Dimon says credit crisis could worsen

By Karey Wutkowski

ARLINGTON, Va (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) Chief Executive Jamie Dimon said on Tuesday some problems in the credit markets have been resolved, but that does not mean market conditions will not deteriorate further.

"I do think we have some very serious issues to face," Dimon said at a mortgage lending forum sponsored by the Federal Deposit Insurance Corp. "Things could actually get worse."

Wall Street investment banks should not be considered too big to fail, he said, adding the U.S. regulatory response to the credit crisis has been appropriate.

Dimon, whose bank is widely expected to acquire a regional bank, said an accounting rule requiring banks to mark assets to their current market value is a deterrent to mergers.

FAS 157, as the rule is known, would force an acquirer to write down the value of assets from a target bank -- even if the loans and securities were sound -- to reflect current depressed market values. In some cases, Dimon said, a target bank could emerge with negative value under this mark-to-market accounting, forcing an acquirer to raise more capital.

With more short-term suffering ahead for the economy, Dimon said U.S. commercial banks, regional banks and jobs will be the next areas to experience significant stress. Banks must get more realistic about the risk with some products, he said.

"Capital requirements go too low in certain products," he said. "You have to try to be as conservative as possible."

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