David, we completely blew it. We went into Jamie Dimon's office, had our little meet and greet. We did not ask about the duel pistols.
Yeah. From the duel, Alexander Hamilton and Aaron Burr, which JP Morgan owns and keeps in their headquarters. And we blew it. We didn't ask to see them. We'll just have to come back.
When they finish the new building, I'm sure they will be in the executive floor. We can go get a viewing of the piece of American history. All right, speaking of American history, let's do it.
Let's do it.
Welcome to the summer 2025 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
I'm David Rosenthal.
And we are your hosts. Today's episode is the story of a rising star on Wall Street in the 1980s who worked with his mentor to merge and acquire their way to the top of the financial world in the '90s, who then got fired unexpectedly by that same mentor who cast about deciding what to do next and then in 2000 accepted a job turning around a poorly-run Midwestern bank. Then over the next 25 years, he would orchestrate one of the most remarkable runs in banking history and really all of corporate history. This is the story of Jamie Dimon and how he created the modern financial behemoth JP Morgan Chase out of the beleaguered component parts of Bank One, JP Morgan Chase, Bear Stearns, Washington Mutual, and First Republic.
Jamie is now the longest serving CEO of any major Wall Street bank and is viewed as kind of the great stabilizer of the American financial system, especially during the 2008 financial crisis. He now sits atop the largest bank in the US with an over $800 billion market cap, which is more than twice their nearest competitor. They are the only bank within spitting distance of these sort of big trillion dollar tech companies that we've covered here on Acquired. And to really put a finer point on the dominance, they are the most valuable company east of the Mississippi in the United States and the only company east of the Mississippi worth more than half a trillion dollars. Incredible.
So the question of course is how did he do it? Banks fail. Financial firms often have spectacular blowups and large organizations period, financial or not, can often get so bloated that they slow down to a crawl. So what did Jamie Dimon do differently? Well, today's episode we have Jamie with us himself to tell the story. We recorded this live in front of 6,000 Acquired fans at Radio City Music Hall in New York City. So, you'll notice it's a different format than our usual episode. We're always trying to figure out what version of Acquired works live with an audience. And this is our latest iteration.
The Radio City Show also had a second act, a late night talk show where we had conversations with the CEO of the New York Times, Meredith Kopit Levien, and the chairman of IAC, Barry Diller, plus some cameos from around the Acquired Cinematic Universe. And we cannot wait to share all of that with you at a later date. Well, if you want to know every time an episode drops, check out our email list, acquired.fm/email. Come join the Slack and talk about this with us afterwards. If you want more Acquired between each monthly episode, check out ACQ2, our interview show where we talk with founders and CEOs building businesses in areas we've covered on the show. And before we dive in, we want to briefly thank our presenting partner JP Morgan.
Yes, the same JP Morgan, which is funny because when we started planning this show together, gosh, almost a year ago, it was immediately clear to Ben and me that the very best person who Acquired could interview in New York also happened to be their CEO.
And as you all know from the episodes over the last couple years, JP Morgan has been a fantastic partner of ours and their payments team demoed all kinds of cool technology at the event. Our huge thanks to the JP Morgan team for putting on the show with us. And if you ever want to learn more, just click the link in the show notes and tell them that Ben and David sent you. So with that, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only. On to our conversation with Jamie Dimon. Well, this feels appropriate.
You guys dressed up for me.
You dressed up for us, too. Thank you. Last year, we had you on the video board at Jason. You were looking very summery there. You look great tonight.
Thank you.
Yes. Well, we know you're a big history buff and we consider ourselves historians above all else. So what we'd like to do here tonight is walk through the 20-year story with you of sort of how you turned JP Morgan Chase from a bank among many to the most systemically important financial institution in the world. Are you game?
Sounds great. Thank you.
We want to start in 1998. You and your mentor Sandy Weill have just spent the past 13 years building the modern financial institution conglomerate. Really the blueprint for what JP Morgan Chase is today. Except it's not JP Morgan, it's Citigroup. And everybody on Wall Street in the entire world expects that you are going to be named CEO of Citigroup in short order. This is 1998.
1998. This is not what happens. Instead, you get fired and you have to restart your whole career, everything, your whole life from scratch.
Sorry to start here, by the way. But before we get into what you do next, what was the model that you and Sandy built at Citigroup?
Okay, first of all, I am thrilled to be here. I want to congratulate these guys for building the Acquired. It's a great intelligent addition to what we need to learn in society. And so I would say it wasn't quite the model because if you look at what we did at Commercial Credit, Primerica, then Travelers and merged. We were a financial conglomerate. We bought lots of companies and lots of different businesses. We fixed them up. We turned around. We made money. And then we merged it with Citibank which obviously was a huge bank. And you know, my view was we should skinny it down and kind of shed the parts that aren't that important to the rest of the company and keep the things that strategically belong together. That was one of my small disagreements with Sandy about the future of the company. And so it was big. It was making a lot of money. It was quite successful at the time. And then I got fired.
So how are you feeling in that moment? When you got fired?
Yeah, that moment. Well, my wife is here and I was hosting a hundred people recruiting kids in my apartment in New York City, same apartment I have now. And they called me, we had a management meeting a Sunday at 4 p.m. that night. And Sandy and John Reed called me up and said, "Can you come a little early? We got a bunch of stuff to talk about." I was the president, chief operating officer. They said, "Well, it's really important." So I drove up there and I sat down in the room with Sandy and John and they said they want to make a few changes. They said we want to make this person in charge of that. I said okay, well that didn't make sense to me. The second one, they wanted to make someone in charge of the global investment bank which I was running. I thought it was another stupid decision. And the third is they said and we want you to resign. And I said okay because at that moment I knew it was all arranged. The boards had voted. The press release was written. The management team was coming up.
So I waited for the management team to come up. I wished them the best. I said, "You guys have a chance to build one of the great companies." They all thanked me. Sandy said, "You want to do the press with me?" I said, "Yeah, but I'll do it from home." So I went home, went to see my kids. They were like—one of my daughters is here too—they were like 14, 12, and 10. And I walk in the front door and I tell them I was fired. And the youngest one says, "Daddy, do we have to sleep on the streets?" I said, "No, no, we're okay." And the middle one, who's always obsessed with college for some reason: "Can I still go to college?" I said, "Yeah." And the one who was here, the oldest one, said, "Great. Since you don't need it, can I have your cell phone?"
And then that night about 50 people came over. All the same people I just met, all the management team bringing whiskey. And it was like having your own wake. And there's one really tall guy who came in, a very good friend of mine, and my daughter looks up and says, "Who are you?" He says, "I work for your daddy." And she says, "Not anymore you don't." And that was it. I was okay. You know, I tell people your net worth, not my self-worth was involved.
And for anyone who doesn't sort of already know Jamie's story, you were the rising star. Citigroup was the biggest bank. You were the heir apparent. This was like unfathomable and for you to take it this gracefully it says a lot. So, you're sort of wandering in the woods as best I can kind of reconstruct it for about 18 months. Is that right? Figuring out what's next.
Yeah. It took me a while to exit and sign agreements and get out. They were kind of mean. But and then I set up an office and it was late. We went for a nice long vacation and stuff like that. When I got back in September, so that was six months later, I started going to work. I had nothing to do, but I went from 9 to 5 and started calling people and thinking about what I'm going to do. It was in the Seagram building, so I'd go for lunch downstairs every day at the Four Seasons. And I explored everything. Started my own merchant bank. I could have retired just teaching, just investing, but I was 42.
And you took a call about running Amazon, right?
I went to visit Jeff Bezos who was looking for a president at the time. He and I hit it off. We've been friends ever since. He's an exceptional human being, but it was like a bridge too far. Even though that movie had just come out, *When Harry Met Sally*, I was thinking, "My god, I'll never wear a suit again. I'm going to live in a houseboat. This would be really great." It would have been an alternate universe. But I'm still good friends with Jeff. So I got at least one good thing out of it. And then I got serious and I was offered jobs to run other big global investment banks. Hank Greenberg who ran AIG called me up and said, "You should come join us." I was thinking, "I'm going to go from Sandy Weill to you? I had to have my head examined to do something like that."
I didn't know the AIG story.
Yeah. Well, that happened years later, too. And then I got a phone call from a headhunter about Bank One. And I was also, you guys probably know, Ken Langone and Bernie Marcus and Arthur Blank ran Home Depot. My wife, I loved them. But at my first dinner with them, I went to see Atlanta. I said, "I have to make a confession until you guys called. I had never been in a Home Depot."
And we were wondering, David and I were talking about New Yorker.
My friend made me go up there and get some equipment and plants and stuff like that. So, but I love their culture, their attitude. They wanted me to do it. Ken Langone says he still should have gotten me. I wasn't going to pay you enough. Of course, it had nothing to do with anything like that. And I had Bank One, but Bank One was my habitat. I was used to financial companies, services, banking. It wasn't quite global. It was a little global at the time. And it was a troubled bank. And I decided that life is what you make it. It was hard on my family. We had to move. I think for anyone who's going to move kids, they were 14, 12, and 10 or something like that—it's hard.
For some context on Bank One for folks who are not familiar. It's not in New York. It's a large bank, but it's a troubled bank. It's based in Chicago.
Large, David. It's a $30 billion market cap bank. Citigroup, where you just had been before, was a $200 billion dollar bank.
It was 21 billion at the time because it had done a split. So if you look back, it was more like 20 billion or something like that. Yeah. But I didn't worry about that. I was like, in life you make things what they are. I don't like complaining about spilled milk. You just put on your pants, you get going, you see what you can make out of it.
But it sounds like you had opportunities to stay in New York to run bigger, more glamorous things?
This was when I was going to run the company. The other ones would have been some investment banks. I didn't really trust some of the people who were talking to me about that. And there's a whole bunch of other stuff that I explored. I took phone calls, some small companies, some big companies. There's a couple of subprime mortgage companies who called me and I was like, "Absolutely not." We'll get to that. And so I just thought this was a chance and if the family's willing to move and we got a nice—it took us a while. We lived in a rental for a while, but got a nice brownstone. And we end up loving Chicago. Chicago is a wonderful city in a lot of different ways. And like I said, it is what you make it, you know, and I put half my money in the stock at the time.
Yeah. You tied your net worth.
I was going to be the captain of the ship. I was going to go down with the ship. I made it clear to everyone I was here permanently and it'll be what it is. And so I got to work like literally the next day.
Did we do the math right that right before you joined Bank One, you bought $60 million of stock?
I did.
I've never heard of someone taking a CEO job and saying, "I'm going to invest half my net worth in this company now."
Yeah. And I thought it might be overvalued a little bit because people thought it might be sold or something like that, but I didn't care about that. If you work at a company and the new CEO comes in, he's from out of town and you're going to have a lot of shareholders—and I knew a lot of the shareholders. I was going to know a lot of the shareholders. I wanted them to know I was in 100%. Lock, stock, and barrel. There was no question I would never sell that stock and I'm going to go down with the ship or go up with the ship. And they also knew I was making decisions that I thought were right for long-term health of the company, not for a short-term type of thing.
So what did you find when you got there? Day one on the job, you start investigating. Is it better, worse, the same than you thought?
There had been an analyst called Mike Mayo who had done a report. I remember one of the great lines of the report: "Even Hercules couldn't fix it." It had been an amalgamation of Bank One, First Chicago, National Bank of Detroit. They had never put the companies together. So, they had multiple statement systems, processing systems, payment systems, SAP systems. They had different brands, services coming down. We were losing accounts. They were closing branches. It was a mess. Systems, people, ops. But again, I just met the management team. I walked in. I met six of the directors. There were 21 directors. 11 hated the other 10.
21 board members from multiple acquisitions. They were tribal.
They ended up hating each other. I knew that when I went in because I spoke to a lot of people and did research in the bank. But again, in life you get handed these things and it's not perfect. Even today people want to be handed something perfect—it's not perfect. And so I met six of directors. I shook all their hands. I told them I'm going to do the best I can do. I'm going to tell the truth, the whole truth, none of the truth—the good, the bad, the ugly. We're going to try to build a great company. I'm going to need your help. And then they left. So now I'm on the executive floor. I don't even know where to go.
And so I kind of knocked on someone's door, the head of HR. I said, "I do need an office and I really need an assistant." And they were going to give me the chairman's office in the corner. I said, "No, no, I want to be right in the middle so I can see people." And then I went to meet the management team. They put them all in this conference room, nice white plush carpets. I walked in with a cup of coffee and they said, "Jamie, we don't drink coffee in here for obvious reasons." So, I looked at them. I looked at the coffee. I looked at them. I said, "You do now."
And then I just started meeting with them all. And yeah, the systems were terrible. The company was losing money. I didn't know all the businesses really well. So, the credit card company had collapsed. That's probably the business I knew the least. But again, that didn't matter to me. I was going to try to fix it. It had some good assets and things like that. So, I rolled up my sleeves and went to work.
As when we were chatting a couple weeks ago in preparing for this, we asked you in the context of JP Morgan, like what are the critical things in your mind that has made JP Morgan what it is today? And the first thing you said was risk—the culture around risk and the understanding by management of risk. When you got to Bank One, I think this is where you first started putting into practice the culture around risk. What was the risk culture at Bank One and how did you change it?
Yeah, I've always been very risk-conscious and risk-conscious does not mean getting rid of risk. It means properly pricing it and understanding the potential outcomes. And so when I got there, I just started meeting people and going through. I quickly realized that Bank One had more US corporate credit risk than Citibank did. And the way they accounted for it was unbelievably aggressive. And so they had less capital, less reserves, less this. They were calling these things profitable. They were losing money. In a lot of businesses, you've got to be very careful about the credit business. And once I found out that, I kind of panicked a little bit and I went through every single loan in the books. I marked them all down, put up more reserves, told the board about it and then wanted to earn more revenues per dollar of risk.
So for example, in the middle market business, for every loan we had like 80 cents of net interest income from the loan and 20 cents of other revenue like payments. By the time we merged with JP Morgan, we had 40% NII from the loan and 60% NIR from other type of things like payments. In one you're being paid for the risk and in one you're being paid little for the risk. And I always stress-tested and I showed the board that if we have a recession—and we're about to have one—how much money we lose in credit. So I hired a woman called Linda Bammann who said, "Okay, if you're going to let me do credit, are you going to let me sell loans?" They said, "Yes." "Are you going to let me hedge loans?" "Yes." "Can I do 10 billion?" I said, "Yes." She said, "Okay, I'll join." And we probably reduced the balance sheet by 50 billion because of that. And then we did have a recession, but we were kind of okay by then with one big bad one, which is United, which went bankrupt, and we owned it for a small period of time.
There seems to be kind of a fundamental Jamie Dimon-ism, which is don't blow up. A lot of other people have gotten decent at pricing risk, but everyone else seems to be willing to get closer to the line than you. Where did you sort of develop this don't blow up at all costs concept?
Around risk, there's always this ecosystem you've always heard: "Everyone's doing it, everyone's okay, this is going to work, this time is different." And history teaches you a lot. I always say my dad was a stockbroker and so I bought my first stock when I was 14 in 1972. The stock market hit a thousand. It hit a thousand in 1968—I was already helping a little bit with stuff. By 1974, it was down 45%. All the limousines on Wall Street were gone. Restaurants were being closed. You know, markets move violently. And then, we had kind of a recovery in 1980. Had a recession in '82. In '82, it was lower than it had been in 1968. It hit 800. And then in '87, the market was down 25% in one day. In 1990, all these banks—JP Morgan, City, Chase, Chemical—were all taken to their knees by real estate losses. City was worth three billion at the time and the other ones were about a billion dollars. And then you had the '97 real-estate-related thing. You had the 2000 internet bubble and then you had the great financial crisis.
And I could go through history, there's tons of these things. History does rhyme. Too much leverage, too much risk. Everyone thinks it's going to be great. No one thinks it can go down a lot. You know, that stock market went down 20% one year, 30% next year, 20% the next year. At one point, it was down 90%. You know, happens.
It seems like your philosophy is that the worst thing will happen. So, just plan for it. Don't say, "Oh, we're good as long as this crazy insane four-sigma event doesn't happen." You're like, "No, that will happen. It happens often."
Yeah. So when I look at it, I always ask—like when I do stress-testing of risk for high-yield—I remember getting to JP Morgan and going through the risk books and their stress test was that high-yield would move 40% of the credit spread. That time it was at 400, that means 560. And I said, "No, our stress test is going to be worst ever." Worst ever was 17%. And they said, "That'll never happen again. The market's more sophisticated." Well, in '08, it hit 20%. And you couldn't have sold a bond. There was no market. So those things do happen. And the point isn't that you're trying to guess them. The point is you can handle them. So, you continue build your business. And so, I always look at what I call the fat tails and manage that we can handle all the fat tails. And not the stress test the Fed gives us, but all the fat tails. Market's down 50%, interest rates up to 8%, credit spreads back to worst ever. Of course, your results will be worse, but you're there. And the thing about financial services, leverage kills you. Aggressive accounting can kill you, which a lot of companies do.
And the goal should be confidence. If you lose money as a financial company, I always knew this too. The headlines are what people read, and if they're relying on putting their money with you, they look at that differently. They lose trust and that causes runs on banks. You saw some recently because people take the money out.
One thing that you just said, which is that you might do worse but you're there—there's sort of this trade-off that you make where you're less profitable in the short term but at least you stick around. If you look back at the companies that you've run, Bank One, JP Morgan Chase, is that true in the good years that you've been less profitable than those who are kind of risk-on?
Yeah, a little bit. If you look at the history of banks up until 2007, a lot of banks were only 3% equity. Most of them went bankrupt. We never did that. But in '08 and '09, we were fine and they weren't. And so you want to build a real strong company with real margins, real clients, conservative accounting where you're not relying on leverage. It's very easy to use leverage to jack up returns in any business, but in banking it can be particularly dangerous.
So it seems like a core part if not the entirety of this distilled into your operating strategy is the Fortress balance sheet. When did you first hear about the fortress balance sheet?
I've been talking about it way back to Primerica in the 1990s. You've got to be able to survive the tough times. The fortress balance sheet is that you run a company serving clients well. You have good margins, good liquidity, good capital. I'm as conservative an accountant as you can find. I don't upfront profits when I can spread them over time. And accounting—of course, accountants hate it when I say this—you can drive a truck through accounting rules. Certain things are considered expenses, but they're good investments for the future. And revenues: if I make bad loans, they are bad revenues. They will kill you, but for a while, they look pretty good. So, it's all those things: margins, clients. In the banking business, the character of the clients you have will reflect in your bank. So the first thing is who are you doing business with, how you're doing business, and also making sure your compensation plans aren't paying people for stuff which is stupid or unethical.
All right listeners, now is a great time to thank one of our favorite companies: Vercel.
Yes, Vercel is an awesome company. Over the past few years, they've become the infrastructure backbone that powers modern web development and now the AI wave. If you visited a fast, responsive, modern website lately or used a slick AI native app with agents and hyper-personalized interfaces, there's a good chance it was built and deployed on Vercel.
For the past decade, they've been on a mission to democratize the lessons of the giants, companies like Google and Amazon and Meta. And the idea is developers shouldn't have to spend weeks and engineering resources to stitch together dozens of services just to launch a web app. Vercel made it simple. You write code, you ship it fast, globally distributed, and without developing a second skillset in the nuances of deployment. That's the magic of their framework-defined infrastructure which lets developers and large teams go from idea to production without any friction. Vercel has been synonymous with front-end development, but now they do backend and agentic workloads as well. Vercel calls this the AI Cloud. Purpose-built for the next era of apps and already in production across companies like Under Armour, PayPal, Notion, and AI startups like Runway, Decagon, and Browserbase.
Yep, the AI Cloud takes removing deployment friction even one more step. In some cases, developers don't even need to push code anymore. Agents can release features continuously. Infrastructure configures itself and interfaces adapt to how you work. If you want to build the future of software, head to vercel.com/acquired. Just tell them that Ben and David sent you.
Now is also a great time to thank another of our favorite companies, Anthropic, and their AI assistant, Claude. Claude has really transformed our workflow here at Acquired. Preparing to interview Jamie Dimon requires serious research. Obviously, decades of banking history, regulatory changes, three financial crises, building the fortress balance sheet. This is exactly the kind of complex analysis that Claude is excellent at. David and I have never had assistants here because we think it's important for us to do the research ourselves. But Claude now gives us the best of both worlds. It's an extra set of hands that we have full control and visibility into what it's doing and how.
Where Claude is especially great for me is extended thinking mode. When I asked it to analyze JP Morgan's strategy through multiple financial crises, I could watch Claude's reasoning through each decision point step by step. And it has full context by connecting to our entire 10-year base of knowledge here at Acquired through something called MCP, the model context protocol. They have pre-built integrations with Gmail and Google Docs and also services like Jira, Asana, Linear, Square, PayPal, as well as custom integrations for any internal tooling that you have.
And Claude is built by Anthropic with a laser focus on accuracy and trustworthiness, which is exactly what we need.
Yep. If you want to start using Claude yourself or for your organization, go to claude.ai/acquired and they've got a special offer for Acquired listeners: Half-price Claude Pro for 3 months, which gets you access to all the features mentioned above.
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All right, David, catch us up to the merger. So you run Bank One for four years from Chicago and then in 2004 you merge with JP Morgan Chase in what is termed at the time a merger of equals. Bank One shareholders get 42% of the combined company.
I think people don't realize how much of JP Morgan Chase is Bank One today. That's why it's a little irritating to me when they say you've been running it since '07. I was running 40% of the company for the whole time. And when I got to Bank One, I already knew that a logical strategic merger might be JP Morgan. I know all these companies and that's the other thing about Fortress balance sheet is you also have real strategies that survive the test of time and you're not flipping and flopping. And then I'm sitting there and across the tape comes JP Morgan Chase to merge. They're now worth like 80 billion or 90 or whatever the number was. I'm like, well, there goes that dream. But four years later, our stock had doubled or something like that. And I'd been meeting with Bill Harrison, the current chairman of JP Morgan at the time. We were talking about it. We both knew it made business sense. They were kind of looking for a CEO. So we had been talking probably for a year and a half before that.
Did they give Bank One shareholders 42% because they were looking for a CEO?
There were two lawsuits. We got the premium, they got the name and the location and I effectively had kind of control from day one because inside the merge agreement—and this is almost unheard of when we get the premium—to not have me become CEO 18 months later, 75% of the board would have to vote me out.
The default was you were going to become CEO.
And the board was eight Bank One people and eight JP Morgan people. I knew a lot of the JP Morgan board members too who respected me. Bill Harrison and I were very close. But that was the agreement. They got sued for paying too much to buy me. I got sued for not taking enough. If you get sued, you can't win these.
I think every shareholder is probably happy today.
But it worked. It worked out.
All right. Before we get to 2006, when you're going through that process and even maybe the couple years before you and Bill were talking, you're starting to think about JP Morgan as a partner. I'm curious, did the brand, did the name JP Morgan factor into your thinking at all? Did you view that as an asset?
JP Morgan brand is a Tiffany name. I didn't value it in the deal. I think the first thing is run your company well and people thought I was going to start doing deals immediately. I was like no, we suck. We haven't earned the right to run someone else's company yet. When we're running a good company we can merge with somebody. But the first thing I looked at was business logic. Every business we had a consumer business, they had a consumer business. We had a credit card business—they were both terrible. They had a big investment bank. We had a big US corporate bank that needed some of those investment banking services. We both had a wealth management business. I knew we could save a lot of costs. So the business logic was pretty impeccable. Then there's the ability to execute—can you get it done? You've all seen a lot of deals where they fall apart, they have infighting. It kind of happened at City. And then there's the price. I knew we had a Tiffany brand, but I don't think it would have mattered that much if everything else didn't work out.
All right. I'm gonna fast forward a couple years. It's 2006. You're officially chairman and CEO of the combined JP Morgan Chase. And 2006 on Wall Street is like go-go baby. It's like the 1980s all over again. I think you had the same incentives as everyone else, but you behaved very differently. Am I missing something? Did you have the same incentives or you pulled JP Morgan back hard on the risk side in 2006?
I did. So there were cracks out there in 2006. We definitely saw subprime getting bad and that's when I pulled back on subprime. I wish I had done more because if you look at what I did, you say, "Okay, well you saved half the money but you would have saved more."
You still had some losses.
Yeah. But we also had maybe a third of the leverage of the big investment banks and a lot more liquidity. So in 2006, I started to stockpile liquidity. The big investment banks went from 12 times leverage to 35 times leverage. For bridge loans, in '07, the bridge book of Wall Street was $450 billion. Today it's 40 billion. JP Morgan can handle the whole 40 billion today. And they were much more leveraged deals and a lot of them fell apart before you had the collapse in the mortgage markets which really took down a lot of these banks.
But you did have the same incentives and you had the same access to information that a lot of these other folks did, but you didn't blow up. What explains this? Because usually behavior follows incentives.
Yeah. Well, first of all, if you work for me, I would tell you: I don't care what the incentive is. Don't do the wrong thing. And don't do the wrong thing to the client. If you're the client, how would you want to be treated? I had gotten rid of that one risk thing—there were multiple risk things like that. The second I put in all these new risk controls, all of a sudden you weren't making money by taking that leverage because I was looking at how much capital can be deployed if things get bad. And so I was looking at earnings through the cycle. And then, very importantly, all of these investment banks were doing side deals, private deals. I got rid of almost all of them.
This is for comp senior bankers.
And so today at JP Morgan Chase, there are no—we all know about it. There are no winks, there are no nods, there are no side deals, there's almost no one paid on a particular thing because if you're paid on a particular thing, you can do the wrong thing and meanwhile not help the company manage its risk. So we changed the incentive programs and I'm quite conscious about incentive programs that they don't create misbehavior. If you're in a company and you say the incentive program is doing that, you should tell the company this incentive plan is not incenting the right behavior versus being the customer. A lot of it was leverage. If you have 30 times leverage and you're getting 20% of the profits, you'll go to 40 times leverage. It's literally will add 25% to your bonus. And so I got rid of the profit pool of 20% and the leverage, and I lost some people too in the meantime.
It's funny. JP Morgan as part of the system had the same incentives but you changed the incentives for your team within the company.
All right. We got to go to 2008. March 13th, Thursday, 2008.
It's Thursday night. You get a call from Bear Stearns' CEO. The stock closed that day at $57 a share. It's like 150 a couple months before. Three days later—God, I remember it like yesterday, I was working on Park Avenue—two dollars a share. You're buying Bear Stearns. Tell us the story.
So, I was at Avra on 47th Street with my parents, my parents' favorite restaurant. My whole family was there. It happened to be my birthday. Alan Schwartz, who was the current CEO—we'd seen their stock go down. I knew they had some real problems because we saw the hedge funds and some of the things that were taking place there. And he said, "Jamie, I need $30 billion tonight before Asia opens." To which I said, "I don't know how to get $30 billion for you. Have you called Paulson? Have you called Tim Geithner?" So we all called. I called up the management team. I went back in. I probably had a hundred people come in that night. They all got dressed, they went back to work. Bear Stearns went bankrupt. I spoke to the Fed about let's just get them to the weekend. We had one day and we needed a Saturday and Sunday and we concocted this loan.
We couldn't lend the 30 billion and the Fed technically couldn't lend the 30 billion, but the Fed can lend to us technically and I can technically use the collateral of Bear Stearns. So we got literally a one-day loan and then the next day I had thousands of people come in—due diligence—and we went through every loan, every asset, every balance sheet, all the derivatives, all the lawsuits, all the HR policies—real due diligence in a two or three day period—and bought the company that night for $2 a share. Hank Paulson was telling me, "Why are you paying anything for it?" I said, "Well, I do have to get shareholder votes."
Do you need Bear shareholders to approve?
It was a public deal. And the worst part of it is I was going to get the lawsuits from the Bear shareholders. But we couldn't let it go bankrupt. It wasn't like an industrial company I can buy in bankruptcy. It would have been gone and the crisis would have just unfolded.
Okay, two questions. One, what would have happened if it went down? Two, afterwards did you think it was over?
No. Look what happened with Lehman—it was an uncontrolled failure. There was money locked up everywhere. People panicked. That would have happened with Bear. So it did stop that and I would have thought that it gave other people time to clean up their act. I would have thought some of the other firms had more liquidity, more capital and were a little bit more prepared. The stress in the system was already mounting. So we bought it and you know, probably did help in hindsight. It didn't stop the crisis from unfolding. We bought it and then a week later we changed it to $10 a share. It had been at 120.
The way to think of it is it was 300 billion of assets. It had 12 billion tangible book value. We wrote off the whole tangible book value in the purchase to liquidate the loans, to hedge stuff, severance costs, lawsuit costs. So we paid a billion dollars for a company that had been worth $20 billion recently. The building we're in now was worth a billion dollars on the balance sheet for zero. And we got some very good people and we got some good businesses, but it was an extremely painful process.
I've seen estimates that in the fullness of time, after really dealing with unwinding all the stuff there, it cost you 15 to 20 billion.
It was the 12 billion we wrote off that didn't cost us—we didn't really pay for it. And then the government sued us on the mortgages, which I was quite offended by. I really thought, "Take this problem and then we'll come after you anyway." This is the government down the road deciding, "I don't care, we're going to come after you anyway." So while we kind of saved the system, they made us pay $5 billion on the bad mortgages that Bear Stearns had done. And that's what made me make the statement I wouldn't do it again. I wouldn't really trust the government again.
I got to ask a follow-up question to that. Is that a structural thing, just the way that we're set up with a new administration every four years?
Yeah. They don't feel obligated to what the prior administration did. Some contracts were violated in this thing—literally contracts. Since you operate under their laws, they can take you down. So I went to see Eric Holder trying to settle this mortgage stuff. I brought my lead director. He expected me to come and be pounding my chest. And I went in and said, "Eric, I am here to surrender. I cannot fight and I cannot win against the federal government. A criminal indictment can sink my company. I will not do that to my company or my country. I'm here to surrender. Before I surrender, I want you to know the circumstances by which we bought WaMu and Bear Stearns because 80% of what they were asking for related to Bear Stearns and WaMu, not JP Morgan Chase." And I went through the whole thing. He said, "Thank you, I'll take it in consideration," but they never gave me the accounting. And so it is what it is. It was quite painful, but got to move on.
We'll move on. I do have one more thing: whether you would have done it again, you were very clear. It was not a great deal on paper for JP Morgan, but as we look at it now, the reputational value—the reputation of JP Morgan now is unlike any other in the industry.
Part of why you're worth $800 billion is that reputation. A lot of what created that reputation was that weekend.
Yes. And I know I say I wouldn't trust the government. If the government called me again and said, "We need your help to save our country," well, of course, I'm a patriot that way. I just would try to come up with some ways to avoid the punishment by the next president.
You need the version of the merger agreement with JP Morgan Chase where it's like 75% of Congress needs to vote not to sue you.
All right. So, Bear Stearns happens. Six months later, you get another phone call. WaMu is going under. You do buy WaMu. Contrary to everything we're talking about with Bear, WaMu is a great acquisition, right?
Yeah. So, this is a lesson about acquisitions—it's very hard. Remember, we bought WaMu a week after Lehman went bankrupt and most boards wouldn't have touched that at all because the whole system was in trouble. But WaMu put us in California, parts of Nevada, Georgia, Florida, which we weren't in. So, think of these really healthy states. And they had 2,300 branches. They had huge mortgage problems, but we had looked at it over and over and over. So, we knew their mortgage books cold.
We bought it for a $30 billion discount to tangible book value because they had debt and we left the debt behind. And that 30 billion was approximately what the mortgage loss was going to be. So, we bought the company, think if you bought a company clean, we wrote off all that stuff. The books were clean. And then we did something unheard of, too. The next day or two days later, I went in the market, raised another 11 billion dollars of equity, which I didn't really need, but again, this is my conservatism. I was like, this can get even worse and I don't want to be short capital liquidity. So, we raised that to make sure our balance sheet was just as strong as it was after WaMu as it was before WaMu.
And you already had the reputation to pull this off, right? In the worst month of the financial crisis, who can go out and raise 11 billion dollars of equity?
People trust you. We knew a lot of the shareholders and you earn your trust over time. We gave them a quick little presentation and a lot of them stepped up and said, "This is great." We also knew we could execute it because we're behind the Bear Stearns. People forget the work is the next day—you've got 50,000 people consolidating 5,000 applications, branches, compensation programs, payment systems. It's a lot of work, but we obviously have the capability to do that and we have the capability to do WaMu. I think we finished the WaMu consolidations in nine months. So within nine months they were all on the same systems which allows you to start doing a better job in customer service.
So this fortress balance sheet strategy and raising this equity capital and having additional margin of safety and conservative accounting—in retrospect it seems like the obvious right strategy. Why wasn't everyone else copying it? Have people changed and does everyone else run their banks like this now?
I think people are more conservative today. I think regulators are more conservative today. But again, people get involved in aggressive accounting. They don't look at stressing their own bank in a real way. You saw people take too much interest rate risk, too much credit exposure. And very often it's the new products that blow up. It takes a while; they haven't been through a cycle. You had that with equities way back in 1929. You had it with options. You had it with mortgages. Even Ginnie Maes at one point blew up even though they're government guaranteed.
Arguably, you had it with quant and with LTCM.
Quant happened with leverage lending. And then people then become more rational in how they run these balance sheets.
So I have to ask you, is this private credit today?
I don't really think so. I don't think it's $2 trillion. It's grown rapidly—that's an issue. But there's some very good actors in it who know what they're doing. Customers like the product. But there are also people who don't know what they're doing and it's grown rapidly. There may be something in there that will become a problem one day. I don't think it's systemic. The mortgage market at the time it blew up was $9 trillion and a trillion dollars was lost. A lot of these private credits are not leveraged like that, but it doesn't mean there won't be problems.
What are some of these in your mind that are potentially problematic today?
Well, I look at asset prices—they're rather high. If today PEs were 15 as opposed to 23, I'd say that's a lot less risk. I would say at 23 there's not a lot of upside and there's a long way to fall. And that's true with credit spreads. We stress test everything. We do like 100 stress tests a week to make sure we can handle a wide variety of things. And then the biggest risk to me is cyber. This cyber stuff is—we're very good at it. We spend $800 million a year on it. We work with all the government agencies. But it's grids and water and even part of the military establishment. The protections are not what you need if we ever get any kind of war where cyber is involved. China is very good at it and so is Russia.
All right, I'm going to pull us back to the story. We're going to fast forward to 2023. Silicon Valley Bank and First Republic both fail. You're there again. Did you see it coming? What lessons did you learn from how 2008 went that you could apply in 2023? Obviously you bought First Republic.
Silicon Valley Bank and First Republic both did some very good stuff, but they both had something unique: I'm going to call them concentrated deposits. A lot of venture capital—what happened with Silicon Valley Bank and kind of First Republic is some of these large venture capital companies told their constituent clients that the banks aren't safe, get out. And they all removed their deposits. In one day, 100 billion. And that caused the problem. But they also had other problems. They didn't have proper liquidity. They had taken too much interest rate exposure. And the interest rate exposure was hidden by accounting—it was called "held to maturity" where you don't have to mark even treasuries to market. I always hated held to maturity. If you said what's the tangible book value of one of these banks and you marked that one thing to market, all of a sudden it was 50 cents on the dollar. The regulators helped us because they said rates are going to stay low forever. So these banks bought a lot of 3% mortgages and when rates went up to 5%, those were worth 60 cents on the dollar.
Both those took too much interest exposure known to management and it was known to the regulators and fixable. We knew about Silicon Valley Bank. We were trying to compete in that area. We have a whole campus in Palo Alto now. We've hired 500 innovation bankers. We're going to get there. And we knew First Republic. I had called Janet Yellen and said, "That company's in trouble." They waited a little bit too long. But you could imagine the day we bought it, you never heard about it again. We merged everything in. First Republic did a great job with high-net-worth clients, single point of contact. So now if you go down Madison Avenue, you see things called JP Morgan Financial Center.
That's your first JP Morgan-branded consumer effort, right?
Because it's kind of based on that. When you walk in there, we know your small business, we know your mortgage, we can do a whole bunch of different stuff. So very high level services. I think we have 20 of them now. If it works, in 20 years we have 300. These things are opportunities and I hope it works.
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All right. So, we're effectively caught up to today. If we're now trying to answer the question: how did you separate from the pack? Why did you become a completely different animal than your whole competitive set? What are the things in your mind that led to this success?
Well, we skipped over strategy a little bit and this is important. What we do is the same thing that a community bank does, other than global investment banking. If you walk into a small community bank, they know your business account, they know your consumer account. They usually have a trust company managing your private affairs. Their CRM is up here; they don't need a Salesforce CRM because they know everyone in town. The strategy—those businesses fit together. They feed each other. A lot of our middle market clients use investment banking products. All of our businesses feed each other. We got rid of everything that didn't fit a strategy. And then you start building client businesses, fortress balance sheet, fortress accounting.
So it's holding a portfolio of things that feed each other.
They fit. Whereas City had consumer finance—that didn't fit. Life insurance—that didn't fit. Sandy just wanted to do more of them. You once you get involved in these things, it's hard for people to understand the risk in each one. All of ours fit. I don't like hobbies. I don't like things we made—and we've made plenty of mistakes because you have to try and test things—but then you're always investing for the future. That investment is always people, branches, and technology. Our people run the global investment bank but they've opened commercial banking branches all over Europe and it's feeding all other parts of the company. Sticking to your knitting, constantly investing, not overreacting to the market. If you're strong when others aren't, you have a chance to buy things you want to buy. And then always look at the world from the point of view of the consumer.
And building teams of people. Our people are curious and smart. They have heart, they have soul. They give a damn about the guards in the company and the receptionists—it's not just about the big-time bankers pounding their chest. We try not to put up with that. The company serves the clients and I think the clients know that.
When you really dig in to start analyzing JP Morgan's financials, you kind of see this one thing that jumps right out at you, which is the efficiency ratio. For every dollar that you make compared to your competitors, you get to keep 15 cents more of that dollar as profit. It's not hard to see how that compounds. Why is your efficiency ratio so much better than competitors?
It is literally continuously investing and gaining business at the margin and not stopping. The thing about margins is that we have that margin while investing a lot. It's much easier to have that margin and just cut billions of dollars of marketing tomorrow. We can stop opening branches and save a billion dollars next year. Your margins will go up, your growth will go down. So we kind of look right through the cycle and we look at the actual economics of what we do, not the accounting. We have great people and great products. We do investor day and we tell everyone everything. I never do presentations; I'm watching them do the presentations and I'm saying, "Oh god, we're just giving away too many secrets here."
So there's secrets as to why the efficiency ratio—I saw Howard Schultz here before.
No, but you look at what he built over the years—the consistency, the curiosity, the heart. It's just always doing that, knowing you're going to make mistakes but building the culture that just kind of plows through that. Sports is a great analogy. If you have a sports team with a bunch of real jerks on it, are they going to be a great team? Almost never. If the team members aren't giving it their best every day during practice—you look at Tom Brady, every day at practice, he worked hard. It's not that different in business. The difference in business is you can BS about it all the time. But in sports, you see it on the playing field. Companies have that; it's like a sauce that works.
All right. We've got one last question for you. If you look back to 2008, which was a long time ago now, all of the other leaders that were involved in that era have long since retired. It seems like you're working as hard as ever and in it as much as ever. Why are you still here? What keeps you going?
I want to thank my wife who's here too who suffered through all this with me all these years. I couldn't have done it without her. My grandparents were all Greek immigrants who didn't finish high school. But there's a Greek ethic: have a purpose. It could be art, science, military, business, or just being a great parent, a great teacher. Have a purpose and then do the best you can, give it your all. Don't be one of those people who complains all the time; you give it your best and then treat everyone properly. If there's a bully beating up on someone, you are not allowed to allow a bully to do it.
In my hierarchy of life, the most important thing is my family. The second thing is my country because I think this country is the indispensable nation that brought freedom of speech, freedom of religion, freedom of enterprise. And then my purpose—because my family doesn't want me home every day—this is my contribution through this company. I can help cities, states, schools, employees, and I get the biggest kick out of that. As long as I have the energy, I'm going to do it. My daughter said, "Dad, you need some hobbies." And I said, "I do: hanging out with you, family travel, barbecuing, wine, whiskey, and I love to read history. Hiking." This gives me purpose in life beyond family and beyond country. I get to do a lot of things for our country that I just think are quite meaningful from this job. And so, when I'm done with this, I'll teach and write. But I got to do something.
There are a lot of people who have floated your name for political or policy roles over the years. There is only one job that could possibly impact the country on a bigger scale than you're currently doing. Do you agree?
Probably a great place to leave it.
Jamie, thank you so much for joining us.
David, Ben, these guys are great, by the way. So, thank you.
Well, that is it for our conversation with Jamie Dimon. Listeners, thank you so much to all 6,000 of you who came to watch in person. Was so cool.
So cool. Well, we have some thank yous. First to our partners this season: JP Morgan, an incredible partner to us here at Acquired; Statsig, the best way to do experimentation and more as a product development team; Vercel, your complete platform for web development; and Anthropic, the makers of Claude. You can click the links in the show notes to learn more about each of them.
As always, a huge thank you to Arvind Navaratnam at Worldly Partners for his excellent write-up on the Jamie Dimon years of JP Morgan, which is linked in the show notes. If you like this episode, go check out other recent episodes like the start of our Google series, our Rolex episode, and then our interviews with Steve Ballmer, Mark Zuckerberg, Howard Schultz. If you're new to the show, I think all of those are great places to start.
After this episode, if you are still looking for more, we have a second show for you: ACQ2. The most recent is an episode with Jesse Cole, the founder and owner of the Savannah Bananas.
For something completely different.
Yes. And if you want to talk about this with the Acquired community, come join the Slack: acquired.fm/slack. And with that, listeners, we'll see you next time.
We'll see you next time.