HIGH in a Park Avenue skyscraper, James Dimon sits just footsteps from the mahogany roll-top desk of J. Pierpont Morgan, the feared lord of the House of Morgan and the most powerful financier of his time.
It is a fitting spot for Dimon, who, as master of the modern Morgan empire, JPMorgan Chase, has suddenly become the most talked about — and arguably the most powerful — banker in the world.
On Sunday, Dimon, weary-eyed after three days and nights of frantic negotiations, stunned Wall Street with the news that JPMorgan would buy Bear Stearns, the troubled investment bank, for a fire-sale price of $US2 a share.
With that one jaw-dropping deal, Dimon, like the bank's namesake before him, has become a principal player in the biggest financial drama of his age. And, like J. Pierpont Morgan, he is capitalising on the fear and panic that can grip the markets to expand his banking empire.
"You are on an emotional roller-coaster on any deal, but much more so on this one," Dimon, 52, said. "For all the drama today, it could have been much worse."
Such assurances aside, Dimon's agreement with Bear, reached at the behest of the Federal Reserve and the Treasury Department, has failed to allay fears that the worst is yet to come for the financial markets and the broader economy.
But for Dimon, a Queens native whose grandfather and father were stockbrokers, the deal represents a watershed moment. Only a decade ago, Dimon was famously cast out of Citigroup by his mentor, Sanford Weill, leaving his career in tatters. It was a stinging blow.
Dimon eventually joined Bank One as its chief executive. There he cut costs, pulled the ailing bank back into the black and sold it to JPMorgan in 2004, setting the stage for a remarkable Wall Street comeback. But for sheer audacity, nothing in his career rivals his bid for Bear.
"This is a transformative deal for Jamie Dimon," said David Hendler, a financial services analyst at CreditSights, an independent research firm. "Now he is viewed as a senior financial statesman."
Dimon's race to cut a deal for Bear began about 6pm on Thursday, when Alan Schwartz, Bear's chief executive, called with startling news: Bear had been driven to the brink of bankruptcy by what amounted to a bank run.
Dimon quickly dispatched his investment banking co-heads, Steven Black and William Winters, to assemble a team for a possible takeover. By Friday, JPMorgan was plotting how to assess Bear, particularly the risky, mortgage-related assets that had led to crippling losses.
By 8am on Saturday, about 40 bankers were huddled in the boardroom of the eighth-floor executive suite at JPMorgan's headquarters. Under the command of Black and Winters, the group divided into teams, each charged with assessing an aspect of Bear, and began heading across the street to Bear's headquarters to scour the books. More than 200 bankers ultimately joined in.
By Saturday evening, the JPMorgan bankers believed they were so close to a deal that they began drawing up a presentation to investors. The expected price per share was in the double digits, roughly half Bear Stearns' closing price of $US30 on Friday. But the bankers could not agree on how to value Bear's holdings of complex mortgage securities.
With so much uncertainty hanging over Bear's portfolio, the JPMorgan bankers decided to ask federal officials to explore ways to limit the bank's risk. Among the options was having the Fed guarantee billions of dollars of Bear securities — an unprecedented step for the central bank.
On Sunday morning, JPMorgan threatened to walk away from the deal because it felt it would be taking on too much risk. Dimon and his team wanted to give federal officials time to explore other options.
"You have to have a margin for error so, if you are wrong, you are not jeopardising the company," Dimon said.
A Bush Administration official said the Government was not concerned about the fate of a single bank but about the stability of the financial markets. Indeed, this official said, Bear Stearns was "anything but too big to fail". But its failure would have had huge repercussions for the stability of the broader markets.
A Treasury official said Henry Paulson, the Treasury Secretary, was first alerted to a potential crisis at Bear Stearns on Thursday afternoon. He immediately began talks with Fed Reserve chairman Ben Bernanke and Timothy Geithner, president of the Federal Reserve Bank of New York.
Soon the bankers and policymakers were racing to strike a deal before markets in Asia opened on Monday, fearing markets might plunge if Bear failed to find a buyer. But there was still no agreement. Giving them hope a deal would be reached, JPMorgan executives began briefing credit ratings companies and Dimon talked to his board. Just after 7pm, with less than an hour to go before Asian markets opened, the two sides reached an agreement.
In buying Bear, Dimon has clung to the Morgan tradition.
A century ago, J. P. Morgan demanded that New York banks rescue one of their own during what became known as the "Panic of 1907".
But while Bear Stearns shareholders stand to lose billions of dollars, Dimon has scooped up potentially lucrative businesses and Bear's soaring New York headquarters on the cheap.
Weill, who built Citigroup deal by deal with Dimon by his side, praised his former colleague's stewardship of JPMorgan. Dimon has dodged many of the subprime mortgage losses that have weakened rival banks.
Dimon, for his part, said he was looking forward to getting some rest. "There are two types of not getting sleep," he said. "There is not getting sleep because there is a lot of work. The other is because you can't sleep. I had a little of both."
NEW YORK TIMES
By 8am on Saturday, about 40 bankers were huddled in the boardroom of the eighth-floor executive suite at JPMorgan's headquarters. Under the command of Black and Winters, the group divided into teams, each charged with assessing an aspect of Bear, and began heading across the street to Bear's headquarters to scour the books. More than 200 bankers ultimately joined in.
By Saturday evening, the JPMorgan bankers believed they were so close to a deal that they began drawing up a presentation to investors. The expected price per share was in the double digits, roughly half Bear Stearns' closing price of $US30 on Friday. But the bankers could not agree on how to value Bear's holdings of complex mortgage securities.
With so much uncertainty hanging over Bear's portfolio, the JPMorgan bankers decided to ask federal officials to explore ways to limit the bank's risk. Among the options was having the Fed guarantee billions of dollars of Bear securities — an unprecedented step for the central bank.
On Sunday morning, JPMorgan threatened to walk away from the deal because it felt it would be taking on too much risk. Dimon and his team wanted to give federal officials time to explore other options.
"You have to have a margin for error so, if you are wrong, you are not jeopardising the company," Dimon said.
A Bush Administration official said the Government was not concerned about the fate of a single bank but about the stability of the financial markets. Indeed, this official said, Bear Stearns was "anything but too big to fail". But its failure would have had huge repercussions for the stability of the broader markets.
A Treasury official said Henry Paulson, the Treasury Secretary, was first alerted to a potential crisis at Bear Stearns on Thursday afternoon. He immediately began talks with Fed Reserve chairman Ben Bernanke and Timothy Geithner, president of the Federal Reserve Bank of New York.
Soon the bankers and policymakers were racing to strike a deal before markets in Asia opened on Monday, fearing markets might plunge if Bear failed to find a buyer. But there was still no agreement. Giving them hope a deal would be reached, JPMorgan executives began briefing credit ratings companies and Dimon talked to his board. Just after 7pm, with less than an hour to go before Asian markets opened, the two sides reached an agreement.
In buying Bear, Dimon has clung to the Morgan tradition.
A century ago, J. P. Morgan demanded that New York banks rescue one of their own during what became known as the "Panic of 1907".
But while Bear Stearns shareholders stand to lose billions of dollars, Dimon has scooped up potentially lucrative businesses and Bear's soaring New York headquarters on the cheap.
Weill, who built Citigroup deal by deal with Dimon by his side, praised his former colleague's stewardship of JPMorgan. Dimon has dodged many of the subprime mortgage losses that have weakened rival banks.
Dimon, for his part, said he was looking forward to getting some rest. "There are two types of not getting sleep," he said. "There is not getting sleep because there is a lot of work. The other is because you can't sleep. I had a little of both."
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