During this week’s acute banking crisis in the US, Jamie Dimon moved quickly. What exactly happened?
Dimon is the boss of America’s largest bank JPMorgan Chase and arguably Wall Street’s most powerful banker. He played a key role in Thursday night’s rescue of First Republic Bank, the third US bank to run into trouble after Silicon Valley Bank and Signature Bank.
Dimon, 67, who has been the top boss at JPMorgan for eighteen years, spoke according to different media personally with top executives from other major US banks on Wednesday to convince them to stage a major bailout. A few hours later, $30 billion was on the table.
Although Dimon needed a little “encouragement” from Treasury Secretary Jay Powell and central bank boss Janet Yellen, he was then able to shine as co-architect of the bailout. Business newspaper Financial Times wrote about the “three J’s” (Janet, Jay and Jamie) deal. Other politicians also praised Dimon and his fellow bankers.
Was this a new experience for him?
No, he probably had déjà vu. During the previous banking crisis, he was also at the helm of JPMorgan and also received attention. His bank then came to the rescue twice to stabilize the financial system. In March 2008, JPMorgan (with the Fed) acquired the ailing bank Bear Stearns. Six months later it did the same with the troubled bank Washington Mutual.
JPMorgan was then able to take on that saving role because it was in an excellent position itself. It hadn’t taken the same big risks with toxic investments as its competitors. In fact, the bank made uninterrupted profits until 2013, something that hardly any American bank succeeded in during the crisis years. Former President Obama called Dimon at the time “one of the smartest bankers we have”.
Was this a Robin Hood action by Dimon?
Certainly not. Dimon knew all too well then that a total collapse of the financial system would sooner or later threaten his own bank as well. The two acquisitions later helped JPMorgan grow into the nation’s largest and most profitable bank. And gave Dimon (now one of the top earning bankers in the US with $34.5 million last year) an even stronger voice on Wall Street.
Although Dimon himself later complained that such a rescue was likely “not again” would do, because the state went after JPMorgan afterwards for abuses at Bear Stearns – legally, JPMorgan was now responsible for that. In September 2008, when the behemoth Lehman Brothers collapsed, Dimon did not lift a finger. He deftly let this poison pill pass him by.
It goes without saying that Dimon once again calculates cold-bloodedly. He seems to hope, as he did fifteen years ago, that this intervention will calm the panic among investors and depositors.
And even if it all ends well: if the image persists again this time that banks are doing nothing and that the government has to come to the rescue, we will have to wait for a political response in the form of stricter banking rules, just like after the previous crisis. Dimon has strongly opposed some of those stricter rules after 2008. And it was precisely in recent years that they had partly weakened again.
In the absence of columnist Marike Stellinga, who is on writing leave, NRC chooses a person of the week every Saturday.
A version of this article also appeared in the newspaper of March 18, 2023