one out. We think it's a smart thing to do.
Business Banking. I already mentioned the total company loans were up 70%. This is just the Business Banking that's done out of the branches. You can see it's gone way up. You go to '08, $5.65 billion of loans, and now we're doing $5.9 billion. Remember, in Business Banking it's the same thing as having mortgages. People weren't verifying income, they weren't doing appraisals where real estate was involved, so it's kind of back to a more conservative underwriting. We think Business Banking loans will be up a lot next year, too. We're -- so we think it's a great area.
If you look at WaMu, WaMu didn't do as much business banking as we did, so we've added something like 600 business bankers under WaMu states, California and Florida. If you look to the right, you can see we're growing deposits and loans. We think this opportunity also as a $1 billion dollars of revenues 5 or 7 years out. So if you drove around California like I did in the summer, you're going to see a lot of business banking that we're doing, that we didn't used to do before.
This page, because we get asked -- this cross-sell, we don't always show, we don't know now everybody measures it. But the chart in the upper left right, retail banking has cross-sell, these -- we think these are done the way other companies do it. We think they're better than most other companies, okay? So we're not -- you can compare them however you want, but obviously, do it. We've added -- the thing you told us to look back, what do we do with WaMu? So we added a whole bunch of stuff at WaMu, that's all at the bottom, so we've added 6,000 bankers or 4,800 bankers and advisers in the 2,300 WaMu branches, and they're selling more investment sales, more credit cards, more mortgages and checking balances are starting to go up. And I already mentioned Business Banking, so the cross-sell initiative is working quite well.
Card, I'm not going to spend time on. Receivables came way down. But when we look at a lot -- first of all, profits are way up, charge-offs have come way down. Our share of spend over the last several years has gone from 16.6% to 19%, and that's the one number that really drive profits more than almost anything else. And these new products are doing great. If you don't have them, please try them, Sapphire, Ink, they're all really good, so give it a shot.
Commercial Bank. Our Commercial Bank has performed extraordinary well in the recession, earning returns north of 20% in the worst years and in the worst quarters. All we're doing in the Commercial Bank, which -- that's why I should do this myself. Oops. All we're doing in the Commercial Bank is basically adding 2 things, one is in the WaMu footprint, again, mostly California and Florida; bankers, so we've added hundreds of bankers. You can see we've done $1.8 billion of deposits. We have $2.2 billion of loans. This opportunity we're fairly confident we'll be earning $500 million 5 or 6 years out. Because if you look at the new markets, Seattle, Portland, San Francisco, L.A. L.A. is like Chicago. San Francisco is like Dallas. These are huge opportunities for middle market businesses.
And we're doing some out of footprint, which we didn't used to do, which are down below, St. Louis, Nashville, Bowling Green, Knoxville, Charlotte, we're going to add 50 or 60 bankers. There, we're doing things that JPMorgan uniquely can help the larger -- middle market companies do, like going international. We do a lot of business with these middle market companies internationally.
And next page I won't go through is cross-sell in the Commercial Banking, equally important. You can see there's more and more of it. And the other -- the only other thing to focus on, NII is in the middle market part of the business, spread income, loan income is only 28% of the business. So the rest is investment banking, derivatives, syndicated loans and treasury, cash management services, where you can see that those have come down because NIM is down there, and eventually that will recover a little bit, too.
Asset Management. We're growing it all over. The best way to look at it is how many client-facing people you added over the last couple of years. You could see we've gone from 1,800 to 2,600. So these are people who deal with the clients. This is not the investment management side. It's the client-facing side, the private bank and Private Wealth Management, and the all Bear Stearns broker operation. And we love the business. We're going to keep on growing it. A lot of this is international, not just in the U.S. And investment management, we've -- I mentioned we have the Gávea. We're always adding products. We're also adding sales people there. More host sales to cover the clients around the world who would like to buy JPMorgan Asset Management.
Next page, Global Corporate Bank. This is the effort where we're adding -- we're going to end up with 300 Global Corporate Bankers, huge international expert -- expansion. This is mostly the call in 3,500 multinational to do more cash management, more custody, which drives a lot of FX, derivatives, swaps, et cetera. Here are some of the numbers here, we think it's doing quite well. If you ask our investment bankers and traders, by the way, they would acknowledge this is bringing in more business to them, too, just having senior calling officers out there.
And the next page shows you some of the expansion. You can see we've added -- we're adding locations, Panama, Colombia, Ghana, Saudi Arabia, Qatar. In some of these areas, we're already there. We're adding different capabilities. Local lending, custody. In some of the countries, they're -- most of these things breakeven rather quickly, and again, it's really to serve multinational clients who are already moving into these markets.
Let me cover a couple of regulatory issues. There is so much misconception around regulatory issues. I wanted to get it all down on paper here. This is not really about JPMorgan Asset Management. I'm fairly comfortable we'll navigate this and build a very good business. I think these things are important for America. I think the attitude should be more collaboration. You're going to see, unfortunately, you're going to see a lot of litigation and relegislation as everyone fights over this, because it was done by just one party to the other, and so you are going to have a fight. But we think a constructive look at these things in game and write is a good thing to do, and we're going to leave you with a few ideas.
Before we talk about regulation itself. I beg the regulators and the policy makers of the world to acknowledge this page. This page says that before Dodd Frank and Basel III, the market had already added more capital, more liquidity, lot of bad actions are gone. Boards, Risk Managements and regulators are more -- far more focused on risk. I think some of the comp practices put in place are actually better than they were before. Most of off-balance sheet vehicles are gone. CDOs and CLOs, are far -- if they exist, are far more conservatives. Asset-backed commercial paper is more conservative. Repo and tri-party is more conservative. There's less leverage loans and less leverage in the leverage loans. There are more conservative money market funds. And underwriting and mortgage, which was maybe the heart of the problem, is back to where it was 20 years ago: 80% loan-to-value, verify income, appraise the home. In fact, it's probably gotten a little too conservative at this point. And all Alt-A and subprime is pretty much gone.
This happened before. And by I believe is a substantially deleveraging in this, and one of the reasons we've had slow growth in the United States. I can't prove it. I'm convinced that Ben Bernanke, Jr., will write a book and show that this slowed down growth. Because the academics, always you ask me how to prove it, I can't. That's the job of the people who look backwards. And there has been significant regulation. We actually support a lot of it. So I made a little column, where we kind of support it and where we have comments, which I hope are constructive comments. And the funny part, by the way, is Barnie Frank, because you know he's retiring, most of my concerns, he agrees with, okay? He was not for the Durbin Amendment. He was not for some of the things that are taking place. He thought they should be left out of this -- the Dodd Frank regulation. I'm not -- the ones in blue, I'm going to talk about in detail, so I'm going to mention the ones in white really quickly.
Basel III RWA consistency it's obviously not that consistent around the world. The regulators say they're working on it. The industry, not the taxpayer, we are paying FTI, we'll pay $5 billion to the FDIC. The way they started to charge is basically an asset charge at this point, and I -- probably they're going to charge 10 basis points. But that's being charged into bank lending, repos, short-term deposits. It's not right. And I honestly think this should be fixed at one point. The mortgage business needs to be reformed. If the CFPB could do one thing, get this right from the consumer standpoint, standardized contract, servicing fees, make it clean and crisp. And from the industry standpoint, I think there'll be a good thing.
Three years after the crisis, we don't know what qualified mortgages are. We don't know the GSEs. We don't know what the skin in the game is. It's holding back the mortgage market. I wish this was done much quicker. The Consumer Protection Bureau, I hope is a plus. We're working with them and we just what kind of the same rules hopefully in all 50 states. Resolution authority, we believe in it. And matter of fact, the FDIC came out and said they have the authority to properly taking down the Lehman. I just think we should work with the regulator to make sure the world believes it. That you could take down a major bank like JPMorgan or anybody else, bury the bank, the shareholder pays, unsecured debt pays, the taxpayer doesn't. We think the industry should pay. So we would like to set up in a new way that eliminates this too big to -- any talk about too big to fail. And we believe it could be done, even though it's a little complex.
And the Financial Stability Oversight committee, we kind of believe there should be oversight, there are a lot of gaps. There's a lot of overlap. But look at this, this is one of my favorite charts, my spaghetti chart, which the people at JPMorgan really don't want me to show. All we're saying is this is not the best way -- the green are new regulators, and the arrows are who regulates what. You could see this huge overlap. There is growing confusion. There is huge bureaucracy and we're going to make mistakes. This is not the way to have a transparent, coordinated, consistent, rational regulatory system. I hope that someone goes back and fixes this one day.
The thing that bothers me -- one of the things that bothers me the most, I'm going to lose this battle, but I'm going to say it again, if this G-SIB charge. And I wanted to just put the facts up here. First of all, it was only to charge more for big banks. There's no benefit to size. There's no benefit of diversification. There's no -- so it's just like all the negatives and none of the some positives. I think this is rather contrived. If you don't believe me, go through what they look at to determine what is a systematically important institution. And I'm going to mention 4, okay? But the 4, hopefully, will get you to think a little bit.
Wholesale funding, they look at as all assets minus retail deposits. That means the secured and unsecured debts are treated the same. Long-term debt and overnight debts are treated the same. And then old Middle Market deposits, in which people like us have a lot, or corporate deposits which are very sticky if they're this corporate checking account, don't count, all wholesale, huge law. Assets under custody. I don't know it's in here at all. It's already segregated. Market -- here's one. Market share debt, equity loans and underwriting. Well, of course, JPMorgan has a fairly good share of that as does Goldman. And the point of this one is because it's not substitutable. Why? I tell the -- I tell them, well, no, of course it's substitutable. In fact, almost every deal has several people in it. You don't really have to substitute it. I mean, so I don't know why it's in here, except directly aimed at successful American investment banks.
Complexity, OTC derivative notional, I try to remind people that an interest rates swap is less complex and less risky than the Middle Market loan. If you don't believe me, go get a Middle Market loan file. And so I don't know why that one's in there, though I don't disagree with everything in here. I understand the intent, I don't disagree with all the intent, to reduce certain interconnectedness. And cross-jurisdictional activity, so if we lend overseas, for example, whether it's secured, unsecured or trade finance, all counts the same, okay? So this violates, to me, most things about why you have risk-weighted assets. And I am a little afraid that some of these things, this page is -- I'm saying it very delicately, things we should be thoughtful and careful about, okay? So we're not hissing all over the regulations, we're saying let's be thoughtful.
I'm going to talk more about trading but -- in a minute, so I'm not going to do it here, other than we got to make sure Volcker is right. We have the deepest, widest, most transparent and best capital markets on the planet. Let's be really careful about damaging that, okay? There are unintended consequences to G-SIFIs. Give you just 2, okay? Processing businesses, it'll be easier for JPMorgan to win and not much risk-weighted assets. Consumer loans, since we have to carry 9.5% and competitors 7%, we're not going to want to own. It doesn't mean we won't originate, distribute, keep this skin in the game. Is that what you wanted? The G-SIFI-shed consumer assets? I'm not sure. And so I'm just raising these questions here.
Pro-cyclicality. Almost everything is more pro-cyclical. If you look at how we do market rate risk and credit risk and CVA risk and loan loss reserving and -- it's all more pro-cyclical. So the more things get, the more capital you got to have, so it'll work precisely the way it shouldn't work.
And then, I'm not saying regulations are totally skewed against American banks. I made a list of those which are. And I think these are, in my opinion, fairly indisputable. They may get fixed. A lot of the regulators are -- they're redoing some of these things. But these are indisputably bad for American banks uniquely. The Volcker Rule is only in the U.S., extraterritoriality margins is only in the U.S. We won't -- will not have tax-efficient preferred stock.
Liquidity ratio. I don't know why they have covered bonds kind of 100%, but and Ginnie Mae's count 85%. And liquidity doesn't include a lot of things which are really liquid, like gold or other things. So I just think we should look at this. And then -- and I won't go through to the G-SIFIs, I've already mentioned that already.
So let me cover a bunch of key investor topics here. So we go to Page 23, there's a European exposure. You can peruse this at your own leisure. What it shows is our net exposure to Greece, Italy, Ireland, Portugal and Spain is [indiscernible] $15.9 billion. It breaks it apart by country, by sovereign, non-sovereign, by lending -- remember, lending is cash lent out of committed lines, so they may not actually be lent out yet. AFS Securities is where we own as a portfolio of the parent, most of those have fairly close to their mark.
Trading. There's $15 billion, but in this case is mostly $14 billion of derivative mark-to-market offset by $6 billion of collateral, that's most of the derivatives for -- the derivatives collateral is for that. Almost all of the derivative collateral is cash. We always get asked that question.
Hedging. $5 billion. Now you can say it may or may not work. My estimate, by the way, I look -- when I go through this, we do it multiple ways, is that we would lose $3 billion after tax if you had a disaster. That's the direct loss to JPMorgan under a disaster in these 5 countries. Obviously, there are other effects, there'd be huge other effects. Some good, some bad. Usually, mostly bad, but that's the direct one.
The second I also want to point out because we get asked all the time, so we added that the top 5 banks in Italy are $1.4 billion of this exposure. The top 5, so obviously, it comes down. And the other thing I want to say, which is not on here, is that I always get asked the question on derivatives of $14 billion. People say, My God, but you -- that's your net, because you have huge long and short. And I -- and we do. Maybe it's $100 billion by $100 billion, I've got the exact number. But the point is, if you go back counterparty, so take -- and all our hedging is outside of these 5 countries, by the way. So take a large American bank that we trade with, with Italy's sovereign debt, with almost all derivatives, we'll be long 10 and short 10, and cash is posted as a collateral. So the fault of a counterparty is not going to sink our hedges. We don't have a lot of wrong-way risk. That is true for all -- most of global market counterparties. So the question is, if you might be -- if you're long 10 with one and short 10 with another, you net it, but that's not -- if something goes wrong with the counterparty, you're in deep trouble. We don't do that. So I just want to make that extra point here.
We've been asked a lot about expenses. You can see our expenses, this little chart, $45 billion. And we're just estimating, rolling $49 billion, don't try to do the numbers yourself, for 2011. We took out of here all Investment Banking comp, okay? We run that well. I'll talk about that separately. We think we're quite efficient in the Investment Bank, but it's the most volatile numbers, so kind of with the overhead of running the joint. We took out litigation. We've obviously put away a lot of money for litigation, and kind of foreclosure matters, we have onetimers. So this is kind of what's the overhead ex IB comp? And you can see, it went from $45 billion to $49 billion. But almost $ 1 billion was higher mortgage service and expenses, just mortgage expenses and service, mostly default mortgages and normal mortgages. FDIC insurance is up $600 million. We spent another $500 million marketing credit cards. We think it's got very good returns. You might see us do more of this. We look at it as an investment in the future. And there's $450 million with just the expansion of the commodities business. So $2.5 billion of the $3.6 billion was those 4 items. You -- I talked before about all these other growth things we're doing. Those cost money. So we're -- we actually think we're -- our expense is in pretty good control.
The $49 billion will probably be, we haven't finished all the numbers yet, approximately flat next year. And the only other number I want to point out is that the -- we're still bearing high cost in here, about $1 billion or $2 billion, for just this cost of servicing real estate and things like that. So there's about $2 billion which will disappear over 3 or 4 years, and depending how the mortgage situation plays out.
People ask about reserves. This is -- I'm showing what we expect our through to cycle credit losses to be. If you said, What would your reserves be when you get to normalized credit? Probably $15 billion, $16 billion, $17, billion. We have $28 billion, so obviously, there's $10 billion plus to let come out. You can look at that as capital or not. A lot of investors said, Well, why are you being so conservative with reserves because that's expense of capital? We understand that point. We're just conservative people.
Private label litigation. You can read this at your own leisure. Here's what I want to say, is that we've been sued at $54 billion of securities. We expect the number to go up. Whether you do repurchase claims or litigation, it's pretty tough. We've hired top lawyers, top people, top mortgage people, to make sure we understand exactly exposure we've been through. All 700 securities that were done by JPMorgan, Bear Stearns and WaMu. A lot of this stuff, 30% or 40%, was actually underwritten by somebody else, which is where they have to go get their claims. If you do a repurchase claim, you got quorum requirements, you got approved loss. There's a lot of -- you got to do loan by loan. It's pretty tough. Just it's pretty tough. If you do litigation, okay? We think that's closer to clear risk of claims and set forth. Investors mostly sophisticated, they understood and accepted it. You got to prove damages from economic decline. House prices went down 40%. It's hard to say it was because of something else. And so it's pretty tough here, too.
So we put a lot of money. If you calculate repurchase reps and warranties, like the GSE calculations, which I -- we've put out before, that number would be like a $5 billion or $6 billion number. A lot of analysts, they're -- they're all over the place, but if you say, What's the average? It's around $6.5 billion. We think we have significant reserves. If someone is going to be reasonable on this, we'd have a conversation. In my opinion, it's unlikely. It's just to complicated. Its loan-by-loan. Sometimes it's tranche-by-tranche. And there are too many players. We're not going to pay twice, reps and warranties, and securities losses. So unfortunately, the likely outcome is litigation over a long period of time. And I'll comment in a second on reserves.
Investment Banking. I think it's still a great business. I think you got to be very careful. Look at the business from the standpoint of the customer, not the standpoint of the Investment Bank. Our customers, and that's true for Goldman's customers and Morgan's and Citi's and everybody else, equity, debt, capital markets, balance sheet management advice around the world is going to still be there in years, okay? And I can make argument, and I have some numbers here that show how much credit and financial net worth is going to grow. And how much financing needs are going to grow. There are going to be huge growth over 10 to 15 years. It's a volatile business. It's a volatile business. Trading and investment banking freezes or it could drop in half in a day. That's why I -- we never talk about pipelines, because you -- like the pipeline, the good news is the pipeline is going up, the bad news is we're doing no business. And so but I don't think you should look at the business and, Okay, that's permanent. It's not permanent. I'll talk about trading a little bit later. But I say the same thing a little bit about trading here. We service a lot of investors. Those investors are going to have twice as much money 10 years from now than they have today to invest. And they are going to need to invest that money, and I'll give you a little more detail in a second.
So we're going stay focused on client business. We think a lot of these things are going to change products and pricing and how we deliver. We think we need to be more efficient in certain areas. But underlying a lot of growth. The only caveat I put in this whole thing is, if somehow some of these rules end up being so negative to American banks that we lose -- start losing shares to overseas banks. That's the only one -- I don't expect that to happen. And if that happens, we'll all going to have to figure out what to do about it.
The next page, I'm not giving you a page. We're doing something on Investor Day in February called Demystifying Market Making. And we're going to do it because there is so much misinformation on this. And we just want to give you a taste of it and just some good information. This shows you volumes over the last 15 years or so. Volumes are going to go up. Most people forecast it'll do more. Secondary tradings is going to go up. This is U.S., but it would be even more true if we went to Asia/Latin America, et cetera. And the important thing here, and we have a -- I'm not going to show this chart, there'll be a new one, spreads have been coming down for years for clients. And you know it, actually, everyone knows, okay? But it's been true for swaps, FX, almost every product there is. That's a good thing for investors. They get to buy something cheaper or better.
This page shows you JPMorgan. We think we've become one of the top traders in the world in fixed income. We've moved up in equity. Bear Stearns prime broker helped us in an enormous amount. And we're building out like all of the folks with electronics stuff to do these things even faster, quicker, more effectively. And I think it's really important, trading, half the trading areas, if you weren't a -- if you're not in the Investment Banking business, it's hard to make money. You need primary and secondary to make money trading. If you look at the FICC business, because this is the one we get the most comments, What's going to happen? I think volumes are going to grow over time. Clients are going to grow overtime. Spreads will come in as have been happening forever. That's a good thing. And it's a hugely diversified business. So and when people say, like some of the people are out there speculating all the time, we have a 120 desks and 20 major trading centers around the world serving an awful lot of clients, with research, sales, trading, execution, reporting, risk management, et cetera, across tons of products.
And I just -- when I look at this, and we may give you more detail on the flow, but a lot -- if you look at these numbers, it's most flow. This is mostly real clients calling us up. They want the best bid and ask, et cetera. If you talk, and this is true for Goldman Sachs, too, you can't -- we deal with 16,000 investors, okay? And it costs us a fortune to run this. 2,500 sales professionals, 2,000 training professionals, 800 -- we spend alone on research like $500 million a year. And 13,000 people, risk, credit, technology, ops, et cetera. You can't duplicate this. And this has lead, like most business with the kinds of scale, to better prices for more clients, which is a good thing not a bad thing. I remind Paul Volcker sometimes is that, when the client gets a better price, that's good for the client. That's a good thing. That's your client, by the way. It's not a bad thing. No different than Walmart or Costco. And we think these are hard to duplicate franchises, with volatile flows, but over time, very predictable growth over time. We have the deepest, widest capital markets. We should make sure we keep this.
This page shows you some of the volumes. Again, most of these volumes are high-volume activities. And if we don't have it on here, and we may actually show it next time, but we don't make that much money in poor trade. I mean, I do a lot of these things to make money. So I do think it kind of helps prove that it's a real service over time, including derivatives.
The next page shows you derivatives. Another great fallacy. Most companies in the world use derivatives. Most derivatives, FX and trades commodity and equity, okay? When they say, Lack transparency, you and I know, in this business, you can actually -- they mean pricing, which I think they mean, you can actually price most of these things with penny and pips on your Bloomberg. Yes, there are some exotic ones. They're much smaller and they're going away. Companies need this. These are sophisticated people who do it in their own interest. They don't do it because some trader is ripping them off. Most of them know exactly, I -- if you don't give them the best price, it goes elsewhere. And so you get paid for research, execution, advice, being there in good times, doing things the clients want. So we're going to give you a lot more on derivatives, we think it would be valuable to make our shareholders a little bit more comfortable overtime.
Next page shows you capital. So -- and this is all -- this Basel III risk-weighted estimates. On the right, we show -- oops. On the right -- left-hand side, we show you capital. This is using analyst estimates for earnings. So don't say this is JPMorgan. We just took your average estimates, we plugged them in here. And your average estimates for stock buyback, which is like $7 billion to $10 billion, and this is what it would come out to, which are risk-weighted assets. To the right, we show you how we get there, that today we're approximately $1.5 trillion. There are a bunch of things that add to it, market risk, capital is going to go way up, CVA is going to go way up. There's a bunch of stuff that goes way up. There's a bunch of new things that bring it down. So we think by the end of fourth quarter '12, without a lot of doing dumb things, we're going to about $1.4 trillion, with some normal growth. And we obviously have a lot of run-off of assets and et cetera. And we think these are pretty good numbers you can use about where the company would be with capital.
The next page shows you how we're going to look at businesses. Put this down as a tentative look, okay? We'll give you a view of how we're going to look at it, but to the right, how we're allocating capital for the businesses. I kind of have this belief the competitors are going to cluster around numbers. There's not going to be that everyone can run a $7 billion and other people run at $9.5 billion. We're assuming we're going to be at $9.5 billion. But we think that investment banks have to run close to $9 billion, $9.5 billion. Big wholesale, big commercial banks, we think have to run close to $8 billion, $8.5 billion. If you're a processing bank, we think it's going to be really hard for you run at $7 billion and compete, because you won't have as much capital as the other person, so instead you'll be a carrier. We broke it out for every part of the company, and we have our target returns. We don't -- these returns, which average 16% of return of intangible comments, which I really look at, close enough is as good. We haven't changed them a lot. Is it possible that when we're all done with this, we'll reduce a little bit? Possible. I don't think it's that important. If you added the earnings, this should be out of $24 billion of earnings. If you add -- where people think we earned this year like $20 billion, that's $20 billion after bearing a lot of litigation, very heavy mortgage servicing costs. So it's not an unreasonable thing that JPMorgan earned this kind of money, which is a good return on capital.
And the only other caveat I'll give you here is that, corporate, we have a lot of assets at corporate. $300 billion of a investment is for asset liability management, et cetera. How we allocate that to a division is to offset deposits. We'll have to be a little bit more detailed how we do that, so we'll -- I think we'll become more efficient, not less efficient, with that one.
And the next page shows you how we're going to look at capital. So we got this new CCAR, it's the Federal Reserve Comprehensive Capital Analysis and Review stress test. The stress test is unemployment goes from where it is today to, I think, it's over like a 2-year period to 13%. Home prices go down 20% from where they are today. That's a severe global market shock. Think of markets -- I think Equity Market down 50%, and credit spreads gapping out to 17%, and high yield at 20%. And a new real stress in Europe, so that you have -- whatever you own in Europe has real stress in it. We think the results and all of this are going to be fine. That we'll show, that we'll make a lot of money anyway, typically over a 2-year period. And that I doubt, my own personal opinion, I don't know how these others sort it out, that it's unlikely even under these things, over a 12-month period, we'd lose money. That's my own opinion. And that's without taking drastic action. And that we never -- we would probably want to say we'll never drop down below 8%. This test is for Basel I, 5%.
I think what this test is going to show will be different than what people think. It's a hard stress test. I knew that sort of -- I don't know if every bank, would do these numbers in every bank. But and I know you guys did it in a lot of banks. So close enough is good enough. It'll show that most banks are okay. Matter of fact, maybe there's too much capital to handle this kind of stress easily. Maybe he says there's too much capital. And I think liquidity might be more important.
Here's what we're thinking about doing. Again, this is tentative, we reserve the right to change it. We told you last time that we're going to keep -- that we don't see any need to go right up from $7.5 billion to $8 billion to $8.5 billion, or as quickly you can to $9.5 billion, that we may kind of meander there and use the capital, do other things. So here's my comments. If the Board asked, We want you at $9.5 billion by the end of 2012. We can do that. I think it's a good statement. They haven't asked that. That's not our target. And this is a Board level decision, but my attitude is that there is going to be a little bit of Race to the Top that we -- we're probably better off getting to $9 billion plus in 2012. We can still get to $9 billion plus and buy back approximately as much stock as we bought last year, was $8 billion or $9 billion, and maybe a little more. It would depend on the earnings and all that. So that's maybe not as much as you all want to see, but it will still put a great position in capital over time, and maybe we'll modify that. But I do think the things you've seen around the world, people are going to go up higher, faster and quicker, and there's no reason, I guess, not to at one point.
Then 2 pages -- 1 page of forward-looking comments. So the Investment Bank market revenues are about flat but from the last quarter. This comment's from last year, right? I think. This is year-over-year. I'm talking quarter-over-quarter now. So market -- but my experiences is that December, I guess December 15, it's dead. So we're kind of -- and you assume they'll be no volume after that then it will be down the first and last quarter. DVA is the negative couple of million dollars so far, a couple of hundred million so far. I personally want to make a public statement. I think DVA is one of the more ridiculous concepts that's ever been invented in accounting. We never look at it as earnings, ever. We just -- we have to deal with it and describe it and it distorts all of our numbers.
Mortgage Banking revenue will be a little bit lower than people expect. We have lower spreads, lower volumes. I think there are timing issues in how people account for some of this stuff. Our repurchase losses will be a little bit higher. We think it's purely timing, the speed up of how the GSCs are processing it. And that MSR Risk Management will lose $100 million or so, okay? Obviously, that bounces around a lot. We'll put in new better models and all that. Plus, we'll be a little more conservative on the return we expect in MSR. So Mortgage will be a little bit worse than people think.
Consumer and Business Banking. The only other thing that -- we've mentioned it before that there will be some spread of compression next year, and which we don't mind, which means we're not going to be reinvesting at these lower rates. We'd rather take the spread compression and wait for another day than try to catch up a spread compression.
Credit card loss will be at 4.3% -- will probably be below 4.34%. Private equity a small loss this quarter. If you recall, the corporate net income would be approximately 0, it's going to be a little bit better than that. And here's a fair disclosure, disclosure. The ability to repurchase additional $950 million of equity, which means stock or warrants, et cetera, we actually have, okay? It was unused. We had $8 billion approved. But we didn't use all the dividend stock that we had been approved for. And we can use that to buy back stock. We can start that tomorrow after this FD disclosure. And we'll decide what to do with it over time.
And then 2 big factors, okay, both for the fourth quarter. Obviously, reserve take down and litigation reserves, we don't know. We kind of think about those things, we review it. But let me make a -- maybe a more important statement. Next year, it's going to be very, very hard for JPMorgan not to take down reserves. I'm talking about credit and mortgage, credit card mortgage, the most part. And if you roll through the numbers, we almost have to. I like to leave them up, but I'm not going to be able to leave them up. In my own opinion, in my own opinion, and I guess that we've been through a lot and obviously things change, it's unlikely that litigation additions will be more than reserve take down relating to mortgage. That's my own opinion. So that's how I'm plan -- looking to plan the company.
And I'll end by saying, I think we're in great position. We look forward to the future. We're happy where the company is. And we're proud of what we do every day. Thank you. Did I do that in 25 minutes?
Richard Ramsden - Goldman Sachs Group Inc., Research Division
So I guess the question first. I mean, as you think about the benefit of getting to a fully loaded 9.5% early versus the cost of not being able to return capital when your share price, arguably, I think, in the views of many investors, is very cheap, how do you weigh that up? Do you think when you get to 9.5% you will be able to return 100% of the capital that you generate because you're fully compliant with everything of that?
Right. Just sort of in reality, look, you're going to have to ask the Fed because they are putting out the guidelines and the rules and you're talking about 2013. My own opinion is, is that at one point, if banks meet their capital requirements, they are properly run, they meet all the -- it's not just capital, say you got to have Risk Management and all, which I agree with. The banks will be free to do what they want with their capital, as they should, as long as the system is protected. So I think when you're over 9.5%, yes, I think they'll free it up. I don't know, I'm talking about stock buyback. I don't know if they're going to be thinking about dividends. They may have some view of limiting dividends when the company don't start to pay too much. Or that's what the conservation buffer is for, that if you dip into it, which I think would be perfectly reasonable, if you dip into the conservation buffer, you can't raise dividends, you have to cut them. So I'm not opposed to that concept. But I think they haven't written all those rules yet. I think at one point, they have to allow Board to decide how much stock to buy back, as long as they're meeting all the regulatory requirements.
Richard Ramsden - Goldman Sachs Group Inc., Research Division
The Fed is going to be publishing the results of the stress test, as you talked about. Our expectation, and it sounds like it's your expectation, too, is that what it's going to show is, even under an extreme stress scenario, that there is excess capital, in particular for you. Do you think that, that will increase your flexibility in terms of your ability to return capital?
Yes, I think what they -- what I've heard the Fed say publicly is that, next year, they're going to have one set of rules. But after that, they're going to change them again and be much more flexible. I'm not opposed to disclosing the numbers. I mean, matter fact, you guys have done your own numbers. How much you're going to lose in home equity, how much you're going to lose in mortgage, how much you're going to lose in credit and around the world. There's not a bad -- it's not -- most of it's stress test anyway. This is just different. It's a little harsh. But I think if approved, in some ways, I think it will improve the stability of the system definitively, definitively, like we don't have to talk about it anymore. I think that's a good thing. And I don't think that it will come back and say, Okay, now you got to do 15% or 20%.
Richard Ramsden - Goldman Sachs Group Inc., Research Division
Okay. Right. But so if we turn to Europe, so I guess, again, one of the things that's come out is delevering in Europe, I think everyone is not taking it is a given. So a couple of questions. I mean, the first is, if you look at the -- some of the businesses that the European banks are getting out of, be it trade finance, equipment leasing, aircraft leasing, but those haven't necessarily been the biggest businesses for you historically. I mean, how much of an opportunity do you think it is for you to expand in those?
So I guess let me make a broader statement. First of all, we want the Europe -- the European banks lived under a different schematic for a long period of time. And it was part of how they ran, it was part of what the regulators allowed, which is more wholesale funding and more leverage. And they're being pushed very quickly to go to less wholesale funding, less leverage. But at precisely the wrong time. So we say we're going to run the system counter-cyclical, where they make it more pro-cyclical. So I'm a little sympathetic to the position they're in. Some are going to shed businesses and assets. I think they're quite different. If there's a good business that we could buy, we'd listen, okay? Assets are a little bit different because you can buy assets all you want, but that goes back to would you rather buy back stock or buy assets. A lot of the assets, and they have been shedding, but most that we see so far in the big numbers are trade -- not shedding, but not rolling, trade finance, revolvers and some asset sales and CMBS in the United States and some RMBS in Europe. We'll bid. If we think it's a rational asset, we'll bid. We -- don't get to change the future of JPMorgan.
Richard Ramsden - Goldman Sachs Group Inc., Research Division
Okay. But on the front further, I guess, since you last spoke, we've seen the restructuring in Greece, which was the private sector took a much larger write-down [indiscernible] did not participate and against that CDS didn't trigger. You're not changing your last expectations...
Yes, so CD, the CD -- here's the importance, CDS, the contracts say that if you do a voluntary restructure, it doesn't trigger. It wasn't that the regulators are positive says you can't. The contract says. You can change the contracts going forward, my guess is some will, okay? The other thing, which I think was a little bit of a mistake, is that 2/3 of the debt was going to be voluntary, but the IMF and the ECB would keep their debt, no haircut, which effectively subordinated everybody else. That's a little bit of a mistake under law to do something like that. And I think they realized that they caused a problem. So but we expect CDS to be effective. In Greece, if you don't voluntarily restructure your debt, or if you do and there's a default, it triggers. If you don't voluntary restructure and there's default, it triggers. I mean there's a damn good chance, it's going to trigger. So when you're -- whoever your CDS contract is really will pay off. So but I do think, going forward, people will be very, very cautious about doing sovereign CDS. And I don't -- look, I don't think it's a big deal for the future of anything. If they want to get rid of them, that's fine with us. But -- and you saw when the made announcement what happened. Basil III went up, CDS spreads gapped out, because they created more uncertainty by doing that. So I don't think it's -- but I don't think it's that big a deal for the future of the business, any way, shape or form.
Richard Ramsden - Goldman Sachs Group Inc., Research Division
Let's open it up to the audience. Ron?
Jamie, I see the political states are starting to heat up and banks are already are everybody's favorite pinada, and may even get more so in 2012. And maybe that even started yesterday with President Obama's remarks. And so I was wondering if you had any thoughts on maybe whether the industry could be placed in an even more hostile environment than it does now.
Yes, so here's -- I'm not going to -- yes, I'm going to -- maybe, but here's how I look at the world, okay? And I'm not going to comment directly on his remarks, but here's what I'd like to hear from our politicians. This country, the United States, I'm sorry if you're from somewhere else, okay, still is the best country in this planet, particularly regarding business. We have the best military in the planet and we will for decades. We have the best universities in the planet, rest of world is coming up. We just have among the best. We have the best rule of law on the planet. You don't spend a lot of time worrying about corruption or ownership until recently in this country. And I -- but I think the tort system is excluded. We have the best businesses, large, medium and small. We have somehow started to debate the small and bigger against each other, they are not. They're symbiotic. When Boeing was going to build that plant in South Carolina, 4,000 jobs in the plants, 20,000 outside. The outside jobs are mostly small business. Jobs appear in small business, not always created in small business. We are not looking at facts, we're making decisions for a wrong reason. Our big businesses, most of them, are world-class. I'm not talking about JPMorgan, but you think Boeing, Johnson & Johnson, Wal-Mart, GE, these are among the best businesses in the world. And big businesses are philanthropic, they're charitable, they're diverse, they pay their people better, which I thought was a good thing. They have medical insurance, not just to their employees, most of those employee -- insure a lot more than just their employees. These are wonderful institutions. And like any institution, including the military, media and congress, sometimes there's a bad apple. And yet we denigrate the whole institution. People around the world will give their arm and a leg to own these companies, okay? So they're symbiotic. They're great companies. We have the deepest, widest, most transparent capital markets in the world. Yes, there were some flaws. We should fix them. We should punish people if they committed a crime or made a terrible mistake. This country is the best place for business on the planet and the best country. It's the most free. It's the most open. That's what we should be talking about. And if you ask, and I worked in Wall Street most of my life, and you ask most people in Wall Street, they don't mind paying. We don't -- we're not -- I don't -- Warren Buffet gets mostly dividends and interest income, which is why it's 17%. But most of us, wage earners, okay, are paying 39.6%, and now I guess it could be 12% or something in New York, and the states, 50%. I don't mind paying 50%. And just like President Obama, I would love to lift up the poor, the impoverished, the inner city school kids, but we still want a meritocracy. We took out -- we have a wonderful country, and that's what we're doing, helping people get by, that's all. And so, yes, that's what I'd be talking about if I was a politician running, which I'm not, by the way. I mean, acting like everyone has been successful is bad and that you're -- because you're rich, you're bad. I don't understand it. I don't get it. It is what it is. JPMorgan will be here for 100 years. That's how we're managing the joint.
The risk-weighted asset mitigation to just 12 months out, it that looks pretty significant. Two things, doesn't that hurt revenue, overall, as you're losing some of those earning assets? And second, why get to the goals early when our European brethren look like they're going to not be there for years?
Well, they have been -- their regulators have said, you have to be 9% by June 2012. It's a different...
But that's both...
I know, it's a different -- I understand, I understand. I just think there's going to be a little more Race to the Top, and the people want to get out of this question anymore. We don't want capital confusion, we want capital certainty. So that's my own opinion, it may change. Maybe my Board will feel differently, but right now, we'd like to get north of 9% and get out of all this stuff. Risk-weighted asset mitigation, there's a number near about runoff. That is a known number, okay? That is mortgages, home equity and sort of [indiscernible], which is going to run off, okay? We've disclosed that. It's going to cost us revenues. But actually, it was going to cost us revenues, but it's not going to cause us profits. We're not making money in all that runoff. So and I like quality revenues, not just revenues. And the second one is just a flip side of the other. There are a lot of CVA and credit models and stuff going -- and market risk models going in. We're going to be implementing new models, which we should do, and that's all it is, it's the battle of the models. I mean, this is going to be done at a very detailed level. And by -- I think part of it violates the keep it simple and stupid rules. Too complicated. It will lead to additional problems down the road. And it will have the same model, by the way, it's going to lead to the crowded, the ship where everybody's on the same side, which is, by the way, what happened in mortgages. Go ahead.
Most people think we can't really clear -- fix the housing industry until we can somehow clear foreclosures and kind of move forward instead of move backwards. And there doesn't seem to be any attempt, whether it's government-wise or unless it's a new bank to make mortgages in a new market. How is that possible? I mean, how do we get past that?
Make more new mortgages?
Well, to your point, we don't have a standard underwriting procedure. We don't have a standard buyer anymore. We can't clear foreclosures. And so housing prices can't go up, which is going to restrain growth. Is there any possibility that, that clears in the next 12 months?
Yes. So let me give you a flip side of this one, too. So we're -- 5 million homes are being sold a year and being financed. That's down from 7 million, but 7 million was a bubble, maybe norm would have been 6 million to 6.5 million. Mortgages are being done. They're 80% LTV. You got to prove your income, that's a pay stub or a tax return, and appraisals are being done probably too tough. So they are being done. And then there are government programs for refis, which are being done, this HART program. So you're going to have more people who have high LTV, over 100%, who can refi, we think that will be another -- another million homes. So remember, there are 75 million homes in America. 25 million do not have a mortgage. 45 million have a mortgage. 5 million of the 45 million are having some kind of issue, okay? The banks are actively and aggressively modifying those who can afford a home at 2% interest rate. That's what we're doing. So we've done and other banks have done hundreds of thousands of these. And we do the government program called HAMP, we do your own program, okay? So we've done -- I've got the number, 1 million plus. The -- now take the foreclosure and the home prices, so foreclosures, and this is where people have it wrong, so all-time affordability, housing formation will go up when jobs go up. We've been destroying more homes than we're building. The number of homes for sale is coming down, not going up, just get the chart. The number of new distressed loans, we call it shadow inventory. Shadow inventory is coming down, not going up. That's the facts. I'm not making it up. And now it's very high scale. So it's gone from, on a scale of 1 to 10, it's up to 10. It's going to bounce around there. But it's going to come down in 12 to 18 months because the front is way down, 30, 60, 90, 120. Newly bad stuff is way down. Half what it was 18 months ago. So you are watching, right now, it's coming to balance. I don't know when it's going to crisscross. I think if you have job growth and people have confidence and start buying homes. And home prices are still going down a little bit, predominantly because so much is distress sales. The percent of distress sales which are a 30% discount, but you think of the wholesale prices, which are banks, they just want to paint them and sell them, okay, are a high percentage. But that percentage is going to come down. And if you go market by market by market, it's getting better, not worse. So to me, it's now a confidence game. It's business confidence, consumer confidence and jobs. And once, I think, once you have real job growth, I think housing will turn quicker than you think. I'm not saying in the next 6 months, but sometime in the next 18 months. And there are huge investors coming in, by the way, buying 20 homes at a time, 20 condos at a time. Someone told me in Miami, 20% of new home sales are Brazilians, okay? There are -- markets are starting to get clear. And maybe -- we're not against other programs to help do that, if they were properly constructed.
Richard Ramsden - Goldman Sachs Group Inc., Research Division
Yes, from the back.
Jamie, I'm curious as to how you feel about S&P's revised rating methodology when it comes to the banking sector, and how they could have possibly have wound up with a single A on your holding company?
Honestly, I'm going to say the same thing I think Tim Geithner should have said when they downgrade America. That's their opinion. It's just someone's opinion. It's a well-thought-through opinion. It's got a consistency in history to it. But I think we have a battleship balance sheet. I don't understand it. Nor do we need government support to have our battleship balance sheet. And extreme liquidity. I mean, extreme. Like we have $150 billion right now with central banks around the world, like earning 25 basis points or 15 or whatever you get paid around that.
Jamie, capital markets revenues are under both cyclical and structural pressure. A lot of Investment Bank having single-digit ROEs will blow their cost of capital. And yet, we haven't seen a material reset down with the compensation ratios. Do you expect that to happen?
Okay. Here's a great number for you. So payout ratio as a percent of revenues and stuff like that, I told this to the press on some call I was on. And it's in a chart I did once, so I will give you some numbers. If you are a highly capital intensive business, the payout of revenues to employees are going to be very low. And so certain companies manufacturing is still at sort of -- it's like 10% or 20%. If you were in the 100% people business, high capital component, particularly brain component, like lawyers or accounting, it's 90%. Investment Banks are both, right? We have a -- we need a lot of brain power to do our jobs well, and we got a lot of call centers, et cetera. We're both. We do everything. And so the payout ratios of Investment Banks, ours was about 40% or so, I've got the exact number, last year. And this year, it's been running closer to like 35% to 37%. But this is the number I gave my media friends. You know what newspapers are? Higher than ours. I said, Why don't you put that in your article? And he was just outraged. By the way, people aren't thinking clear, too. What's the GDP? What's the GDP of this country? Like $15 trillion. What's consumer income? $10 trillion or $11 trillion. That's a good thing. I mean, I don't understand this whole thing. Anyway, the bank -- I think most of the banks are putting compensation plans, risk adjusting things, and are -- I think you've seen some of them have come down. Some haven't come down because the results are terrible so as a percent of revenues or trade or profits, they're a big percentage, but these dollars have come down. And every estimate, people think, well, if comp is coming down in Wall Street this year. And so I think it's coming. I think we have to earn a return to shareholders. I think some of the things that drove comp way up over a long period of time, like too much leverage, have reversed and are pushing it down. But I think it will always be a high paid business.
Richard Ramsden - Goldman Sachs Group Inc., Research Division
Okay. I think we have time for one more question. Yes, sure, hurry up.
Jamie, people are talking about too big to fail, but what about too big and too complex to manage? You listed all those places you're doing business and all the various businesses that you're in. At what point does it become too big and too complex to manage?
Well, my whole life, I've looked at companies succeed and fail, large companies and industries. And some succeed and some fail, okay? And you have GE, Westinghouse. You had Toyota, which aren't doing well now but still build great cars, and a lot of U.S. car companies. You had some in every industry. So I don't like to look and say, Well, it's a given that this is going to happen. It's not a given. In any industry, there are winners and losers and you want to be a winner. They're complex. Remember, some of what we do is not -- it's like it's cookie-cutter. We do the same thing every place. We're not adding complexity. We're reducing complexity. The reason companies get big and large is why? Economies of scale. There is huge economies of scale in our businesses. Who is the beneficiary of economies of scale, ultimately? The consumer, the client. That's a good thing. You want economies of scale. You want productivity. I tell all my democratic friends, if you didn't have productivity, you'd be living in a tent and hunting buffalo. And there's huge in banks. It's data centers, networks, diversification. I mean, you build a new risk system, $50 million bucks. New liquidity, there's one, $50 million. And we provide those services around the world. So we bank caterpillar in 40 countries. And we bring them stuff that's cheaper, better, faster, quicker, that's why they do it. There are negatives to size, and you've mentioned complexity. The biggest ones, greed, arrogant, hubris, stupidity, lack of attention to detail and headquarters that forgot why it's in business. Folks, thank you very much. We'll talk to you all soon. Good luck.