“Please hold for Mr. Dimon.”
On a Monday morning in the fall of 2009, I received a phone call from the chief executive officer of JPMorgan Chase (JPM). Jamie Dimon, at the time the most admired CEO on Wall Street, had issues with a book review of mine published a day earlier in the New York Times.
Dimon decided to take time away from running the largest financial institution in the U.S. to express his displeasure personally. Four years later, as Dimon grapples with an array of scandals, our chat comes to mind.
I had reviewed Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase, a biography by Duff McDonald. Paraphrasing McDonald’s flattering account, I wrote that Dimon exercised more caution than many of his counterparts in the several years leading up to the bursting of the housing bubble. Then Dimon acted boldly in March 2008 to scoop up the remains of the wrecked investment bank Bear Stearns in a government-orchestrated salvage operation that forestalled even greater panic. His generally savvy stewardship has left giant JPMorgan in a strong competitive position, and earned him McDonald’s praise as a “hero,” a “financial philosopher,” and a “moral and managerial compass for both his industry and the country itself.”
For all his success, being a moral and managerial compass “is a lot to live up to.” I wrote:
After an era in which many private-sector financial leaders showed themselves to be unremittingly reckless, greedy, or incompetent—or all three—there’s a natural desire to honor the exception proving the rule, the white knight who keeps his nerve and his humility. Is Jamie Dimon that paragon? Can he chart a more promising course for Wall Street, even while “swimming against the tide of an entire industry of overreaching CEOs,” as McDonald puts it? The evidence the author himself marshals—though doesn’t come to grips with —suggests that we cannot count on Dimon as a savior.
In our phone conversation, Dimon first demanded to know why, in general, I lacked McDonald’s enthusiasm for his career. He seemed unable to weigh the praise I had echoed in my piece against the suggestion that he shouldn’t be above criticism. This revealed a degree of self-regard impressive even by Wall Street standards. I had, after all, described him as a “brilliant but flawed winner” and acknowledged that he “may be the best of his breed.”
He proceeded to march through my review, paragraph by paragraph, reading aloud passages that displeased him. He didn’t like my interpretation of his tempestuous relationship with Sanford Weill, the merger-and-acquisition artist with whom Dimon built Citigroup (C) in the 1990s:
McDonald convincingly demonstrates that Dimon matured into a far superior manager than his mentor. But the author perplexingly gives Dimon a pass for what he and Weill wrought in Citigroup: an ungovernable colossus that almost inevitably spun out of control.
Dimon protested that he was long gone from Citi—ousted by Weill—before it teetered on the precipice during the 2008 crisis. At JPMorgan, Dimon had proved himself a superb manager, he told me. He wasn’t interested in the point I had emphasized: that he and Weill played a central role in pressing politicians to eradicate the 1933 Glass-Steagall Act separating investment banks from commercial banks. This and other deregulatory initiatives, combined with the formation of Citi, helped inspire a race for gigantism and risk-taking on Wall Street that contributed centrally to the crisis.
He moved on to his stewardship of JPMorgan, wanting to know why I didn’t agree with the broad, positive consensus exemplified by McDonald’s book. Well, I pointed out, I had acknowledged that Dimon “sensed before many others the dangers inherent in fraudulent home loans and the toxic securities Wall Street confected from them.” What I added was that his minions “engaged in many of the deplorable practices that destabilized the financial system. They just stopped sooner and protected their bank from the fallout more effectively.”
McDonald lauded Dimon for unloading huge volumes of subprime mortgages JPMorgan originated. That struck me as similar to “praising a corporate polluter for trucking his poisonous sludge into the next state. It doesn’t solve the problem; it merely moves it elsewhere.” Dimon said he was insulted by the comparison.
The larger theme of the review was that, while JPMorgan had emerged from the 2008 crisis less damaged than its rivals, Dimon’s performance hadn’t convinced me that the large banks were prepared to change their ways. His defensiveness on the phone reinforced my assessment.
Last week, on Sept. 19, JPMorgan agreed to pay $920 million to settle charges related to the notorious London Whale trade, a fiasco in 2012 that already had cost the bank $6 billion. On the same day, regulators announced nearly $400 million of additional fines and restitution the bank will pay to resolve accusations of pushing bogus services on credit-card customers. The $1.3 billion total for that day’s mess came on top of a slew of other allegations involving energy-trading manipulation, mortgage-backed securities fraud, and failure to disclose suspicions about the Bernard Madoff Ponzi scheme.
Was JPMorgan ever as well managed as many (including Dimon) claimed, or was it just less badly managed than most competitors? Has Dimon reevaluated his record? I’m only a phone call away.