Last Man Standing (28 page)

One person he did keep around was Jimmy Lee, the legendary J.P. Morgan banker who had pioneered the use of syndicated loans. A larger-than-life personality, Lee was also known for backroom politicking and front-room confrontations, but Dimon knew a valuable asset when he saw one. The Rupert Murdochs, Sumner Redstones, and Sam Zells of the world asked for Lee by name when working with J.P. Morgan. He also hosts an annual confab in Deer Valley that draws an enviable roster of heavyweights, including DreamWorks’ Jeffrey Katzenberg, General Electric’s Jeffrey Immelt, Microsoft’s Steve Ballmer, and the NBA commissioner, David Stern.

(Shortly after the deal, Dimon asked Lee to join him for dinner at the Post House, a steak house in the Lowell hotel on East 63rd Street. Moments after sitting down, Lee pulled a piece of paper out of his pocket and put it down on the table next to him. Dimon looked at Lee and said, “What’s that?” Lee replied, “It’s the list of things I needed to do today. I wanted to make sure I covered all the topics I wanted to talk to you about.” Dimon looked incredulous. “Let me see that,” he said. After a quick scan of the sheet of paper, Dimon threw it back at Lee dismissively. “That’s not a list,” he said. “Do you want to see a real list?” He then pulled his own out of his pocket. The two men laughed at their shared, antiquated approach to scheduling.)

As time passed and he handed more and more power over to Dimon, Harrison’s one disappointment was finding out that when you hire the most confident man in finance, it’s unlikely he’s going to ask for your advice very often. Harrison used to seek his predecessor’s counsel out of respect, even if he’d already made up his mind. Dimon didn’t bother with such pretense. “But if you understand that, you’re OK,” says Harrison. “He doesn’t waste time like that.”

The transfer of power from Harrison to Dimon stands as one of the cleanest and most orderly in recent financial history. In stark contrast to the disastrous handoffs that have characterized Wall Street—David
Komansky to Stan O’Neal at Merrill Lynch, Jon Corzine to Hank Paulson at Goldman Sachs, and, worst of all, the vicious civil war between Phil Purcell and John Mack at Morgan Stanley—it is a model of clarity and execution.

• • •

In Bank One’s last annual report as an independent company, Dimon noted that the company’s share price had risen 85 percent during his tenure, versus a 25 percent decrease in the S&P 500 and a 24 percent increase in a relevant index of banking stocks. Touching on an issue close to his heart—financial strength—he also trumpeted the fact that on the day the merger was announced, the bond-rating agencies had put both banks on “positive watch.”

He called out an old foe, Prudential Securities’ analyst Mike Mayo. On a conference call with analysts, Dimon said, “Mike Mayo has had Bank One for sale since the day I got there. And yesterday he made it a buy. The first [thing] he wrote about [Bank One] was something like, ‘Even Hercules couldn’t fix that mess.’ I want the next one to say, ‘I was wrong.’” A minute later, a voice came on the line. “Jamie Dimon … it’s Mike Mayo. Since you got to Bank One, I was wrong.” Dimon’s response: “Thank you.”

(Mayo actually stewed over being called out in public, especially as he didn’t consider that his rating of Bank One was a failure. He’d actually downgraded Bank One stock to “sell” in 1999, when it was trading for $60 a share. Even though he’d been wrong about it during Dimon’s tenure, this was still one of the best calls he’d made in his career. But he took the high road and said nothing. Two years later, though, when Dimon made another crack at his expense during a presentation to investors on January 31, 2006, Mayo thought the criticism of his record had gone too far, and issued a report defending his stock picks, as well as pointing out certain errors in Dimon’s remarks. The
Financial Times
picked up the controversy, and on the day of its report, Mayo’s phone rang. It was Dimon, calling to apologize to him.)

Mayo had been right about one thing, though. Despite Dimon’s capable restructuring of Bank One, he did have trouble juicing the company’s
revenues. Even in 2003, the firm’s top line actually fell 3 percent, to $16.2 billion. He was undoubtedly the Mr. Fix-It of banks. But did he have the vision to take one to the next level without a jumbo-size acquisition? His defenders argue that he was shrinking the bank by shedding underperforming businesses in order to have a solid core from which to grow, and he sold to JPMorgan Chase before that strategy came to full flower. Critics respond that it’s impossible to know what
might
have happened, and that Dimon sold the company for fear of not delivering.

In one last burst of enthusiasm, Dimon said in an employees’ meeting that even if Bank One had forgone a few billion in the deal, it didn’t matter; if they did a good job, JPMorgan Chase’s stock could reach $100 in five years—the equivalent of adding $200 billion in market value. Nearly five years later, in the midst of the credit crisis, the stock was treading water at $35 a share. “I didn’t say I’d eat my hat if it didn’t get to $100,” he recalls. “But that’s taken on a life of its own.” Sitting on a bookshelf in his office was an Australian leather hat under glass. Beneath it, a clock was counting down to zero, with only 150 days remaining—a gift from the JPMorgan Chase executive Blythe Masters. “That’s going to be hard to chew,” he laughs.

Dimon stepped down from the board of Yum! Brands when he became president of JPMorgan Chase. At the time, corporate governance experts and the media had begun shining a spotlight on the issue of interlocking directorates—evidence of the clubbiness atop large American companies—and both Dimon and David Novak—the CEO of Yum!—decided they didn’t need the trouble. “I told David, ‘I need you on my board more than you need me on yours,’” Dimon recalls. “And he said, ‘You’re right.’” (Interestingly, Dimon now agrees with Weill’s position at Citigroup that there be no insiders on the board. “But at that point in time there were lots of boards that had them,” he says. “I agree you shouldn’t have any. But that wasn’t the issue for Sandy. He wasn’t saying, ‘We’re going to do this for corporate governance reasons.’ That wasn’t the issue at all.”)

A few months after the merger, Dimon and a group of JPMorgan Chase’s senior executives were having a dinner in a private room at Le Bernardin, when Ina Drew, then head of the bank’s treasury group,
walked into the room and announced that Sandy Weill and Ken Bialkin were eating in the main room with their wives. Jay Mandelbaum and Bill Harrison decided to go downstairs and invite Weill up to say hello to the team.

Weill did come to say hello, and Dimon went down to visit Joan Weill. A number of longtime JPMorgan Chase executives had never met Weill before, and were excited to meet the banking legend. They peppered him with questions about, for example, his opinion of their own performance, and the rumor that Weill had been on the verge of buying Deutsche Bank. He had been, he replied to the latter, but the German company’s CEO, Josef Ackermann, had backed out at the last minute.

His defenses down, Weill spent forty-five minutes with the JPMorgan Chase team before graciously taking his leave. Word came back the next day that upon returning downstairs, Weill had told his dinner companions that the team had shown him more respect than Chuck Prince had offered since Weill had made him CEO of Citigroup.

One important constituency wasn’t thrilled about the merger: the Dimon family. Dimon had moved three young girls to Chicago at a challenging age, and here he was, four years later, proposing to move the two who were still in high school back to New York. “There’s been a lot of crying in the household these last two days,” he told reporters when the deal was announced. Judy Dimon, who had taken nearly a year to adjust to Chicago, wasn’t ready to pack her bags yet, either. (This is not to say she didn’t support the move. When he asked her opinion, Judy told her husband, “We’re not getting any younger. And this is your chance to do something great.”) The decision was made for Judy to stay put until the youngest daughter, Kara, graduated from Chicago Latin in 2007. “Women would say to me, ‘Don’t you even dream about making Kara move and go to another high school,’” recalls Dimon. “So I commuted for two and a half years. That was painful. I had no idea how hard it was going to be, being away from home four days a week. Leaving home on Sunday night to come back to New York was depressing. I hated it.”

The family eventually purchased a second apartment on Park Avenue for $4.875 million in December 2004, combining it with the one they
already owned. Built in 1929, their apartment building is one of the few left in Manhattan with a grand courtyard in the middle. The triple-arch entrance suggests opulence within.

Still, the Dimons’ apartment somehow manages to be understated despite its oversize footprint. “For a long time, most of our furniture was hand-me-downs,” Dimon recalls. “Sure, we could afford better stuff, but the kids were there and we had a dog and I never wanted to be the kind of parent who was always worried about the kids spilling something. I still don’t. But when we came back, we renovated it.” That said, it is still a place where you can entertain 100 brokers on the terrace on a Sunday.

• • •

When Dimon stepped into Harrison’s shoes at JPMorgan Chase, he was, for the first time in years, in an unfamiliar role. Unlike Sandy Weill and Chuck Prince, Dimon had yet to run a global mega-bank, with innumerable moving parts.

His first move was to expand the company’s profit centers from five to six—the investment bank, retail financial services, credit cards, commercial banking, treasury and security services, and asset management. The first three were the largest in terms of revenue and profits, but the last two had demonstrably superior returns on equity.

The merger actually
was
a good fit, as there had been little overlap among the two companies’ business lines. In the first quarter of 2004, for example, JPMorgan Chase earned 57 percent of its net income from its investment bank and 22 percent from retail banking and credit cards, whereas 59 percent of Bank One’s earnings came from retail banking and credit cards, 31 percent from corporate loans, and 10 percent from asset management.

In strong markets, the combined company hoped to see a disproportionate share of earnings come from investment banking and trading. When the market was choppy, the retail and commercial banking divisions might provide stability. And the treasury and asset management divisions were money machines requiring very little capital.

Specific roles took several months to be determined, but Dimon’s
core posse from Bank One remained with the merged company—Mike Cavanagh, Jay Mandelbaum, Heidi Miller, Charlie Scharf, and his adviser Bill Campbell. Whereas Cavanagh, Miller, and Scharf went on to carve out well-defined roles as CFO, head of treasury services, and head of retail, respectively, Campbell became a part-time adviser. Dimon’s Praetorian guard stayed largely intact.

Dimon swears he doesn’t use consultants unless they are absolutely necessary, but he continues to use the services of Andrea Redmond, the recruiter who helped get him in the door at Bank One. (What better endorsement of an executive recruiter than the one who finds
you
for the job?) Redmond introduced one of the more recent additions to the company’s operating committee, its credit card chief, Gordon Smith, to Dimon in 2007. (Smith had been a high-level executive at American Express.)

Mandelbaum found himself with the most amorphous job, head of strategy and business development. Heritage JPMorgan Chase’s head of asset management, Jes Staley, had been concerned that Mandelbaum—having run asset management at Smith Barney—would be gunning for his job but the mild-mannered Mandelbaum instead settled into a role as one of Dimon’s most trusted sounding boards. The other was the firm’s general counsel, Joan Guggenheimer, the woman Dimon had long ago elevated over Weill’s daughter Jessica Bibliowicz. Both stood out for their ability to tell Dimon when he was wrong. “Whenever I have really complicated stuff, I give it to Jay,” Dimon has said.

(“Jamie is either in agreement with you or he’s going at you,” says one JPMorgan Chase executive. “With one exception. He will sit down and reason for hours with Jay. If something is really going wrong, you watch, the person who is behind him is Jay Mandelbaum.”)

When Dimon rolled into JPMorgan Chase, his reputation was largely unchanged from that he’d had before decamping for Chicago: a cost-cutter and systems integrator; a man who got excited by finding ways to collapse 10 different credit card processing technologies into just two or three. But Bill Harrison quickly realized that the Jamie Dimon who returned from Chicago was different from the one who had left New York. Mergers take their toll on institutions, and if people aren’t
happy, they will leave, raise hell, or rebel, and Dimon seemed to understand that. “A merger exposes how good a leader is very quickly,” recalls Harrison. “And Jamie got his hands around things very quickly.”

Two things surprised Dimon out of the gate. The first was a practical issue. The company’s technologies were far less integrated than he’d thought. The second was about the enduring nature of a powerful brand. “We could get off a plane anywhere in the world and the prime minister would want to see us,” he recalls. “I knew the name was good, but I didn’t know how good that calling card still was.” (The bank, for example, has been doing business with Saudi Arabia’s national oil company, Saudi Aramco, for 70 years.) If he could get everything moving in the right direction, he would have something he never had at Bank One or at a pre-Citi Travelers: a gold-plated corporate name on which he could capitalize.

As always, Dimon stamped out internal politics wherever he could. In early executive meetings at JPMorgan Chase, a few people thought it in their best interests to try to pull him aside afterward and whisper their thoughts about this person or that one. He quickly made it clear that he was uninterested in such grade-school tactics. “If you can’t say it in the room, don’t say it at all,” he told more than a few executives. (He later elaborated to
Fortune
on his irritation with obfuscation. “In a big company, it’s easy for people to b.s. you,” he said. “A lot of them have been practicing for decades.”)