A change of fortunes for J.P. Morgan CEO Jamie Dimon
Saturday, November 6, 2010; 3:30 PM
Jamie Dimon wanted Washington Mutual and he wanted it bad.
The J.P. Morgan Chase chief executive was determined to expand on the West Coast, and Seattle-based WaMu, as it was called, was a prime target.
Dimon had a team of auditors poring over WaMu's books in March 2008, at the same moment the Treasury Department was pressing him to acquire struggling investment bank Bear Stearns.
While he initially couldn't make a deal for the Seattle lender, J.P. Morgan did buy WaMu in September 2008 after it was seized by the Federal Deposit Insurance Corp., which meant the assets came at a bargain price of $1.9 billion.
The 2,200 WaMu branches in California, Washington and 12 other states gave J.P. Morgan's consumer bank, Chase, a total of 5,410 branches - the second-biggest network in the nation. And it moved Chase to first from third in deposits, with $905 billion after the deal closed.
Dimon, 54, got what he wanted - and a lot that he didn't want. J.P. Morgan is now saddled with $74.8 billion in nonperforming home loans inherited from WaMu, a third of the $230.7 billion in mortgages on its books.
The WaMu losses are just one of the afflictions besetting the man who, in the midst of the recession two years ago, was dubbed the world's most powerful financial executive by the New York Times and labeled President Obama's "favorite banker." New York magazine called him "Good King Jamie," while a biography of Dimon by author Duff McDonald is titled "Last Man Standing."
Back in 2008, Douglas Ciocca, managing director of St. Louis- based asset manager Renaissance Financial, compared Dimon with J. Pierpont Morgan himself, who helped rescue the financial system in the crash of 1907.
"He's been a voice of reason throughout the industry pretty much throughout the financial crisis," Ciocca said.
A lot has gone wrong for Dimon since those halcyon days. Both the WaMu mortgages and J.P. Morgan's own home-equity loans are spilling red ink. Dimon's commodities-trading team, led by Blythe Masters, has suffered a big setback. Dimon complains that hundreds of millions of dollars in profit will be lost to the Obama administration's new financial regulations, which he fought unsuccessfully to derail.
Still more potential profits will be lost to the new Basel rules, which will increase capital requirements for banks worldwide beginning in 2013. The Basel Committee on Banking Supervision pushed back the date the capital rules would take effect because of the fragility of big banks in the United States and Europe.
In consumer banking - J.P. Morgan's biggest revenue source - the bank is pushing against a regulation limiting it to 10 percent of national deposits. With more than $2 trillion in total assets, J.P. Morgan is now the second-biggest U.S. financial institution by assets, after Bank of America.