WASHINGTON — James Dimon, the chief executive of JPMorgan Chase & Co., dismissed the growing calls to nationalize financial institutions and said lawmakers and pundits should stop girding for government takeovers.

"I don't know what they mean whey they say nationalization," he told reporters Wednesday after a speech at the U.S. Chamber of Commerce. "It wouldn't be a great thing to nationalize a lot of banks that are perfectly healthy. That would be a terrible mistake."

When it comes to unhealthy institutions, Dimon said, that is where the Federal Deposit Insurance Corp. should come in.

"That's what the FDIC is for," he said. "If a bank is in really poor shape, the FDIC will take care of them and if the government wants to aid them another way that's better for the country, they should do that."

In his speech to the Chamber of Commerce, where he was greeted as a hero nearly a year after his company agreed to acquire the collapsing Bear Stearns Cos., Dimon discussed Fannie Mae and Freddie Mac, regulatory restructuring and his own failures during the financial crisis.

The dramatic growth of the government-sponsored enterprises during the housing boom was "perhaps the largest regulatory failure of all time," he said. "It would have been devastating to this country if the country didn't do what it did" when the Federal Housing Finance Agency put the GSEs in conservatorship in September. "I'm still in shock that we allowed to take hold an implicit guarantee. It's not right. It shouldn't have happened."

JPMorgan Chase has grown during the crisis, picking up Bear Stearns and Washington Mutual Inc.'s banking operation after those companies faltered.

Dimon said the regulatory restructuring being considered by Congress and the Obama administration should establish a systemic risk supervisor and determine how to deal with massive firms that collapse.

"There have to be pre-existing procedures in place to deal with 'too big to fail,' " he said. "Failure is fine. As a matter of fact, the American public doesn't care about failure, as long as it doesn't damage the system."

Dimon acknowledged his own errors that have been revealed by the market turmoil.

"My biggest mistake probably in my whole career was not closing down our mortgage broker business sooner," he said.

Despite the political storm that has surrounded bankers who accepted money from the Troubled Asset Relief Program, Dimon said he remains confident in his decision to accept the funds.

"We believed then, and we believe now, that accepting the money was the right thing to do for the U.S. financial system, even if it was not necessarily the right thing to do for JPMorgan Chase," he said. "We didn't think JPMorgan should be parochial."

Dimon also took issue with the Basel II capital system the largest American banking companies are implementing.

"We need to fix Basel II, which doesn't include liquidity," he said. "It needs to be less procyclical. It needs to be fairly applied. It has been very inconsistently applied around the world … and some countries get away with leveraging more."

Dimon also reiterated his company's opposition to legislation that passed the House last week that would let bankruptcy judges rework mortgage terms.

"We think that could cause a whole new round of problems in the capital markets," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.