J.P. Morgan Chase’s Dimon emerges as a banking power

September 17, 2011

The event was a June 8 American Bankers Association conference on international economics in Atlanta, and the keynote speaker was Federal Reserve Chairman Ben S. Bernanke. During a question-and-answer period, Jamie Dimon, chief executive officer of J.P. Morgan Chase, waited patiently while other bank executives threw polite queries at the central bank head.

When his turn came, Dimon spent several minutes reeling off positive changes in the financial system since 2008, suggesting that the new global capital requirements under Basel III and the rules being formulated under the Dodd-Frank legislation are overkill.

“We know there are 300 rules coming,” he told Bernanke. “Has anyone bothered to study the cumulative effect of all these things?”

The implication was that the Fed, which will enforce the new rules for big banks such as J.P. Morgan, hadn’t studied the impact — which Bernanke said was true. “It’s just too complicated,” he said.

The Dimon-Bernanke encounter touched off a cloudburst of commentary in the financial world.

“Jamie is really the only bank CEO who has the clout to take on Bernanke like that,” says Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia.

“It wasn’t a radical question,” says H. Rodgin Cohen, senior chairman of New York law firm Sullivan & Cromwell. “It was the fact that he had the courage to speak out at all.”

The financial crisis ended the careers of Wall Street CEOs such as Bear Stearns’s James Cayne and Hank Greenberg of American International Group. It helped cement the reputation of Dimon, 55, as the most powerful banker in the United States — and perhaps the world.

When Treasury Secretary Henry M. Paulson Jr. needed someone to save Bear Stearns from collapse in March 2008, he turned to Dimon. And Dimon answered the call when Sheila Bair, the Federal Deposit Insurance Corp. chairman, was searching for someone to take over Washington Mutual, the largest U.S. thrift.

Dimon, who was fired from Citigroup by his mentor, Sandy Weill, 13 years ago, emerged from the financial crisis a born-again hero. His bank took $25 billion in aid from the U.S. Treasury out of patriotic duty, not because it needed the money, he often says.

With a record $17.4 billion in earnings last year, J.P. Morgan has emerged as the United States’ most profitable bank, and the world’s third-most-profitable. In 2012, it is likely to surpass Bank of America as the largest U.S. lender by assets.

Dimon has not been without challenges. His Washington Mutual purchase saddled the bank with tens of billions of dollars of toxic mortgages, while Chase bank’s own home-equity loans have also been spilling red ink.

Dimon’s advantage is his attention to detail, Cohen says.

“It’s not the charm or the charisma that sets him apart,” Cohen says. “It’s the depth of knowledge that he has of all aspects of the institution he runs.”

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