For Jamie Dimon, the last decade has been replete with irony. In 2008, as head of JPMorgan Chase, he bailed out not one but two Wall Street icons — Bear Stearns and Washington Mutual — at a time when many of his iconic peers were being propped up by taxpayer funds. Chief among them is Citigroup, where fire-fighter CEO Vikram Pandit is still struggling to clean up the mess over which his ineffectual predecessor Chuck Prince presided. And Dimon, whose stubborn “Fortress Balance Sheet” philosophy kept JPMorgan Chase famously insulated from the sub-prime debacle, isn’t just the last man standing; he is having the last laugh.
It is worth wondering how different Wall Street history might have been had Dimon, the grandson of Greek immigrants and once tipped to be Obama’s treasury secretary, succeeded his long-term mentor Sandy Weill at Citigroup, one of the world’s largest banks. That was the post to which most people — not excluding Dimon himself — predicted he would ascend 10 years ago when Citi merged with Travelers group, the powerhouse he and Sandy Weill had bolted together by a long string of M&As. By then, at age 42, he had already acquired his reputation as a Wall Street wunderkind, the kind of guy who “could carry a bank balance sheet around in his head”.
But tensions with the maverick Weill had been simmering long before the Citi-Traveler merger — they’d already fallen out over Dimon’s refusal to promote Weill’s daughter Jessica. The Citi-Travelers merger, which appeared to place the exigencies of power politics over the need for synergies and scale, only stoked the embers of that inevitable clash of personality and style. The ill-judged plan of having co-CEOs in the mild-mannered John Reed and the tempestuous Weill was not the only weird element of the Citi-Travelers deal. The global corporate unit was also assigned two heads in Dimon and Deryck Maughan, of whom Dimon had a demonstrably poor opinion and even poorer personal relations, because Maughan flatly refused to report to Dimon. Later, Reed added his twist to this arrangement by suggesting an astonishing tri-CEO structure to accommodate Citibanker Victor Menezes to balance out the fact that corporate banking was headed by two former Travelers executives. Dimon received a sop in terms of being made president of the combined entity, but that turned out to be a titular post. Only the CFO reported to him — everyone else reported to Weill and Reed. If all this was a way of telling Dimon he wasn’t wanted, it worked. Within months of the merger and following some high drama at a corporate retreat, Weill convinced an easily persuadable Reed that Dimon needed to go.
For 16 months thereafter, Dimon became America’s “most famous unemployed person” and Weill, having disposed of Reed as co-CEO, was eventually succeeded by Chuck Prince, once the company’s general counsel, whom a Dimon acolyte uncharitably described as “the quintessential ass-kisser” (it was Prince, in fact, who worked out the severance deal with Citi). In hindsight, it was clearly a “battlefield promotion” — management-speak for promoting people for lack of an alternative. And that’s because Dimon’s exit and subsequent CEO-ship of the little-known Chicago-based Bank One and then of JPMorgan Chase saw the cream of Citi’s managerial talent head out the door — and mostly towards Dimon. In December 2008, Weill confessed, “I think I made a very bad decision on succession.” The year 1998 was seminal for Dimon and the Street in more ways than one. That was the year 14 banks — including Salomon Smith Barney, which had become part of the Travelers empire — agreed to a $3.65 billion government-engineered bailout of Long Term Capital Management (LTCM). Ironically, it was Salomon Smith Barney that partly contributed to the LTCM crisis because it was Dimon’s insistence that it unwind its fixed income position which he saw as unduly risky. The trouble was that LTCM had on its own books many of the same positions that Salomon was selling. “Orchestrating the bailout of LTCM was the original sin when it came to so-called moral hazard. The government has stepped in to facilitate the rescue of a bunch of capitalists gone mad. The next time that happened, Jamie Dimon would play a central role,” McDonald writes.
Given the hyper-attention that the American business press applies to Wall Street, the broad contours of the Dimon story and the Dimon-Weill split are well entrenched in contemporary corporate legend. They grow in the telling not the least because of the extraordinary personalities of the two dramatis personae, of which at least one has given corporate America a rare folk hero. McDonald, a highly-rated Canadian journalist who writes for most of the blue-blooded American journals, has managed to make a racily readable addition to the growing body of writing on the subject with some careful and wide-ranging reportage. If the book does not stray from the received wisdom of Dimon’s genius and brilliance, it escapes the taint of hagiography because McDonald applies a more critical eye to his subject than most American journalists.
Of course, historians will say it is way too soon to take a final call on the Dimon legacy. McDonald acknowledges that, “JPMorgan is hardly out of the woods, and in the next few years it will bear as much of the brunt of the economic crisis as any bank.” But Dimon will undoubtedly have a big role to play in how things pan out. “He comes in technicolour and stereophonic sound,” as the pernickety Warren Buffet once wrote of him. “He has a broad outlook, and he’s young, so there's going to be action for him for a long time to come.”
LAST MAN STANDING
The Ascent of Jamie Dimon and JPMorgan Chase
Duff McDonald
Simon & Schuster
328 pages; $28.00
