HENNY RAY ABRAMS / Stringer
Sandy Warner , chairman and CEO of JPMorgan , shakes hands with William Harrison Jr ., chairman and CEO of Chase , after an analysts ’ meeting where the merger of their two companies was discussed , September 13 , 2000 .
share prices during the tech boom and wave of LBOs to acquire other institutions . Meanwhile , Morgan ’ s profits and share price lagged , which left it vulnerable . Senior management unveiled a plan to enter the mass affluent market at a Managing Directors ’ ( MD ) gathering in January 2000 , but it proved to be “ too little , too late .”
Following Chase ’ s purchase of Morgan in September 2000 , some were quick to blame Warner for profiting from the sale . However , what has not been revealed previously is he was approached by Chase two years earlier . He rejected the offer to become head of the combined entity then because he did not believe it would be favorable for Morgan ’ s shareholders .
What ensued after the merger was not pretty . Employees from both Morgan and Chase were unhappy . Many officers from Morgan felt the firm had been sold to a less prestigious institution and one that was much larger and more bureaucratic . For their part , Chase employees were upset that Chase ’ s share price fell by 9 % after the merger was announced . Also , many felt that their new colleagues from Morgan were arrogant and treated them in a condescending way .
For Bill Harrison , who became CEO of the merged entity , this was a much different experience than Chemical Bank ’ s mergers with Manufacturers Hanover and Chase Manhattan , both of which went smoothly . Moreover , the problems of integration with Morgan were further compounded by the appointment of coheads for various business units . This often meant they were pre-occupied with who would eventually get the nod , rather than on how to build their businesses and maintain employee morale .
When Jamie Dimon came on board in mid-2004 , Morgan had a leader who could run a financial services conglomerate effectively . One of Dimon ’ s crowning accomplishments is his ability to combine both wholesale and retail banking with investment banking , while also overseeing 255,000 employees worldwide .
The time Dimon spent with Sandy Weill acquiring businesses and integrating them left him well suited to take on an institution as complex as JPMorgan Chase . It is the combination of six large institutions , which themselves were the product of previous mergers . Consequently , he did not agonize over a culture clash as his Morgan predecessors did .
One of the keys to Dimon ’ s success is his ability to combine a strategic vision of global finance with detailed knowledge of each of JPMorgan Chase ’ s six main business lines . He is also adept at the so-called “ plumbing ” of banking that includes technology and operations , and he has a strong grasp of management information systems to assess performance of individual business lines .
A former Morgan executive contends that Dimon is the first Morgan leader who is both a business manager and a keen observer of financial services . When he became CEO in mid-2005 , Dimon spelled out his vision in the company ’ s 2005 Annual Report . He began by asking whether JPMorgan Chase was in the right businesses , and he proceeded to assess various risks the firm faced . He wrote : “ A company that properly manages itself in bad times is often the winner . For us , sustaining our strength is a strategic imperative . If we are strong during tough times — when others are weak — then opportunities can be limitless .”
This assessment would prove prescient when the collapse of Lehman Brothers sent shock waves throughout the global financial system in September of 2008 . Leading up to the crisis , Dimon had maintained a “ fortress balance ” sheet , and the bank had previously taken steps to lower risks . Consequently , while it sustained a loss in investment banking and took hits to earnings in retail and card services , it was much better positioned overall than other leading financial institutions . JPMorgan Chase , in turn , attracted considerable assets of individuals and corporations who sought a safe haven refuge .
The bottom line is that Dimon deserves credit for reviving Morgan ’ s legacy : He pulled off what his predecessors were unable to achieve and built on the foundation that had been laid , while integrating diverse cultures into a cohesive whole .
The story of what happened to Morgan is important because it is also emblematic of the consolidation of the US financial system over the past 40 years . The fact that Morgan was acquired is not noteworthy by itself ; the same can be said of most of its rivals . At the beginning of the 1980s , for example , there were 10 US moneycenter banks . Twenty years later , only three names were left — JPMorgan Chase , Bank of America and Citicorp — and each of them was the product of mergers . A fourth name was later added to the list , Wells Fargo , which also expanded as a result of mega-mergers .
By the early 2000s , the top four banks accounted for about one third of total banking sector assets . Moreover , that tally would rise above 50 % during and
30 FINANCIAL HISTORY | Fall 2020 | www . MoAF . org