Sunday, May 20, 2012

J.P. Morgan and the Marlboro Man

Git along, little doggies
“I don’t wanna join your goddamn union, alright? Loner. Lone gunman. Get it? That’s the whole point. I like the lifestyle, the image. Look at the way I dress. Why don’t you become a cop or something? You can have coffee in the morning with friends.”

— Grosse Pointe Blank

It is patently obvious from last Friday’s page one article in The Wall Street Journal that J.P. Morgan granted reporters extensive access to Jamie Dimon and key bank officials to help create a blow-by-blow account of the implosion of the bank’s “London Whale” over the past several weeks. There is no other way to explain the appearance of Mr. Dimon’s pillow talk with his wife at the climax of the crisis, or the humanizing details of top executives downing vodka and wine in the midst of a confessional bull session.

It is also clear that, whether or not Mr. Dimon had a hand in directing this public relations exercise himself, one of its clear purposes was to help rehabilitate the image of the formerly Least Hated Banker in America to an approximation of his former regard. The gruff, no-nonsense quotes, brusque take-charge leadership, and self-deprecating assumption of responsibility for the cock-up are all we can and should expect from Mr. Dimon, based upon his meticulously constructed and maintained public image.1

But notwithstanding the industrial-strength fact spinning and image polishing being spoonfed to an adoring public in the Journal’s piece, I take away a rather dimmer view of Mr. Dimon’s character and capabilities from the exercise than I suspect the J.P. Morgan public relations department intended to impart. For one thing, we learn later in the piece that Mr. D. is an exhaustively hands-on manager, prone to grilling his department heads in three-hour monthly business reviews which drill down all the way to minutiae like Blackberry roaming charges. And yet this was the same man who spent increasingly little time over the preceding three years reviewing the risk profile and operations of a Chief Investment Office purportedly responsible for reducing firm risk as it delivered ever larger gains, even up to 10% of the total profits of the entire firm. This was an executive self-consciously famous for having sailed through the Great Financial Clusterfuck of 2008 with nary a scratch on his corporate hide, who now unaccountably and unforgiveably failed to perceive that the line officer responsible for the CIO’s biggest and most opaque bets unilaterally “dropped risk-control caps that had required traders to exit positions when their losses exceeded $20 million.” This is a man whom the article paints as a hyper-demanding micromanager who unaccountably developed a massive blind spot and a cavalier disregard for risk in the one area of the firm which he had explicitly encouraged to take on more risk.

Also missing from the article is the story of how Jamie’s handpicked, loyal, and diligent lieutenants—who, in the cavernous multi-trillion dollar global financial edifice which is J.P. Morgan Chase ought to have some pretty big and important jobs—instilled the discipline and diligent attention which Jamie himself demanded from them into their own subordinates and departments. Nor did any of these high-powered, massively compensated executives successfully challenge Mr. Dimon’s increasingly lackadaisical oversight of the CIO in Operating Committee meetings or bring to his attention disturbing warning signs of impending disaster like the scrapping of risk limits.

I read the Journal article, in other words, as a classic case study of an overpowering, imperious CEO who has built such a cult of personality around himself and his firm that he will not suffer anyone to challenge him. Pardon my Harvard Business School French, but why the fuck is the CEO of one of the largest commercial and investment banks on the planet personally conducting three-hour departmental operating reviews every month? Why did word that the CIO’s New York and London offices had devolved into vicious internecine warfare after the semi-retirement of Ina Drew not reach Mr. Dimon’s ears? Or—what is possibly worse—if it did, why didn’t he smash some heads together and fix it? The yawning gaps and omissions in the Journal’s tick-tock scream loudly to me that Mr. Dimon has built an executive rank at J.P. Morgan which is not only overly dependent on him and his excessively involved attention to the operational minutiae of his far-flung empire, but also one which seems incapable of effectively challenging him when he is wrong. Pardon my perhaps naive presumption, but it does not seem unreasonable to me that the Chief Executive Officer of a global financial services holding company with over 261,000 employees scattered all over the world should fucking delegate a little.

The irony in all this, of course, is that Jamie Dimon built his considerable and well-deserved reputation as a top notch manager in financial services primarily through his 16-year stint as Sandy Weill’s lieutenant at American Express, Citigroup, and elsewhere. Jamie earned his spurs and the respect of almost everyone who worked with him for exactly the kind of reliable, forceful, and intelligent hands-on work which Sandy relied on him to deliver. Yet Jamie was no pushover: he could and did deliver both good news and bad both up and down the chain of command, and he got into more than his fair share of knock-down, drag-out fights with his boss and mentor, too, when he thought he was wrong. Sandy relied on him to do so. That is what made him invaluable. And yet it seems Mr. Dimon has forgotten or maybe never learned the primary lesson of his own career: a CEO is only as successful as his lieutenants are powerful and independent, as well as loyal.2

In conclusion, Dear Readers, it does not reassure Your Humble Yet Fretful Bloggist that Jamie Dimon appears to have decisively seized the reins of the runaway horse and rescued the day. At $2.3 trillion in assets and over a quarter of a million employees, Mr. Dimon’s ranch is big enough that this writer believes he needs to hire a few more capable cowhands.

Climb down off the palomino, Jamie-boy, and start paying attention to the payroll.

1 If you are one of those charming naïfs who believe Jamie Dimon’s public image as a gruff, no-nonsense straight shooter is not meticulously constructed and maintained, I can only imagine you also believe Donald Trump to be a self-made billionaire with a slightly unfortunate natural hairline who just happens to be staggeringly good in bed. Congratulations. You are a public relations person’s wet dream.
2 I have heard some speculate that Jamie forced Bill Winters out of the firm because the latter became too powerful and independent himself. The departure of his other longtime lieutenant, Steve Black, a year later, is also suggestive. It is probably overly simplistic to draw a straight line between these two events and the collapse of the CIO, but one does wonder.

© 2012 The Epicurean Dealmaker. All rights reserved.