Consulted by politicians, capable of convincing his peers to place billions of dollars on the table, the president of JPMorgan ChaseJamie Dimon, played – as in 2008 – a central role in the rescue of a bank.
The bank First RepublicDespite everything, he still hasn’t gotten his head out of the water and his shares have fallen more than 25% on Wall Street.
By committing to deposit $30 billion at First Republic Bank, 11 major US banks sent him a life jacket.
Dimon, 67, was one of the architects of putting this plan into practice.
The head of the largest US bank by assets had already implemented rescue strategies in the midst of the financial crisis in 2008, buying Bear Stearns and some Washington Mutual assets. His prudent management allowed JPMorgan Chase resist the turbulence of the banking system at the time.
These purchases increased the firm’s assets but also led to lawsuits over the toxic financial products it added to its portfolio, and billions in legal fees. Dimon said several times that he shouldn’t have taken control of Bear Stearns.
This time he did not want to buy a troubled bank. But Dimon spoke by phone this week with Treasury Secretary Janet Yellen and with the president of the Federal Reserve (Fed, central bank), Jerome Powell, according to sources very close to those conversations.
“Revered”
The objective of their calls: to find a way to reactivate confidence in the banking system, eroded by three successive bankruptcies of banks in the United States, including that of Silicon Valley Bank (SVB), which worked with the technology sector and whose fall was the largest, precisely, since 2008.
Jamie Dimon also met in his office with Treasury Assistant Secretary Wally Adeyemo since the beginning of the crisis on March 10, according to The New York Times.
The government adopted strong measures on Sunday to avoid contagion, and JPMorgan It already agreed at that time to provide liquidity to First Republic.
US President Joe Biden assured on Monday that he would do “everything necessary” to ensure the soundness of the banks.
But the situation remained fragile.
Yellen suggested that private banks step in together, according to a source familiar with the talks.
Once the idea was outlined, the interested parties had to be persuaded.
Bank of America, Citigroup and Wells Fargo quickly agreed, according to sources close to the matter.
But to persuade other bank presidents less convinced of saving a competitor, or of the efficacy of such a move, Dimon and Yellen picked up the phone.
The director of the cabinet Joe BidenJeff Zients, and Lael Brainard, director of the White House National Economic Council, were kept informed.
On Thursday, as First Republic stock fell again and after a congressional hearing for Yellen, Dimon met with her in her office to hammer out the final details of the deal.
A statement announcing the joint action of the big banks was released shortly after.
Dimon “is revered by his peers,” said Jeffrey Sonnenfeld, a specialist in management and corporate governance at Yale University.
“He speaks with knowledge, authority and a rare clarity,” explained the academic. “And he’s been doing it for a long time,” he maintained.
At the head of JPMorgan since 2005, Jamie Dimon is in fact the only president of a large bank to remain in office after the 2008 foreclosure crisis.
“Nobody else has his authority and credibility. Everyone answers when he calls, particularly in the world of finance,” Sonnenfeld said.
His intervention in favor of First Republic Bank recalls that of the founder of the bank he runs, John Pierpont Morgan, in October 1907.
A fundamental figure in US finance, he provided substantial funds to try to prevent the spread of the bank run.
When the crisis spread, he managed to coordinate the heads of the large financial institutions and the Treasury Department, meeting them in his library without letting them leave before reaching an agreement.
The episode led, indirectly, to the creation of the Federal Reserve (Fed) system in 1913.
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