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J.P. Morgan's Dimon: 'What Caused the Crisis? You Did.'

J.P. Morgan Chase & Co. chief executive Jamie Dimon told a room full of people at the U.S. Chamber of Commerce today that they caused the current economic crisis.

Dimon asked the audience members how many of them had pulled their savings from money market funds, bond funds and the like in the weeks following the collapse of Lehman Bros. last fall.

A number of hands shot up in the room, prompting Dimon to say: "What caused the crisis? You did."

Dimon explained: Money market funds, bond funds and others were direct lenders to the marketplace: They now supply 40 percent of the funding that traditional banks used to.

When panicked investors pulled their money from these funds to place it in cash, gold or simply in a drawer, it caused what Dimon called a run on the banks -- a run on non-traditional banks.

Dimon said that money market funds contained $3.5 trillion before Lehman's collapse. In the two weeks after, investors withdrew $500 billion.

"Individuals were acting wisely; there was no malfeasance here," Dimon stressed. The financial institutions couldn't handle it, he said.

"Although this has been an incredibly difficult period, our markets are showing some signs of modest healing and recovery," Dimon said. "We are seeing a bit of a reduction in the rate of decline in home prices in some key markets, notably California. January was a great month for the bond markets. Commercial paper rates have come down. ... While I’m optimistic about the future, the world is still in the sharpest, most globalized downturn we’ve seen since the Great Depression."

-- Frank Ahrens
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By Frank Ahrens  |  March 11, 2009; 4:01 PM ET
Categories:  The Ticker  | Tags: JP Morgan, Jamie Dimon, U.S. Chamber of Commerce  
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