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 JPMorgan Chase & Co. (JPM), waited patiently while several other bank executives threw polite queries at the central bank head, Bloomberg Markets magazine reports in its October special issue on the 50 Most Influential people in global finance.
(For a slide show of the Bloomberg Markets Most Influential 50, click here.)
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 JPMorgan, 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 community.
Taking on Bernanke
“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 and an analyst at FBR Capital Markets Corp. in Arlington, Virginia.
“It wasn’t a radical question,” says H. Rodgin Cohen, senior chairman of New York law firm Sullivan & Cromwell LLP, which represents numerous Wall Street firms. “It was the fact that he had the courage to speak out at all.”
The financial crisis ended the careers of several Wall Street CEOs -- men such as Bear Stearns Cos.’ James Cayne and Hank Greenberg of American International Group Inc. 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 Paulson needed someone to save Bear Stearns from collapse in March 2008, he turned to Dimon, according to Paulson’s book “On the Brink” (Business Plus, 2010). And Dimon answered the call when Sheila Bair, chairman of the Federal Deposit Insurance Corp., was searching for someone to take over Washington Mutual Inc., the largest U.S. thrift.
“Jamie is a talent,” Paulson told Bloomberg Television last year, lauding Dimon as a strong leader who was able in little time to pull together a difficult deal to save Bear Stearns.
Secretary Dimon?
The comments led to speculation that Dimon might eventually replace Timothy Geithner as President Barack Obama’s Treasury secretary.
Dimon, who was fired from Citigroup Inc. (C) by his longtime 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. Much like his company’s namesake John Pierpont Morgan, Dimon was heralded as the lender of last resort when other institutions faced a run on their assets.
“There’s nothing canned about Jamie Dimon,” says Anthony Scaramucci, founding partner of SkyBridge Capital LLC and a fellow alumnus of Tufts University. “That honesty and freshness makes him real to his employees, makes him real to the press, makes him real to politicians. He’s a no-bulls--t kind of guy. He’s the top dog.”
Sarkozy Tiff
Dimon’s gentle combat with Bernanke wasn’t the first time the CEO has confronted a public figure. He sparred with French President Nicolas Sarkozy over what Dimon called irrational bank rules at the World Economic Forum in Davos, Switzerland, in January. Sarkozy bridled.
“Don’t be accusatory of us,” Sarkozy said during a panel discussion.
With a record $17.4 billion in earnings last year, JPMorgan has emerged as the U.S.’s most profitable bank, and the world’s third most profitable, after Industrial & Commercial Bank of China (1398) Ltd. and China Construction Bank Corp. (939) In 2012, the bank will likely surpass Bank of America Corp. (BAC) as the largest U.S. lender by assets.
Dimon has not been without his challenges. His WaMu 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. And JPMorgan has paid about $300 million in fines and forfeited another $647 million in future investment fees to settle criminal and civil charges related to the sale, before Dimon took over, of derivatives to municipalities, including near-bankrupt Jefferson County, Alabama.
An Alabama Ally
JPMorgan neither admitted nor denied wrongdoing.
Notwithstanding Jefferson County, Dimon has an ally in Alabama. While the JPMorgan CEO was grilling Bernanke, Spencer Bachus, an Alabama Republican and chairman of the House Financial Services Committee, was already preparing a hearing to question whether new regulations “could put American companies at a competitive disadvantage and harm our economy,” Bachus said in a press release.
That’s one of the points Dimon has made in his criticism of Dodd-Frank.
Going forward, Dimon’s advantage is that he keeps meticulous track of every detail of the huge bank’s operation, 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.”