• 02 Sep 2008 at 1:20 PM
  • CEOs

How Jamie Dimon Got JP Morgan Chase Out Of Subprime

Everyone now knows that Jamie Dimon is the king of Wall Street. Girls at hedge funds have crushes on him. He’s been on the cover of New York magazine, towering over the city. They’re calling him “King James.”
For the most part, the ascendency of Dimon has been due to the fact that JP Morgan successfully avoided falling into the chasm of subprime mortgages into which so many of his fellow chief executives drove their banks and brokerages. Fortune’s has a long profile that describes Dimon’s management style, and precisely how he pulled JP Morgan back from the subprime brink.
Dimon favors boisterous meetings that delve into detailed analysis of his bank’s business. Fortune’s Shawn Tully reports that people describe these variously as “Italian family dinners” and “the Roman forum.” There not a lot of kow-towing to the big man, apparently. Ideas are debated vigorously and sometimes Dimon backs down. He wanted to get JP Morgan to go “open source” with the financial products it sold, selling clients on products developed by competitors. But one of his lieutenants eventually talked him out of it, convincing Dimon that JP Morgan’s homegrown products were performing as well as anyone else’s.
The subprime call–literally, a call to the head of structured products who was on vacation–came from Dimon after a meeting discussing the performance of the retail bank. In October 2006, the mortgage servicing business was reporting that late payments on subprime mortgages were rising at an alarming rate. Dimon and his team concluded that quality control had slipped at the originator level and decided to slash its holdings of subprime debt. It was this leap from the granular details to the bigger picture that enabled JP Morgan to make the right call on subprime while so many others were still rushing headlong into what was one of the hottest businesses on Wall Street.
We can’t help but wonder if there are, in the Dimon and subprime story, the seeds of an even greater story defending the efficacy of the mega-bank. After all, it was the fact from a retail business that tipped Dimon off to a strategic change at the investment level. A smaller brokerage or investment bank would not have had access to this data. Maybe its not the model of mega-banks that’s broken, after all.
Jamie Dimon’s swat team [Fortune]

72 comments (hidden to protect delicate sensibilities)
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Comments (72)

  1. Posted by guest | September 2, 2008 at 1:26 PM

    First Bitches!
    SPODE

  2. Posted by guest | September 2, 2008 at 1:28 PM

    Jamie just wants Sandy to love him and realize what a mistake Sandy made by firing him

  3. Posted by guest | September 2, 2008 at 1:35 PM

    If the info wasn’t public and they made investment decisions on it … ???

  4. Posted by guest | September 2, 2008 at 1:37 PM

    He used a lot of Mayo.

  5. Posted by guest | September 2, 2008 at 1:37 PM

    solid analysis

  6. Posted by guest | September 2, 2008 at 1:41 PM

    Used a shamwow to wipe up the mess.

  7. Posted by guest | September 2, 2008 at 1:46 PM

    wouldnt have happened at Deutsche Bank, retail and institutional, and corporate and Investment dont talk to each other…in fact they spit at each other in the street such is the inherant hatred.
    one bank bollox… its about 5 units all desperately trying to outdo each other… its a wonder they didnt get hammered more.

  8. Posted by guest | September 2, 2008 at 1:54 PM

    yyyyaaaaawwwwwwnnnnnnnn

  9. Posted by guest | September 2, 2008 at 1:55 PM

    didn’t happen at Opco, nor CIBC, nor Sterling Agee, nor any other boutique shop
    did happen at 90% of all large firms though

  10. Posted by guest | September 2, 2008 at 1:57 PM

    avoided subprime? ok, if you say so.
    jury’s still out on credit card master trusts.

  11. Posted by guest | September 2, 2008 at 2:02 PM

    Now, if only their remaining holdings weren’t so completely and intentionally mismarked.

  12. Posted by guest | September 2, 2008 at 2:09 PM

    Such BS that Jamie saved the day. It was the former head of fixed income (Edspar)and the former head of structured products (Bill King)that trimmed back the warehouse facilities and limiting inventory of subprime. And where are both of those brilliant gents now? Citadel!

  13. Posted by guest | September 2, 2008 at 2:11 PM

    Too bad Chase has the largest credit card portfolio in the universe and will suffer the same fate as many others in the financial sector.

  14. Posted by guest | September 2, 2008 at 2:16 PM

    chase did not much subprime exposure when it bought bank one in early 2004, a fact dimon’s citi/bank one cronies used to illustrate how incompetent the legacy chase management was (`they really missed the boat on that opportunity,’ they said). dimon may have kept the bank from chasing that business once he got there, but to suggest that his guys proactively backed away from it is revisionist history.

  15. Posted by guest | September 2, 2008 at 2:21 PM

    Dimon has some mighty fine PR.

  16. Posted by guest | September 2, 2008 at 2:26 PM

    Jamie’s mom ghost-wrote the article.

  17. Posted by nybasic | September 2, 2008 at 3:07 PM

    I am a former JPM employee, and I’m definitely kinda’ wishing i never left. they are the only ship who isnt bailing water or sinking. Crap. Dah’ well.

  18. Posted by Anal_yst | September 2, 2008 at 5:58 PM

    @ 7
    There’s no way in hell DB is nearly the worst in that sense…
    @3
    I think you’re misunderstanding the phrase my friend…

  19. Posted by guest | September 2, 2008 at 7:34 PM

    Premise may be valid: being a big bank doesn’t necessary mean stumbling like 2000 pound lemming. OK?
    &&&
    What I like about Dimon is this: they say he belted someone at a party.
    True? Who knows.
    Just the fact that they SAY it makes him my kind of guy.

  20. Posted by guest | September 2, 2008 at 7:34 PM

    Premise may be valid: being a big bank doesn’t necessary mean stumbling like 2000 pound lemming. OK?
    &&&
    What I like about Dimon is this: they say he belted someone at a party.
    True? Who knows.
    Just the fact that they SAY it makes him my kind of guy.

  21. Posted by lemmerdeur | September 2, 2008 at 8:36 PM

    Perhaps he had a team of crack blog sifters who brought it to his attention after reading about it on one of the dozens of blogs that was screaming about this shit since at least 2004. You know, years before MSM, years before regulators, years before almost any financier or banker types.

  22. Posted by guest | September 3, 2008 at 1:13 AM

    @ 19/20
    We read too much about Citi, sorry.
    -Andrew

  23. Posted by guest | September 3, 2008 at 7:14 AM

    @18 Anal_yst.
    I didnt day DB was the worst, but just wondered in a lazy late summery afternoon kind of way why their almighty infighting didnt cost them more? And that the infighting, had it been limited (or less encouraged), may have even cost them less.
    Clearly the current “announced” balance sheets are the final proof of a cock up (no disrespect intended)..

  24. Posted by guest | September 3, 2008 at 8:12 AM

    stop giving dimon so much credit, he has never grown anything, all jpm p&l is from takeovers/cost-cutting…jpm is a big retail bank in disguise.. and the employees are his tellers

  25. Posted by guest | September 3, 2008 at 9:31 AM

    24 I’m gonna disagree. I-banking is a hobby at the other universal banks, but not at JPM. They’re the only ones giving the bulges a run for their money.

  26. Posted by guest | September 13, 2008 at 6:26 PM

    JPM is still not out of this subprime mess. Wait till it is finally over and let us see where JPM sits then.

  27. Posted by guest | December 13, 2008 at 10:29 AM

    Chase Bank through the leadership of Exec V. P. Mark Willis is partly responsible for the collapse of the housing market through their irresponsible lending practices to low to moderate income people who werent qualified for homeownership. Check out all their grants and affiliations with radical community groups like Acorn and Hope.

  28. Posted by How Do We Judge the Homeowner? « The Fourteenth Banker Blog | October 17, 2010 at 8:56 AM

    […] that there was asymmetrical information at the time the mortgage was originated? According to Dealbroker, Jamie decided on October 2006 to get J.P. Morgan out of Subprime. According to the article, the […]

  29. […] asymmetrical information at the time the mortgage was originated? According to Dealbroker, Jamie decided on October 2006 to get J.P. Morgan out of Subprime. According to the article, the JPM team decided […]

  30. Posted by Soins | August 25, 2012 at 9:03 PM

    The subprime buruont is probably happening now that appreciation is non-existent; for one full-year prices have been trending down and the reality is setting in that maybe there is a bubble. Now the question isn’t is there a housing bubble but how long will this “correction” last.The quality of subprime credit and their respective borrowers is so bad that the thirst for these loans is no longer there. Lenders felt they could mix in bad loans with high quality loans and this mix would filter the bad taste out; kind of like watered down Heineken at a cheap bar. We are starting to see defaults hit portfolios and no longer is real estate a guaranteed proposition. Buyers of subprime loans realize that there is more water in their drink and at this point it is distorting their overall rate of return.The party is ending.

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