JPMorgan Chase (JPM) said Wednesday that it’s expanding on an existing investment into Detroit’s recovery, pledging to invest a total of $150 million into the once-bankrupt city by 2019.
JPMorgan first announced in May 2014 that it was committing $100 million into revitalizing Detroit over the next five years. The bank ended up speeding up its investment and has already spent $107 million; it will spend an additional $43 million over the next two years.
Massive bankruptcy and ‘a model for what can be accomplished’
The latest news from JPMorgan comes just three and a half years after the midwestern “Motor City” filed for bankruptcy as it faced billions in debt and an ever-shrinking tax base. It’s still the largest municipal bankruptcy in US history.
While some of the city’s neighborhoods are still blighted, the city has seen major improvements since its bankruptcy. By 2015, the city had enough money to pay its bills and its retirees’ pensions, the Detroit Free Press noted. The downtown area has also seen an influx of new businesses, from Whole Foods to Under Armour to Shake Shack to Microsoft.
“Detroit’s resurgence is a model for what can be accomplished when leaders work together to create economic growth and opportunity,” JPMorgan CEO Jamie Dimon said in a prepared statement.
An investment, not charity
The bank refers to its cash infusion as an “investment” in Detroit rather than a grant because more than half of it has gone to market-based investments that will both benefit Detroit and create more capital. So far, JPMorgan has spent $50 million on two funds that help finance affordable housing, mixed-use developments, and high-quality retailers. The bank also provided $7.2 million in loan and grant capital to 100 small businesses, which helped keep or create 700 jobs.
JPMorgan has also funded financial counseling for homeowners; job training programs for the city’s workforce; and a number of other initiatives aimed at job creation and neighborhood revitalization.
JPMorgan’s interest in Detroit’s recovery
So what does JPMorgan get out of spending this money?
When the bank announced the pledge to Detroit back in 2014, it had recently agreed to pay the US government $13 billion over claims that it had misled investors about the quality of mortgages leading up to the financial crisis. The cynical view is that the bank wanted to get some positive press in the wake of that negative news. Goldman Sachs, which paid a multibillion-dollar settlement of its own over the mortgage crisis, has incidentally also invested in Detroit.
Still, JPMorgan has a vested interest in Detroit’s success that goes beyond public relations, in part because it’s the largest bank in Detroit. It’s also been doing business there for 80 years.
‘One man couldn’t do it without business’
For the people of Detroit, JPMorgan’s motivations probably don’t matter if it’s helping improve the lives of city residents. In an interview with Business Insider last week, Dimon argued that businesses and local politicians need to work in concert to get anything done in a city like Detroit. Specifically, Dimon mentioned that the billionaire Quicken Loans founder Dan Gilbert has also been throwing his weight behind Detroit’s revitalization.
“If you look at Detroit, that mayor, it’s been a train wreck for 40 years, the population has gone from 2 million to 700,000. This Mayor comes in, and he talked about streetlights, sanitation, jobs, policing, schools, affordable housing. He’s doing it all, and it’s growing for the first time in 30 years. Literally, one man. But that one man couldn’t do it without business,” Dimon told Business Insider.
He added: “You’ve got wonderful people in Detroit, like Dan Gilbert, JPMorgan Chase. And business couldn’t have done it without a political environment where they wanted to improve things. If you had an antibusiness environment there, it would still be down there.”
Erin Fuchs is deputy managing editor at Yahoo Finance.