JPMorgan Chase, the largest U.S. bank, provided financing for more than 300 trillion won worth of projects in the first year of its Security and Resiliency Initiative. The lending is part of a pledge the bank made last year to supply a total of $1.5 trillion in financing over the next decade to industries it deems critical to U.S. national economic security and resilience.
JPMorgan financed projects worth a combined $230 billion, or about 306 trillion won, during the initiative's first year, The Wall Street Journal reported on the 19th.
The bank unveiled the plan in October last year, saying it would shield the U.S. economy from supply chain disruptions and external security threats. Since then, JPMorgan has invested directly in or arranged loans for companies in industries it considers core to the U.S. economy, including defense contractors, energy suppliers and heavy industry.
Last month, the bank announced a plan to commit more than $2 billion, working with the state of Michigan and Ford Motor, to support new manufacturers that would fill gaps in supply chains. Chief Executive Jamie Dimon said in a CNBC interview in July that the bank also planned to provide financing to Hanwha, the owner of Philly Shipyard, and others as part of an effort to rebuild U.S. shipbuilding.
The first-year total includes a $125 billion transaction involving the energy companies Dominion Energy and NextEra. The Journal reported that the bank acknowledged the deal would have gone ahead even without the initiative.
The Security and Resiliency Initiative was launched at a time when the administration of President Donald Trump was expanding its involvement in strategic industries. The U.S. government took stakes in companies of national importance such as Intel and U.S. Steel, and the Defense Department acquired a stake in the rare earth producer MP Materials, drawing attention to the role of private finance in building up strategic industries. Dimon, who had advised MP Materials, thought at the time that JPMorgan should have invested alongside the Defense Department, and that became one of the reasons behind the initiative.
In a recent interview with the Journal, Dimon said the bank is "working with companies at an earlier stage than JPMorgan typically does," and predicted that the financing would far exceed the $1.5 trillion target it originally set. He also stressed that supplying capital alone cannot resolve the structural problems facing the U.S. economy, saying practical obstacles such as a shortage of skilled labor and burdensome permitting rules must be addressed as well.
U.S. Defense Stocks Slide Despite Surging Wartime Demand. Democratic Strength to Blame?
U.S. defense stocks have fallen sharply despite a surge in demand driven by war and large-scale investment.
The iShares U.S. Aerospace & Defense exchange-traded fund fell 16% from July through mid-October, the Financial Times reported on the 19th. That contrasts with a 3.5% gain over the same period in the Standard & Poor's 500, the benchmark U.S. stock index. Shares of Lockheed Martin, which makes the Patriot missile system, have fallen more than 20% from their early March peak, while Northrop Grumman and L3Harris dropped 35% and 36% over the same period.
The declines reflect expectations that Democrats will make gains in the November midterm elections. The prediction market platform Kalshi put the probability that Democrats take back both the Senate and the House in the Nov. 3 election at 64% as of the 20th. Discontent over security spending is also growing within the governing Republican Party.
Byron Callan of Capital Alpha Partners said Democrats are not calling for deep cuts to defense spending, but predicted that order sizes for major programs such as the F-35 fighter jet and the Sentinel intercontinental ballistic missile would come under intense scrutiny. "Democrats are not going to shout for big cuts to the defense budget, but you can't look at defense in isolation," Callan said. "Democrats also want more non-defense spending, so the defense budget could get caught up in those talks."
Some argue that the market's concerns are overdone. "There's a misconception that if the Democrats win the midterms, the defense industry will be devastated," said Randy Gwirtzman of Baron Capital. "That assigns far too much meaning to the midterm results." Some major defense stocks have in fact rebounded recently on expectations of strong third-quarter earnings. The investment bank Cantor Fitzgerald forecast that geopolitical conflict will keep stimulating weapons demand and support defense companies' share prices regardless of whether the U.S. increases its defense budget.