NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) CEO and Chairman Jamie Dimon said so many things during the bank's lengthy investor day last month, that much of it appears to have gone unnoticed. Still, it is difficult to understand why the following statement did not get at least a bit more attention. "If I were the dictator, I would want a government-guaranteed mortgage." That's right, he really said that. It was about 30 minutes after he told CLSA analyst Mike Mayo, "that's why I'm richer than you" -- a statement that has elicited far more discussion. Dimon made the "dictator" comment in response to a question about how he would reform the current system of housing finance, which leans very heavily on government support via Fannie Mae ( FNMA)and Freddie Mac ( FMCC). Formerly only quasi-public entities, they have essentially functioned as arms of the government since being placed into conservatorship in 2008 by the Bush Administration. Politicians of all stripes say they dislike the status quo in mortgage finance, but no one dares offer a concrete proposal to change it for fear of being blamed if the fix doesn't work. So give Dimon credit for sticking his neck out and proposing something. In some ways, there is nothing wrong with the soundbite I have extracted from his larger statement (which I'll get to in a moment). Those who read the "dictator" remark as an indication of Dimon's arrogance should not get too excited. No one, after all, is surprised to find arrogance in a CEO of a giant multinational. Neither should we be shocked to hear an intelligent person -- Republican or Democrat, banker or Occupy Wall Streeter -- arguing the government must play a role in supporting the housing market. After all, the government has subsidized housing in some fashion since at least the 19th Century, according to James Hagerty's book The Fateful History of Fannie Mae. The ability of homeowners to deduct mortgage interest payments from their taxes has been around for 100 years, which is as long as the federal income tax has been a permanent part of U.S. law. U.S. government support for housing expanded when Fannie Mae ( FNMA) was created in the 1930s as part of the New Deal, but it still took decades for Fannie to come to resemble the giant pillar of housing finance we know today. By 1981, Fannie was the fifth-largest company in the U.S. and it held about 5% of U.S. mortgages. That seemed remarkable at the time, but it looks quaint now. "In the years immediately following the 2008 crisis, Fannie, Freddie
Mac ( FMCC) and the Federal Housing Administration were carrying the default risk on around 90 percent of all newly granted home-mortgage loans," according to Hagerty's book. Near-total government domination of the mortgage market remains essentially unchanged today, despite distant glimmers of a private market revival for select mortgages. In other words, we shouldn't be surprised that Dimon wants the government backstopping mortgages. Such a system worked well for the U.S. for a long time, so it is a totally reasonable view.
Which is not to say a government-supported mortgage market is the only solution. As Dimon himself pointed out slightly before his "dictator" remark, "there are a lot of countries around the world with their governments not involved
that have healthy markets." What's more, Dimon wants mortgage originators, such as banks, paying into a fund that would cover any government losses. He likens his idea to the Federal Insurance Deposit Corp., which covers losses to depositors by charging fees to the banking industry. "The government will never lose money," Dimon declares, with his trademark disdain for ambiguity or self-doubt. Still, the Dimon comment that gives this story its headline deserves far more attention than it has received so far. There is a certain poetry to it, or, for those who remember Greek Drama 101, dramatic irony. Dimon loves to portray himself as an unrepentant capitalist. He is a hero to other unrepentant capitalists -- and rightly so, in some respects. He managed his bank better than many of his rivals during the crisis and it is now an industry leader as a result. Nonetheless, Dimon is a dictator of sorts. He orders public officials to do his bidding and they often comply. When they leave government, he puts them on his payroll. A dictator is nowhere without government. Neither is JPMorgan and neither is Dimon. How gracious of him, then, to express those sentiments so openly. Maybe it will serve as a reminder to those who claim to hate "Big Government" that we rely on it far more than many realize. -- Written by Dan Freed in New York. Follow @dan_freed