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Roger Lowenstein on America’s Banking Guru Jamie Dimon

December 06, 2010 | About:

If you are a value investor chances are you have read Roger Lowenstein’s biography on Warren Buffett called “The Making of an American Capitalist”. I think most of us still prefer it to other books on Buffett that have come out in recent years.

Lowenstein recently wrote a great article on Jamie Dimon of JP Morgan:


Back in 2004, way before the mortgage bust and before Americans thought of banks as four-letter words, Jamie Dimon took charge of JPMorgan Chase & Company. Known as a tough, hands-on manager, Dimon was supposed to avert the sort of foolish risks that tempted so many of his peers. And sure enough, he was different.

Instead of reviewing brief summaries of the bank’s operations, as his predecessor had, Dimon demanded to see the raw data — hundreds of pages detailing J. P. Morgan’s businesses every month. Instead of simply trusting his traders, Dimon put himself through a tutorial, so that he would understand the complex trades the bank was exposed to. And rather than run its mortgage machine at full throttle for as long as possible, Dimon reined in lending earlier than did others and warned his shareholders of looming trouble.

Prudent as they were, his precautions were not enough. Over the last two years, JPMorgan Chase suffered an astonishing $51 billion in faulty mortgages, unpaid credit cards and other bad loans. And Dimon has landed dead center in the controversies that have caused many Americans to lose faith in banking. Chase issued too many faulty mortgages, it was embarrassed by high overdraft fees on debit cards and recently it has admitted to cutting corners in processing home foreclosures. Americans are angry at bankers for helping to bring the financial system to its knees; they are especially angry at those like Dimon whose banks accepted taxpayer investment.

The popular animus has come as a shock to Dimon. Recently, while entertaining a roomful of corporate clients over a tenderloin dinner, he felt the need to assert his and his industry’s worthiness. “I am not embarrassed to be a banker,” he noted. “I am not embarrassed to be in business.” In truth, Dimon has plenty not to be embarrassed about. He fulfilled a banker’s first obligation: he made sure his bank survived. This was thanks to his strategy of maintaining a healthy cushion of capital for a rainy day. When markets melted down and the economy plunged into recession, J. P. Morgan remained not only solvent but profitable every quarter. When other banks were refusing to lend, Dimon’s continued to offer credit to customers ranging from homeowners to Pfizer to the State of California. And when the United States needed a strong institution to bail out a failing bank, it turned — twice — to JPMorgan Chase.

Dimon sees himself as a patriotic citizen who helped his country in a time of crisis. Now the most visible face of Wall Street, he thinks banks and bankers have a role not only in rebuilding the economy but in coming up with remedies for the financial system. Critics say that, as a part — even a solvent part — of a failed system, he should be grateful for the government’s assistance rather than stridently critical, as he has been, of some of its reforms. Dimon, they note, took advantage of the crisis to acquire Bear Stearns and Washington Mutual, and J. P. Morgan emerged from the crisis as a vastly larger institution. That is a cause for alarm to 33 U.S. senators, who voted this spring for an amendment that would have forced big banks to dismantle. The country is deeply divided over the proper role, and the size, of banks, and nothing epitomizes these tensions quite like the narrative of Jamie Dimon.

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