The Banker Who Saved Wall Street

From "Last Man Standing" by Duff McDonald.  Copyright © 2009 by Duff McDonald.  To be published by Simon and Schuster, October 2009.  Reprinted by permission.

On the morning of Sept. 18, 2008, the phone rang in Jamie Dimon's office on the 48th floor of JPMorgan Chase's New York headquarters. It was Hank Paulson, the secretary of the Treasury, who for the second time in six months had a pressing question: would Dimon be interested in acquiring the floundering investment bank Morgan Stanley—at no cost whatsoever?

The call came at a tumultuous moment. Stocks had fallen 27 percent between Aug. 29 and Sept. 10. Lehman Brothers had already failed, Merrill Lynch had been sold to Bank of America, and AIG had received an emergency loan of $85 billion from the federal government. The only remaining question was whether it would be Morgan Stanley or Goldman Sachs to fail next. The government was desperately seeking to stave off a total wipeout of Wall Street. And here was Paulson offering Dimon the chance to own Morgan Stanley for absolutely nothing. At the government's urging, Dimon had agreed to take over Bear Stearns in March in a whirlwind 48-hour deal, a transaction that established Dimon as the government's banker of last resort. "Some are coming to Washington for help," Sheila Bair, chairman of the Federal Deposit Insurance Corp., later said. "Others are coming to Washington to help."

Ultimately, the Morgan Stanley deal was not to be. Dimon reportedly said he'd discuss it with his board, but his initial view was that his bank shouldn't do it—it would be a bloodbath for employees on both sides, a doubling down of risk, and years of distraction for the company. Moreover, Dimon's team was already busy preparing a bid to take over Washington Mutual, which was also on the verge of failure.

The amazing thing about this phone call: Paulson really didn't have anyone else to turn to. In the year since Lehman's collapse, it's become even clearer that Jamie Dimon was the only chief of a major bank to have properly prepared for the hundred-year storm that hit Wall Street. Starting the year before, his firm had been aggressively dialing back its exposure to mortgages—particularly of the subprime sort—while others were sitting tight.

In retrospect, as the economy has begun to stabilize, many of the government's actions last fall—particularly the aggressive and creative efforts of Ben Bernanke to provide liquidity to credit markets—have seemed effective. But in the midst of the crisis, regulators seemed to repeatedly rely on a simple tactic: calling Jamie Dimon and asking him to step in.

As we emerge from the throes of the financial crisis, it has become clear that not only is Jamie Dimon the government's banker of choice, JPMorgan Chase is increasingly customers' bank of choice as well. Its share in retail banking continues to rise, and in the first six months of 2009, it led the industry in the most important capital-raising categories for investment banks, trouncing erstwhile market leader Goldman Sachs. Despite Goldman's outsize reputation, Dimon leads an institution that dwarfs Goldman: its $2 trillion in assets are more than twice Goldman's $890 billion, and the company's market value of $160 billion is twice Goldman's own $80 billion. In short, Jamie Dimon is the world's most important banker. "Banking is a very good business if you don't do anything dumb," says Warren Buffett, who's emerged as a big fan of Dimon. "Morris Shapiro said long ago that there are more banks than bankers, and that's fundamentally the problem. But Jamie is a banker from head to toe."

Dimon is a third-generation banker, the grandson of Greek immigrants and a lifelong Manhattanite. He grew up on the Upper East Side and graduated fourth in his class at the elite Browning School before attending Tufts University (summa cum laude) and excelling at Harvard Business School. Married to Judy Kent, an HBS classmate, he has three daughters, and today he spends much of his life on Park Avenue—the street where he's lived since he was a teenager, and where JPMorgan's Chase's offices are located. After Harvard, Dimon spent the first 16 years of his career as the protégé of Sandy Weill, first at American Express and later at Citigroup. By the late 1990s he'd had a falling out with Weill, which culminated in Dimon's firing; afterward, Dimon served as CEO of Bank One, and became chief executive of JPMorgan Chase in 2004 after a merger of those two banks.