THE GUN THAT GOT INTO JAMIE´S BANK / THE FINANCIAL TIMES COMMENT & ANALYSIS

October 24, 2013 2:01 pm

 

The gun that got into Jamie’s bank

 

By Gary Silverman in New York

 

The weapon in JPMorgan’s hands is a symbol of one of the bank’s biggest problems: weirdness

 

I learnt about the gun a few days ago as I poked around the history section of the JPMorgan Chase website. Among the company’s various possessions, it revealed, was the weapon that had been used by one of its own to murder a rival who dared to get in his way.

 

The deed was done long ago – on July 11 1804, to be precise – in a galaxy far, far away, which is to say Weehawken, New Jersey, and more than eight decades have passed since the pistol that fired the fatal shot was acquired by one of JPMorgan’s predecessor banks.

But despite the passage of time, that firearm struck me as strangely relevant to today’s Wall Street. There is no bigger story in financial circles at the moment than the travails of Jamie Dimon, JPMorgan’s chief executive, and I think the weapon in his bank’s hands is a symbol of one of Mr Dimon’s biggest underlying problems: the vast wellsprings of weirdness that sit beneath some of our more august financial institutions.

 

Mr Dimon is under the gun because US authorities have decided that the time has come for big banks to pay for mis-selling mortgages in the years leading up to the financial crisis. His bills look to be particularly large because he is not only having to cover the costs of the bank that he ran at that time; he is also being forced to pay for the sins of two companies JPMorgan bought – Bear Stearns and Washington Mutual – as the subprime excreta hit the fans of finance in 2008.

Mr Dimon’s defenders argue that it is unfair to hold him accountable for misdeeds that took place at banks before he ran them – and they have a point. I would also ask whether it is fair to expect Mr Dimon – or anyone – to understand so many corporate cultures and integrate so many complex operations without suffering accidents of some kind.

 

Today’s JPMorgan is more than a bank. It is a collection of banks – “built on the foundation of more than 1,200 predecessor firms”, as its website says. Over time, it has absorbed operations as diverse as Queen Elizabeth’s brokers at Cazenove, the Corn Exchange Bank of New York and Springfield Marine and Fire Insurance of Illinois – which counted Abraham Lincoln as one of its first depositors (he was good for $310).

 

The darkness potentially lurking in any of these financial corners is illustrated by the story of the gun held by JPMorgan. Symbolically, it goes back to the founding of the first of JPMorgan’s predecessor firms, the Manhattan Company, established in 1799 by a group of prominent New Yorkers including Aaron Burr, the future vice-president of America.

 

From the start, the Manhattan Company was not exactly what it seemed. It secured a charter from the New York state legislature to supply “pure and wholesome water” to New York City. But a clause added by some cunning soul gave it the latitude to play around with its excess capital, which led it to form the city’s second commercial bank.

This didn’t help Burr’s relations with Alexander Hamilton, the former Treasury secretary who had helped launch the city’s first commercial bank, the Bank of New York. Rivals in politics and nearly everything else, the two men eventually settled their differences with a duel in 1804. Burr shot Hamilton dead, then went back to Washington and served out the rest of his term as vice-president, helping to set the bar for that office at the low level at which some political analysts would undoubtedly say it remains today.

Burr’s gun wound up in Mr Dimon’s bank through a dizzying series of deals that makes you realise how it is also possible for sophisticated bankers to pick up billions of dollars in legal liabilities without really trying. First, the pair of pistols used in the duel – which I guess had sentimental value for bankers longing for the days when they could literally get away with murder – were bought by Burr’s old Manhattan bank. Then the Chase and Manhattan banks combined; Chemical absorbed that lender and took its name; “Chase Manhattan” swallowed JPMorgan, called itself JPMorgan Chase, acquired Chicago’s Bank One, and, in that last deal, brought Mr Dimon into his current pistol-packing fold.

The irony is that the last thing Mr Dimon needs in his current condition is a murder weapon on his premises. It’s just not him, in any case. Whatever you say about Mr Dimon – and I have said some – there is no evidence he ever crossed the river to Jersey and whacked anybody. He’s a decided improvement over his predecessors, in that sense.

 

 

Copyright The Financial Times Limited 2013.