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Dimon adds sparkle to JPMorgan Chase

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usatoday.com
By Greg Farrell
November 28, 2005

On his first trip to JPMorgan Chase's London office last year, Bank One CEO Jamie Dimon had a full schedule: He had just announced the merger of his Chicago-based retail bank with Chase, and agreed to work under Chase CEO Bill Harrison for two years before taking the reins.

Now he had to introduce himself to some future colleagues: the men and women who headed the bank's most important international office.

Instead of planting himself in the heart of London to schmooze with those executives, Dimon zipped out of town for a 90-minute drive to Bournemouth on England's southern coast, where JPMorgan's operations center is located. There, he spoke to a town hall-style gathering of 550 employees and immersed himself in the details of how Chase's back-office operations work in Europe.

If his new colleagues didn't know it before, they soon realized that Dimon, who takes over as CEO of JPMorgan Chase on Jan. 1, is a guy who pays attention to details.

"Sometimes, all that matters are the details," says Dimon, in his first extensive interview since his promotion was announced. "Sometimes, details will sink you. CEOs should drill down."

Dimon, 49, got his start in the 1980s as a "details" guy, apprenticing under legendary dealmaker Sandy Weill, with whom he worked for 15 years before Weill fired him from Citigroup in 1998.

In 2000, Dimon was recruited to be CEO of Bank One, then a troubled financial institution. He slashed costs, replaced a hodgepodge of different technology systems with one unified platform, and achieved profitability.

In 2004, he agreed to merge with JPMorgan Chase, itself a fusion of multiple banks. As chief operating officer, he would work under Harrison until July of 2006. But last month, after Chase reported strong third-quarter earnings, Harrison announced that he would step aside six months earlier than scheduled.

"Once you announce a successor, you have a certain power shift," says Harrison, who will remain chairman. "It should flow naturally. He never pushed me or suggested I do that. I felt no pressure."

But when Dimon takes the helm, he's likely to feel plenty of pressure. The company's stock has been lagging largely because the bank's many operations seem to add up to less than the sum of their parts.

"Strategy and vision are necessary," says Dimon, a Queens native who can't seem to spit out his words quickly enough to keep up with his thoughts. "But it doesn't work if other things don't work. Execution is the only thing right now. Running the businesses well and making them shine. That will create its own destiny."

Analysts who follow the company say Dimon is the right man to improve order and efficiency in the array of banks put together by Harrison, 62. In revenue, JPMorgan Chase now ranks behind only industry leader Citibank.

"Jamie Dimon is reining in what the visionary has done," says Richard Bove of Punk Ziegel. "I have never come across a CEO who understands a financial conglomerate as well as this guy."

"He stepped into a company JPMorgan and Chase that was not well integrated itself," says David Stumpf, a bank analyst at A.G. Edwards. (JPMorgan stock is down 14.4% since the merger closed at the end of 2000, while the Standard & Poor's select financial SPDR, an exchange-traded fund that tracks financial services stocks, is up 9.5%.) "People have high hopes. Whether or not you think he's the greatest financial services CEO in the world, it's got to be better managed than before. Whether you buy into the Jamie hype or not, all the evidence points in that direction."

Hype history

The "Jamie hype" stems from Dimon's first career, as right-hand man to Weill. Dimon joined Weill at American Express' Shearson Lehman division in 1983 as a 26-year-old graduate of Harvard Business School. He came to Weill's attention through his father, Ted Dimon, who was a top Shearson broker.

After Weill was ousted in a power struggle with American Express CEO James Robinson in 1985, Dimon stuck with his boss and new mentor, helping him evaluate opportunities for getting back into the finance business.

Weill eventually took control of Commercial Credit, a floundering consumer loan company. Dimon became his point man in the drive to slash excess costs and rebuild the business. They succeeded, then acquired the brokerage firm Smith Barney, Travelers Insurance and ultimately, Salomon Bros.

But the crowning achievement of Weill's career was the merger with Citibank in 1998 to form the largest financial services company in the world. The merger also led to the lowest point in Dimon's career.

Having worked for Weill for 15 years, the younger executive felt comfortable questioning Weill's decisions. Dimon was so self-assured that he rebuffed the attempts of Weill's daughter, Jessica Weill Bibliowicz, to get on the executive fast track at Travelers. Bibliowicz, a highly experienced financial executive, eventually resigned.

After the merger to form Citigroup, Dimon clashed with his opposite numbers from the Citi side. Weill had enough. He convinced co-CEO John Reed that Dimon the heir apparent wasn't fitting in. They fired him. (Weill and Reed did not return calls for comment.)

Asked if he learned anything from the firing, which caught him by surprise, Dimon leans back in his chair and thinks a moment. At 49, his hair may be graying, but he still has a youthful enthusiasm for answering questions. The lesson: Never shy away from a problem.

"We all avoid things," he says. "But problems don't age well. I try to see the real truth and act on it. On weekends, I'll ask myself, 'What is it I might be avoiding?' "

If a question occurs to him on a Saturday, Dimon will call a colleague to talk it over. Or if he thinks back to a meeting with a subordinate and senses there might be an underlying problem, he'll act on it the following week. "It may just be taking somebody out for a drink, but I'll talk to them," he says.

'Jamie socialism'

Seven years after his firing at Citigroup, Dimon is back to where his early career had been leading: a corner office at one of the world's biggest financial conglomerates. But instead of wallowing in feelings of triumph or revenge, he says he's focused on growing his business.

"I feel tremendous obligation rather than personal triumph," he says. "I was happy at Bank One. I didn't have a dying need to go back to New York. I had a dying need to do the best thing for Bank One."

Dimon says his challenge right now is to keep doing what he's been doing for more than a year: improving efficiency. At Bank One, he canceled the company's policy of issuing cellphones to staffers. Instead, he told employees to pay for their own cellphones and bill the company for any bank-related calls.

In the USA, many companies reward their highest-paid executives by picking up all costs of their health care plans, even if it means rank-and-file employees have to pay more for comparable coverage.

At Chase, Dimon adopted a different arrangement. Investment bankers and traders who make millions of dollars a year pay higher health care premiums so that employees at the low end of the spectrum, such as tellers, can pay less.

"That's 'Jamie socialism,' " says Heidi Miller, a top Chase executive who worked with Dimon at Citigroup and followed him to Bank One. "It's the right approach."

Miller recalls that when Dimon arrived at Bank One, he had a contract that guaranteed him a $1 million bonus. But when he started laying people off to cut expenses, he gave up his bonus. His lieutenants did the same. "He's not afraid of putting himself in the same boat as everybody else," she says.

Dimon's greatest strength, says Miller, is his ability to be both a keen analytical manager and a good people person. "He has a high degree of charisma," she says. "At a large town hall meeting with hundreds of people, they all feel he's talking to them."

Surgeon General's warning

When the merger with Bank One was announced last year, investment bankers at JPMorgan Chase thought Dimon would focus on merging the retail operations of the two organizations, a huge task in itself, and steer clear of their division.

Dimon's strength was in improving operations. The investment banking unit of Chase was generating solid profits. There was some surprise when Dimon began showing up unannounced at meetings among the highflying rainmakers.

Steven Black, who worked with Dimon at Citigroup and is now co-head of JPMorgan Chase's investment banking unit, says he was amused by the thought that Dimon would leave his division alone.

"They thought this was going to be a retail merger, right?" he says. "It should have come with a Surgeon General's warning: For every single thing we do at the entire company, there will be a level of discipline brought to bear that no one has ever seen before. And it will be different."

Black says Dimon's work ethic is beyond compare. "It's a combination of inquisitiveness, of wanting to know every single part of how something works and being willing to go look in every nook and cranny for every bit of efficiency you can get," he says.

Sometimes, Dimon's insistence on inserting himself into every issue sparks heated debate.

"I'm not going to say he's perfect, or that he doesn't step on toes, but you can tell him something, and he's perfectly willing to say, 'You're right. I didn't pay attention,' " says Black. "When you're yelling and screaming and sticking your fingers in each others' eyes, you're treating Jamie as one of your partners, not as the CEO."

"He's not a saint," adds Miller. "He makes mistakes, but he lets you talk back." She acknowledges that she sometimes yells at her boss, a practice Dimon encourages. "The yelling is never personal," she says, adding, "He doesn't yell that much anymore."

If Dimon succeeds in improving JPMorgan Chase's operations, the stock price which has been mired in the $35-$40 range for more than a year should start rising. If that happens, it will validate Harrison's grand plan of bringing all these banks together and finding a successor with the energy and acumen to make it all work. "Jamie is going to be the best CEO in the business," he says. "He's a great operations guy and a visionary."

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.