In Full Stride as Others Fall
During Crisis, Dimon Bolsters J.P. Morgan Chase's Position

By Heather Landy
Special to The Washington Post
Saturday, September 27, 2008

NEW YORK, Sept. 26 -- Jamie Dimon steered his bank away from the bad mortgage bets and risky financing methods that have damaged much of his competition. But the J.P. Morgan Chase chief executive finds himself playing a major role in the credit crisis anyway.

From a dashing rescue of Bear Stearns in March to this week's winning bid in an emergency auction of savings and loan Washington Mutual, Dimon has helped federal officials avoid potential messes stemming from the turmoil in the financial markets.

"It's very fortunate that he's in the position to appear as a white knight, but make no mistake: J.P. Morgan and Jamie Dimon are in this thing to make money for their shareholders," said Tom Kersting, a banking analyst at Edward Jones.

J.P. Morgan shares jumped 11 percent to $48.24 on Friday as investors applauded Dimon's $1.9 billion acquisition of Washington Mutual's banking operations.

Dimon has been instrumental in turning J.P. Morgan into a banking giant. He came to the firm from Bank One, itself the product of mergers, after it was bought by J.P. Morgan in 2004. With the latest acquisition, he now heads a U.S. banking empire of 5,400 locations in 23 states whose only peer is Bank of America.

The son and grandson of stockbrokers who for many years worked alongside former Citigroup chairman Sanford Weill, Dimon has never shared the appetite for risk and disdain for plain-vanilla lending that have defined much of Wall Street in recent years.

"Jamie has always been focused on deposits and on creating what he calls a 'fortress balance sheet,' which among other things means carrying a stable supply of cash that doesn't run out the door at the first sign of crisis," said former J.P. Morgan investment banker David Stowell, now a professor at Northwestern University's Kellogg School of Management.

That fortress mentality has raised Dimon's already considerable profile as competitors, investors and federal officials scramble to unfreeze credit markets and restore faith in the American banking system.

Dimon, 52, said that he and his top lieutenants don't consider themselves "go-to guys" for the federal government.

Although he conceded to showing some degree of flexibility when he was asked by top regulators to buy Bear Stearns and stave off the fallout from a failure of a major securities firm, he suggested that anyone in his position would have responded similarly.

"We went out of our way to accommodate what we thought could have been a devastating situation," Dimon told reporters Friday on a conference call. "Personally, I think that should be the attitude of everybody."

Earlier this month, J.P. Morgan joined Goldman Sachs in trying to arrange a $75 billion loan for ailing insurance giant American International Group, also at the government's behest. But the firms could not raise the financing in the two-day time frame that AIG needed to meet its obligations, and the government stepped in with a loan.

Dimon appeared on the scene again Thursday, picking up Washington Mutual's banking operations for far less than what he was rumored to be interested in paying earlier this year when he was mulling a takeover of the company. But this time, Dimon's bid was not solicited by the government.

"This was an arm's length transaction," he said. "There may have been other people willing to do it," he said, but not at the price J.P. Morgan had offered.

Unlike the Bear Stearns transaction, the Washington Mutual acquisition comes with no guarantees from the Federal Reserve, which put up $29 billion to help J.P. Morgan absorb potential losses from Bear Stearns's assets.

The Washington Mutual purchase, executed late Thursday evening, should generate profit quickly, adding an estimated 50 cents to per-share earnings for 2009, the company said. And crucially, J.P. Morgan sold $10 billion of common stock Friday to ensure that it could absorb any potential losses on Washington Mutual's mortgage-laden books.

Costs related to the merger are expected to total $1.5 billion, the company said.

The acquisition quickly expands J.P. Morgan Chase's retail banking business in California, Florida and Washington state, and strengthens its presence in key markets including New York and Texas.

Michael Moskow, president of the Chicago Fed, described the New York native as a "personable, but no-nonsense" executive who "speaks about a thousand words a minute," is widely known for his attention to detail.

"He's willing to go into the weeds," similar to his mentor, said Stowell, of Northwestern. "Sandy Weill was another extreme detail guy who understood the plumbing of an organization. That was, I'm sure, a very big influence on him. But above and beyond that, he's just a very tenacious guy. And he sees things that a lot of people don't see."

J.P. Morgan hasn't been completely shielded from the mortgage crisis that has infiltrated Wall Street. But its write-downs have been relatively small, and investors have maintained confidence in Dimon's ability to keep the bank healthy.

"He's been preparing for this moment for years," said Jason Polun, a banking analyst at T. Rowe Price. "It's not luck. He's very, very smart. And his discipline, while others were jumping into growth opportunities with great risk, kept the balance sheet in great position to take advantage of the situation at Bear Stearns and at Washington Mutual."

That doesn't mean J.P. Morgan won't have to worry about the backdrop to the ongoing credit crisis: a slowing economy and a more cautious consumer. But Dimon doesn't expect economic tides to throw his growing company too far off course.

"We've never said we're immune to that," Dimon said in the conference call with reporters. "We're just prepared for it."