WASHINGTON — Jamie Dimon, the chief executive officer of JPMorgan Chase, hosted a lunch with 75 business leaders on Monday to help build support for a budget compromise and avoid the so-called fiscal cliff, according to sources familiar with the situation.
The lunch — which featured representatives from the real estate, construction, retail and financial services industries — was a bid to convince business executives to embrace a plan similar to one proposed by the Simpson-Bowles Commission. That plan, introduced in late 2010, calls for Congress to raise taxes and cut spending on Social Security and Medicare in an attempt to significantly reduce the deficit.
The lunch featured talks by two lawmakers, Sens. Mark Warner, D-Va., and Lamar Alexander, R-Tenn., both of whom have publicly supported Simpson-Bowles.
Bankers, including Dimon, have become increasingly concerned about the fiscal cliff — an automatic trigger of steep budget cuts and tax hikes that would go into effect in early 2013 if Congress does not act.
"This is probably very straightforward," said Douglas Elliot, a Brookings Institution fellow and former JPMorgan investment banker. "The financial system will have real problems if fiscal-cliff negotiations go badly."
The lunch also appears to indicate that Dimon's star-tarnished by the costly London Whale trading debacle — is once again on the rise, in both New York and in Washington.
By gathering business support for a compromise similar to Simpson-Bowles, the JPMorgan leader is effectively seeking to give lawmakers political cover to support a deal. Many Republicans have rejected Simpson-Bowles as part of their refusal to support tax increases; Democrats have taken issue with the cuts to social programs.
The consequences of a failure to reach a deal before the nation reaches the fiscal cliff would be dire, bankers warn. Industry observers said the threat that no deal will be forthcoming has already forced banks to pull back on lending and could savage profits over the next year.
Dimon was one of several bank CEOs to sign a letter send to President Obama and all members of Congress last week calling on them to act soon.
"We write today to urge you to work together to reach a bipartisan agreement to avoid the approaching 'fiscal cliff,' and take concrete steps to restore the United States' long-term fiscal footing," according to a letter from the Financial Services Forum, which was signed by Dimon, Bank of America CEO Brian Moynihan, Citigroup CEO Michael Corbat and several others.
The letter added that "merely avoiding the fiscal cliff is not enough."
"We further urge you and your colleagues to enact legislation that truly restores the nation's long-term fiscal soundness," the letter says.
Jaret Seiberg, senior policy analyst at Guggenheim Partners, said that a Congressional failure to reach a deal could spark another financial crisis.
"Much of the industry's lows have been tied to the housing market," Seiberg said in an interview. "A full fiscal cliff calamity — which would include breaching the debt limit in March, the sequester cut hitting in May and the full expiration of the Bush and payroll tax cuts — is going to crush housing."