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(Bloomberg) -- It is clear "something is wrong — and it’s holding us back," with the U.S. economy, JPMorgan CEO Jamie Dimon writes in letter to shareholders, even as he notes U.S. is "truly an exceptional country," probably stronger than ever before.

• JPM erases earlier losses and gains as much as 0.8% after letter is released; KBW Bank Index (BKX) also pares loss, with decliners including BAC, KEY, WFC, COF, NYCB
• Letter notes that the economy has been growing much more slowly in last decade or two than in the 50 years before then, with real median household incomes in 2015 2.5% lower than they were in 1999 and the percentage of middle class households shrinking
• Dimon notes:
  • Over last 16 years, U.S. has spent trillions on wars when it could have been investing that money productively
  • Since 2010, when the government took over student lending, direct government lending to students has gone from ~$200b to >$900b, creating dramatically increased student defaults, population that’s "rightfully angry" about how much money they owe, particularly since it reduces ability to get other credit
  • Healthcare costs are essentially twice as much per person vs most other developed nations
  • Labor force participation is too low
• Regulatory environment is "unnecessarily complex, costly and sometimes confusing;" says poorly conceived and uncoordinated regulations have damaged economy, inhibiting growth and jobs 
• Isn’t looking to throw out entirety of Dodd-Frank or other rules; "it is, however, appropriate to open up the rulebook in the light of day and rework the rules and regulations that don’t work well or are unnecessary"
  • Sees need for "consistent, transparent, simplified and more risk-based capital standards"
  • It’s clear banks have too much capital, and more of that capital can be safely used to finance the economy
  • Believes in stress testing, but it could be improved and simplified
• Sees "Too Big to Fail" as essentially solved: Taxpayers won’t pay if a bank fails as shareholders/debtholders (due to total loss absorbing capacity, TLAC, rules) are at risk for all losses
• Supports new push for Chapter 14 bankruptcy for banks
• Notes in 2016, JPM spent >$9.5b in technology, including ~$3b dedicated toward new initiatives, with $600m for emerging fintech 
  • Notes collaborations with consumer payment systems (Zelle), mortgages (Roostify), auto finance (TrueCar), small business lending (OnDeck Capital), communications systems (Symphony)
• Regarding Brexit, key concern is to make sure JPM is prepared to support clients on day one
• Sees anti-globalization sentiment growing in parts of the world today, usually expressing itself in anti-trade and anti- immigration positions; doesn’t believe globalization will reverse course
• For live blog on Dimon’s letter, see TLIV
• Related earlier stories:
  • 1Q Will Be Tough for Banks; Buy the Dip: Morgan Stanley
  • Still No Signs of Systemic Risk From Auto Loans: CreditSights
  • BofA Slips as Citi Cuts After Post-Election Outperformance

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net Beth Mellor