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|Date: 2023-06-07 Page is: DBtxt001.php txt00017693|
Banking / Social Impact
Founder/CEO at TrueValueMetrics.org developing True Value Impact Accounting
The good news is that JPMC is doing something to be of help to Detroit ... but the bad news is that big banks including JPMC have ignored the decline of the modern economy for a very long time and their role in financialization was a big part of the problem. The American economy went over the cliff in 1973 with the end of cheap energy, and corporate profits only recovered when manufacturing was outsourced to low wage countries. With US disposable income dramatically reduced, banks helped out by lending more and more to keep people buying and corporate sellers profitable. In the end this resulted in the 2008 financial crisis because these behaviors were unsustainable. JPMC's involvement in Detroit is good news ... but if the damage that financialization has done to the real American economy over the past 40 years was to be monetized and charged to the banks, they would all be broke! PeterB ... old and pretty damn angry!
Jamie Dimon, the CEO of JPMorgan Chase, is testing out a new kind of business investment in the city of Detroit. The idea grew out of Dimon's interest in changing the way the bank was engaging in philanthropy. He wanted to try and tackle a major national issue, like urban poverty, by applying the same kind of expertise and analytics to the problem that the bank uses to advise big corporations.
Jamie Dimon: The 60 Minutes Interview
His first target, he said, would be the city of Detroit, just after it filed for bankruptcy.
Jamie Dimon: Detroit is probably one of the biggest failures of an American city that we've ever seen. My view is, why can't we make Detroit an example of America's exceptionalism, have people roll up their sleeves, get together and change the tide of history right there, right now?
So in 2014 Jamie Dimon picked up the phone and called the then-new mayor of Detroit, Mike Duggan.
Mike Duggan, mayor of Detroit
Mike Duggan: My assistant came in and said, 'Jamie Dimon's on the phone.' And I said, 'That's an amazing coincidence. That's the same name as the president of the biggest bank in America.' She said, 'I think it is the JPMorgan (LAUGH) Jamie Dimon.' I didn't have any idea Jamie Dimon knew who I was. So I picked up the phone…I recognized
Lesley Stahl: He cold-called?
Mike Duggan: Cold called. I just-- no-- no warning. And I recognized his voice. He said, 'I want to help the city of Detroit.'
For Mayor Duggan, the phone call was about as unlikely as his victory just months before. He won, surprisingly, as a write-in candidate, becoming the first white mayor of Detroit in 40 years, in a city that's nearly 80% black.
Lesley Stahl: Describe Detroit when you came in as Mayor.
Mike Duggan: Half the streetlights in the city were out. How do you get street lights fixed? A third of the buses were in the garage broken down. People were standing on street corners for hours-- waiting for a bus. There were only eight working ambulances in the entire city. There were times you could wait an hour when you dialed 911. And between 2000 and 2013, 250,000 people left the city of Detroit. I mean, that's more than the entire population of the city of Buffalo. So if you can imagine everybody in Buffalo leaving in 13 years and leaving all the buildings behind and empty. That's what Detroit experienced leading up to bankruptcy.
This is what large parts of Detroit looked like: a bombed out warzone. Abandoned factories. Boarded up houses.
Initially, Dimon agreed to spend $100 million. Not a lot of money for the bank, or Detroit, but he knew that JPMorgan had something in a way more valuable.
Jamie Dimon: So it's not the money, and this is a very important thing. It was about the help, the advice, the consulting, the ideas, the human capital.
And it was about the data that the bank collects and crunches every day, more information about business and consumers than the government collects.
Jamie Dimon: We use big data and artificial intelligence in running our businesses around the world for risk and credit and marketing. So here, we actually have huge data, too, about how people spend their money.
Lesley Stahl: Where their credit cards are showing up.
Jamie Dimon: We can actually see where people spend money on credit and debit cards and checks and where they're spending, like, at restaurants, et cetera. That one piece of data creates where you can open a store, where you can do something different.
Dimon had the analysts build a database just for Detroit.
Jamie Dimon: So we know, in a certain part of town, that you're traveling 20 minutes to buy milk or 20 minutes to go to a restaurant, which means that a store could be 10 minutes away.
Lesley Stahl: To help the young entrepreneur, who wants to open a restaurant. And you're telling him the best place to do it.
Jamie Dimon: To help where you open a restaurant, where you put affordable housing.
The first order of business was affordable housing. Other investors, like the owners of Quicken Loans and Little Ceasar's Pizza, were already pouring money into the redevelopment of downtown.
Sonya Mays and Jamie Dimon
So the mayor asked Dimon to concentrate on the blighted neighborhoods that the bank's data identified as ripe for redevelopment, neighborhoods like this one in Detroit's north end.
Lesley Stahl: So this is typical, huh?
Sonya Mays: Yeah, this is a really good example of the challenges that the Detroit neighborhoods are facing.
Sonya Mays runs a non-profit housing development company. She's a lawyer, former investment banker and Detroit native. With more than $4 million from JPMorgan Chase, she acquired 30 abandoned homes and vacant lots so she could work on revitalizing the whole neighborhood at the same time.
Sonya Mays: This is a big significant investment that is really meant to kick start other investors, home owners, residents coming into this neighborhood. I mean look at this. This is not gonna pull anybody here. You have to figure out how to deal with stuff like that. You really do have to attack everything that is blighted that's potentially gonna drive down property values--
Lesley Stahl: So you have to do the whole street?
Sonya Mays: You have to do it block by block.
She's benefitting from JPMorgan's special program of steering funds to minority businesses that wouldn't otherwise qualify for them.
Lesley Stahl: If you didn't have the JPMorgan special program, you wouldn't have gotten the funds?
Sonya Mays: We talked to a lot of other people. (LAUGHTER)
Lesley Stahl: Not just you, Jamie?
Sonya Mays: Yeah, and the-- answer-- the answer to that is, unlikely. The answer to that is, the best we probably could've done, but for this program and this investment is, do a house, finish a house, sell a house. Go to the next house, do a house. And at that rate, I-- I did this math at some point. At that rate, like it-- you know, it'd take like, you know, a couple centuries.
Sonya Mays, Lesley Stahl and Jamie Dimon inside one of Detroit's renovated houses
This house is one of several Sonya Mays has finished.
Lesley Stahl: Oh wow.
Her work in this neighborhood has been so successful she's expanding it to other parts of Detroit.
Lesley Stahl: Didn't you find, Jamie, that there was kind of a racial bias against giving loans?
Jamie Dimon: Sure.
Lesley Stahl: To blacks and other minorities?
Jamie Dimon: Yeah. I think that's true in poor neighborhoods.
Lesley Stahl: But if you find out that somebody like Sonya not necessarily her you give her a loan you wouldn't have before, but they're paying it back. Are you beginning to think that what you now consider risky, has that changed? In your mind, should it change everywhere?
Jamie Dimon: Are there are things that we could have been doing anyway in normal banking that would've helped in these communities? The answer is probably.
Actually, he is studying that, by partnering with local non-profit groups like the Kellogg Foundation and creating an 'entrepreneurs of color fund' that's an experiment on that very issue of loans to minority businesses.
Jamie Dimon: We started small, 40 loans. They're all paying back.
Lesley Stahl: But those were loans that you would not have ordinarily made.
Jamie Dimon: No, No.
Lesley Stahl: So you changed the criterion for giving credit to someone--
Jamie Dimon: So this is nontraditional banking. I call it kinda venture banking. So look beyond what you do normally. Take a little bit of extra risk. Give them more help.
The loans have gone to open a wine shop, a health club, a restaurant. In all, JPMorgan Chase has helped more than 5,000 businesses here.
Jamie Dimon: Just writing a check doesn't really work very well.
Dimon has also assembled teams of experts from the bank who spend weeks at a time living and working in the city and providing a lot of practical advice.
Jamie Dimon: Very often, these entrepreneurs, they needed help in: How do you sign a lease? How do you negotiate with the government? How can I start using a budget? How do you create traffic? How do you do social media? How can I enter the real banking system, which is what the ultimate goal is? So yeah, it may change how we do banking for small business and we're getting better at it.
Lesley Stahl: Detroit was in a lotta trouble before the financial crisis. But the financial crisis just did them in 100%. That-- that was crushing. Do you feel, in any way, that you're atoning for the sins of Wall Street, when you go and put your effort into Detroit? Is that in your head?
Jamie Dimon: I wouldn't use the word 'atone.' I all-- think we owe back to society.
Lesley Stahl: But Detroit, specifically? The financial crisis just decimated the city.
Jamie Dimon: And I think that we all have to re-earn our trust a little bit because of what happened. It's okay to say, 'Yeah, we should do better than we did last time.' And I think that's true for everybody that was involved in-- in-- the crisis.
The bank has also brought in additional investors while the mayor is working hard to lure big-time manufacturers back into the city.
Early this year he persuaded Fiat Chrysler to build a new plant that would mean 5,000 new jobs. The mayor needed to assure those companies that Detroit could supply well-trained workers. But...
Mike Duggan: Our residents didn't have the skills to meet many of those jobs. And Jamie Dimon had JPMorgan Chase do a whole analysis and it led to the program we have today, what we called Detroit at Work, one of the largest employment agencies in the country where we now get Detroiters, line them up for jobs at Fiat Chrysler, line them up for jobs in a whole number of areas.
From here they're sent to job training programs which, based on JPMorgan's analysis, have redesigned their approach.
Mike Duggan: We took all of the training programs in the city, and they now only train for jobs people are hiring for. Which may seem obvious, but it wasn't before.
Many of the training programs are run by non-profit groups like Focus Hope.
Lesley Stahl: So this kind of thing might be at the Chrysler plant, for instance.
Jamie Dimon: Yeah.
That got a $1.3 Million grant from JPMorgan Chase.
It's all part of the city's long game to reverse Detroit's long decline. It's an effort, the mayor says, that's a push against history.
Mike Duggan: It goes back to the federal policies in the 1930s. That would not lend in areas where people of color lived. You've had decades of federal policies that have worked against people of color to benefit Caucasians leaving cities.
Lesley Stahl: JPMorgan Chase has now committed $200 million--
Mike Duggan: Right. Right.
Lesley Stahl: --to the city. Is that enough? I mean, your problems cost way more than that.
Mike Duggan: Nobody's saying JPMorgan Chase is the savior of the city by itself. You know, we've got a lot of major investors in this town. But they've been an important piece. They pushed this recovery of the city along the track faster than it woulda been.
Lesley Stahl: How far along the plan have you come up to now.
Mike Duggan: I'd say we're about the third inning of the game. (LAUGH)
Lesley Stahl: Third inning of the game.
Mike Duggan: We got a long way to go, but we're definitely on the right path.
JPMorgan Chase has now committed half a billion dollars to take what it's learned in Detroit and export it to, among other cities, Chicago and Washington D.C.
Produced by Richard Bonin. Associate producer, Ayesha Siddiqi.
© 2019 CBS Interactive Inc. All Rights Reserved.
One of America's most recognized and experienced broadcast journalists, Lesley Stahl has been a 60 Minutes correspondent since 1991.
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