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The Heist

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The stock market, for now, is betting that JPMorgan is a winner, and the stock has been rewarded with a 25 percent run-up, boosting Dimon’s own stake to over $200 million. But the benefits go far beyond personal wealth. This might mean that Dimon no longer has to live in Sandy Weill’s shadow. “Has he eclipsed Sandy?” asked someone who knows both well. “Yes, he has. The only positive thing being written about Sandy these days is that Jamie learned from him.” Adds a hedge-fund manager, “Sandy Weill did wonderful things for Citigroup, but forcing Jamie Dimon out will forever taint his legacy.”

When I bring up the inevitable topic of Citigroup with Dimon, he seems exasperated. He is clearly sick of being a character in someone else’s legend. “I left ten years ago,” he said, then corrected himself. “No, I didn’t leave, I was fired. I was kicked out of the nest.”

If he were inclined to, Dimon could easily gloat over the fact that JPMorgan has all but supplanted Citigroup as the preeminent financial conglomerate. The numbers say it all: JPMorgan is valued by investors at $158 billion, Citigroup just three quarters as much. JPMorgan is even mentioned now in the same breath as Goldman Sachs. So ascendant is Dimon’s reputation that he was recently able to lure an ex-Goldman partner out of retirement—a feat which usually takes a governorship or cabinet post—to become the company’s chief risk officer. “There’s no place I’d rather be right now than working with Jamie and his team,” says that new hire, Barry Zubrow.

Dimon seems ready for his new role as Wall Street’s top dog. After explaining how the Bear Stearns deal will likely prove a good one for JPMorgan shareholders, he segued into a rationale for why it might also prove so for the entire economy. “You have to keep in mind the financial conditions of the entire system,” he said, when I asked him whether an appropriate example could have been set if Bear Stearns had been allowed to go under. “Who are you really helping if everyone gets hurt? No, I don’t think highly paid executives at any investment bank deserve to get bailed out. But at some point, you’re just talking about various degrees of suffering.”

Of course, JPMorgan didn’t “save” the system on its own. The loans the company originally provided to Bear Stearns to keep it afloat had been guaranteed by the Fed, effectively making them risk-free. Would Dimon have done the deal without the backstop from the Fed? He pauses. “It would have been very hard to do. Without the Fed to help mitigate the risk, to protect us from an overconcentration in some risky assets, I’m not sure it was doable at all.”

So how worried is Dimon about the risky assets that might be lurking in his firm’s own portfolio, stuff for which he doesn’t have the luxury of a guarantee from the Fed, like, say, the company’s derivatives exposure? JPMorgan had $77 trillion in so-called notional derivatives exposure at the end of 2007, a number that gives some derivatives doubters pause. After pointing out that JPMorgan’s net exposure is only $67 billion—only $67 billion? No worries, then!—Dimon and his team scoff at the analysts’ suggestion that they don’t understand the risks of such exposure. They say they understand them all too well. “Look, if you don’t worry in this business, you’re crazy,” Dimon said. “It’s not lurking in the back of my mind.” He pointed to the center of his forehead. “It’s right here.”


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