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| Rough-cut Dimon |
| Kanika Datta / New Delhi Jul 29, 2009, 00:46 IST |
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Wall Street has recently produced so few heroes that a bio of Jamie Dimon, chairman and CEO of JPMorgan Chase, was inevitable after he pulled off headline-grabbing rescues by buying Bear Stearns and Washington Mutual within six months of each other in 2008.
Writer Patricia Crisafulli rightly points out that Dimon is “the man of the moment” having emerged relatively unscathed from the sub-prime financial crisis. His personal stock soared so high at one time that his name did the rounds as potential candidate for treasury secretary.
Dimon,of course, is no unknown meteor in the world of global finance and not just because he heads the healthiest of the Big Four US banks left standing — Citigroup, Bank of America, Wells Fargo being the others. The 52-year-old son of Greek immigrants has, as the author writes, “enjoyed two rises to the top and one crash in between”.
That “crash in between” refers to a flameout in November 1998 between him and mentor Sandy Weill, the maverick Citigroup chief at the time. Since he was tipped as Weill’s successor at the world’s largest bank, his sacking was assiduously dissected by the US media as was his spectacular turnaround of the Chicago-based Bank One, which was eventually bought by JPMorgan Chase.
The book is a biography but the writer leverages the details of a well-documented life story to provide insights into Dimon’s management style — a sort of “lessons learned” offering to explain how Dimon helped JPMorgan escape the ravages of the global financial meltdown.
The title probably sums up the foundation of Dimon’s success best. He appears to be a drilled-down details man, contrary to the received wisdom that chief executives should keep their eye on the big picture. His trademark accessory is an 8½ x 11 sheet, a “to do” list covered with dozens of little rectangles that are crossed out when things get done.
Yet, he is no micro-manager because of his ability to “dig into the minutiae when necessary and quickly discard what isn’t worth focusing on” and he works through a team of executives and managers empowered with a high degree of trust and accountability.
This outlook and his gut-feel for numbers quickly made him one of the most respected bankers on Wall Street. When he was fired from Citi and took charge at the far smaller and seriously struggling Bank One, several Citibankers chose to follow him — a non-compete clause ruled out making them offers — for less money and lower designations. This for a man with a reputation for impatience, a ratty temper and ruthlessness.
Hands-on leadership and a nose for numbers alone, however, could not have saved JPMorgan from the subprime meltdown had it not been for Dimon’s obsession with transparency — or as associates describe it, “With Jamie, what you see is what you get.” His own philosophy was: “If it’s not the right thing to do, don’t do it” and, more importantly, “Fortress Balance Sheet”.
As a result, Dimon, who took charge of JPMorgan at the height of the subprime boom in 2005, largely avoided the structured investment vehicle or SIVs, the complex derivatives that banks sold to investors and hedge funds, and Collaterised Debt Obligations (CDOs), which are essentially fixed-income securities linked to debt instruments like mortgages.
Remarkably, JPMorgan’s exposure to SIVs was zero — in contrast, Citi had had to take $58 billion of SIVs back on its books in September. As for CDOs, in the second quarter of 2008, JPMorgan took a hit of $5 billion — against $33 billion for Citi, $26 billion for Merrill Lynch and $9 billion for Bank of America.
To be sure, the impact of the Bear Stearns and Washington Mutual buyouts orchestrated by the Treasury and Fed is yet to be felt, but Dimon has gone down in corporate folklore for his ability to swing a deal. When he bought Bear Stearns following a weekend of negotiations, for $10 a share, revised from the original $2 a share, it was considered a steal given that Bear’s Manhattan headquarters alone was worth $1 billion. But then, as Dimon wryly pointed out, “There’s a difference between buying a house and buying a house on fire.”
The book is timely and offers potential but suffers the defects of a quickie. It is being pitched as a management book but, depending mostly on secondary sources, does little to explain the evolution of Dimon’s management style, the mistakes he made en route and what he learnt from them. Instead the writer would have us believe that Dimon was a genius from the time he started out in a “crummy little company” called Commercial Credit. A stodgy and repetitive style does not enhance its value and it may measure poorly against the several other Dimon bios in the works.
THE HOUSE OF DIMON
HOW JPMORGAN’S JAMIE DIMON ROSE TO THE TOP OF THE FINANCIAL WORLD
Patricia Crisafulli
Wiley
242 pages; $24.95
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