jpmorgan
is right now the biggest bank in the
united states probably history of the
united states and jp morgan jp morgan
jp morgan over the last century of the
notable bank murders that have taken
place
jp morgan and its predecessors have been
involved in almost
one-fourth it's the largest bank in
america
more than two trillion dollars in assets
right now they're also the biggest bank
in the world by market capitalization
from the panic of 1907 to 2007
the subprime mortgage crisis and the
financial collapse thereafter
jpmorgan chase has been at the center of
american banking for over a century
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the company has an unabashed ceo not
afraid to speak his mind
he weighs in on you know on politics on
a pretty frequent basis
i was always tell the president that his
two of his advisers told him and i'm not
going to name them
but they told him there would be no
retaliation we said there absolutely
will be and they were wrong
this man is a criminal probably the most
notable banker of the past 25 years
the company helps finance the largest
economy on earth
and even after millions were hit by the
great recession
jp morgan came out bigger and stronger
that's likely just how jp morgan himself
would have done it
so let's start at the beginning
the man behind the empire jp morgan was
born john pierpont in 1837
to a prominent new england family after
traveling europe
morgan returned home to launch his
financial career
his father was in many ways the most
important person in his life
and his father junius was a very
straight shooter very moral very
convinced that in the high risk high
stakes business of investment banking
your word is your bond your reputation
is everything
in 1871 jp morgan along with the help of
a former banker anthony drexel
created a private merchant partnership
called drexel morgan and company
it later became jpmorgan and co
us was the emerging economy in the 19th
century in the middle of the 19th
century
booming busting just
going through all the growth patterns of
and what was becoming a major industrial
economy what they were doing was
funneling investments from europe to
these american companies
not putting their their own capital into
the railroads a little bit they did when
morgan died he had
very minor investments in the companies
that he had
brokered morgan became heavily involved
in reorganizing and consolidating
railroads
if a railroad manager was
suddenly playing fast and loose um
cheating his investors really getting
his company into trouble pierbot morgan
would step in and
fire the managers hire new ones morgan
was trying to monitor and discipline the
companies who
had sold securities to his clients
morgan's next target
the steel industry andrew carnegie had
built the best
steel company in the world he figured
out about economies of scale
he was able to out produce and
underprice
all of his competitors morgan decided in
1900 1901 that essentially he would do
for the
steel industry what he done for the
railroad industry which was consolidate
a
lot of smaller companies into one giant
and he put together u.s steel
capitalized at a billion dollars in 1901
that was an unheard of some for that
time
and people were staggered or horrified
were skeptical he
did revolutionize the financial markets
and it wasn't only railroads and steel
jp morgan was influential in creating
what would later become
a t and he helped finance america's
electrification
his own house was the first private
house ever illuminated entirely by
electricity
his own private study caught on fire the
couple of days after they
installed the system and he said do it
again
i'm not giving up morgan combined edison
electric
with one of his chief rivals and that
became general electric in 1892.
morgan was not without controversy what
he was doing
was very good for lenders from europe
for wealthy people who had money to
invest
it was very good for the growing
american economy overall
it was not good for farmers and small
businessmen who had to borrow money
he was basically keeping the dollar
really strong it cost them more
to pay back their loans than what they
had borrowed and that was really painful
and there was a huge populist
opposition to morgan it was very
controversial and continued to be
controversial
then came the panic of 1907. it's
regarded as the first worldwide
financial crisis
to hit the modern world the american
economy was growing
so fast and with so little supervision
so little government regulation
so few people who really knew how to
govern it there was a panic
or a devastating crash in depression
just about every 10 years
despite reporting strong corporate
earnings the stock market crashed
and stocks plummeted on foreign
exchanges the u.s government
lacked the funds to stop the bleeding
and there was no central bank
morgan delegated two groups of men one
young lieutenants who would stay up all
night and
assess the health of these trust
companies to see whether they were worth
saving
or had to be let go and then two other
senior bankers along with himself who
would be making the top level decisions
the group functioned as the country's
unofficial central bank
the new york stock exchange didn't have
enough money to complete its trades and
the head of the
exchange came across the street to
morgan and said we're going to have to
close before three o'clock because we
can't keep the trades going
morgan said you can't do that in this in
this climate it will make things so much
worse we've got to keep the stock
exchange open so he called several of
the
leading bankers to his office and said
we need 20 million dollars
in 20 minutes to send across the street
to the stock exchange
and these guys without flinching put up
that money
it's evidence of how much they trusted
morgan that that
they knew he was the guy who could stop
this and he wasn't going to do anything
tricky with
it later that week new york city
couldn't pay
me its payroll it went on like this for
two harrowing
terrible weeks and finally it began to
subside
one of the headlines in the middle of
this something like
stocks stabilized for the moment and jp
morgan has a cold
he did he had a terrible cold that he
was as some of this was going on he was
just sneezing and coughing and
making calculations on a piece of paper
but it was just he was
totally exhausted and not young
while morgan was celebrated on wall
street for saving the economy
people quickly realized that perhaps one
banker
shouldn't have so much power for about a
minute after
the end of the panic um morgan was an
international hero but the minute after
that
um the idea of that much power
residing with one private banker really
was not okay it set in motion
a number of financial reforms including
eventually the creation of the federal
reserve
but morgan never got to see the fed jp
morgan died on march 31
1913 in rome the new york stock exchange
was closed until noon on the day he died
to honor his memory
his son jp morgan jr took over
and the company continued to play a
prominent role in financing major
american projects
in 1915 the bank facilitated the largest
foreign loan
in history 500 million dollars to the
english
and the french to support the war effort
during world war one
when the depression glass-steagall act
of 1933
forced banks to split from investment
banks jp morgan and company was broken
up
grandson henry sturgis morgan went on to
found morgan stanley
but that is a history for only half of
what became today's jpmorgan chase
the other side has an interesting
history too that goes back
even further to the 1700s
aaron burr famous for winning a duel
against alexander hamilton
and exiled after being tried for treason
but he is also credited with creating
the earliest predecessor to jpmorgan
chase
he founded the manhattan company in
april 1799.
it sought out a charter that would
enable the company to supply purified
water to new york city residents
in an effort to stave off yellow fever
it also got a banking charter to take on
alexander hamilton's
bank of new york in fact jpmorgan chase
to this day has the pistol that aaron
burr used to shoot alexander hamilton
after a slew of mergers over 150 years
it became chase manhattan bank in 1955.
while jp morgan and company floundered
as a major player in finance
another company emerged chemical bank
what started as a chemical company in
new york city in the 1800s
became one of the foremost banks in the
northeast
in 1969 it created the first cash
dispensing machine
that was installed in the rockville
center branch on long island
now we call these atms and all of that
brings us to the major banking
consolidation of the 1990s
that created the behemoth that is
jpmorgan chase today
the global economy technology and the
rise of wall street's political power
got washington to change the rules the
deregulation
from the 1990s came in two parts one
would be
national banking and the ability to have
greater efficiency i still remember
you had to take travelers checks if you
went from the east coast the west coast
i mean how inefficient was that
chemical bank merged with chase
manhattan in 1996.
huge bank merger was in the news this
morning chemical bank and chase
manhattan are joining forces to become
the biggest banking company
in the nation with assets of nearly 300
billion dollars
then in 1999 the law that originally
split up jpmorgan and company in the
1930s
was repealed today we proved that we
could deal
with the large issue facing our country
and every other advanced economy in the
world
now the elimination of glass-steagall
that was much more controversial
i believe this legislation in its
current form
will do more harm than good in 2000
chase merged with j.p morgan to create
the country's largest bank
chase had a very good brand name but we
think jp morgan uh
is a better brand name that gave a
little extra cachet
uh jp morgan a good brand name long
legacy
um but you know despite the vision the
vision was to better compete against
like
goldman sachs and morgan stanley and
merrill lynch you know
the banks they were second tier size
didn't equal success in the early years
i mean these were big bureaucratic
error-prone
lumbering giants but the consolidation
didn't stop there the company merged
with midwest giant
bank one in 2004. it's the biggest
financial deal to hit wall street in six
years
j.p morgan buying bank one for roughly
58 billion dollars in stock
we negotiated and i think we did is
going to be great for our shareholders
jp morgan wow
look how far they've come five of the
eight
money center banks the 1980s are in jp
morgan
in fact over the last century of the
notable bank mergers that have taken
place
jp morgan and its predecessors have been
involved in almost
one-fourth that set up jamie dimon to be
the next ceo of the company
to me as a bank analyst who has covered
the space for three decades
that was a defining moment that was
when jp morgan and its legacy firms
got a new religion and at some point the
platitudes got pretty heavy i mean
fortress balance sheet this and fortress
balance sheet that
and you know he's a fast talker a lot of
good signs from jb diamond but there's
also a degree of okay the jury is out
on this leader jamie dimon well there
are lots of external factors we cannot
control
we must expect increasing tough
competition around the world
i would say a defining moment also
happened
during the financial crisis and that
would be the acquisition of bear stearns
the the the firm that i keep aaron
that's uh most likely to buy it will be
jp morgan chase obviously helping with
the bank
helping with the financing the bailout
and that showed the value of having a
fortress balance sheet it showed the
value of having strength
when others are weak just like a hundred
years before
jp morgan had to grapple with the
collapsing financial system
i called up my whole operating committee
i told him we're about to have a
catastrophe take place uh all hands on
deck the next day
i think i called my board that saturday
right and said
we have a national emergency and when
you told them how bad it could get what
did you tell them
you're going to see the worst week ever
in america in financial history since
the great depression
that my opinion lima is going to go
bankrupt that
that aig is a possibility and that it
might be a domino effect after that
but the company kept playing a role as a
buyer jp morgan chase followed up with
the acquisition of wamu
and the company emerged from the crisis
stronger
if you made one move more than any other
if you were investing in bank stocks
since 2004
it should have been to own jpmorgan
chase as
an investment since the bank one merger
for the last 15 years
jpmorgan chase has outperformed the bank
stock index
by an average of 600 percentage points
each year
that's tremendous outperformance versus
the banks
despite the company's relative strength
diamond was called in front of congress
to defend the bank's actions
after the industry received more than
700 billion dollars
in government bailout money the question
that i
nor anyone will ever be able to answer
is what would have happened had that not
been injected
when and how it was injected he even
called for more systemic regulation
i think would be a tremendous benefit of
one regulator
looking at anything that can cause
systematic risk
well you know i would make a distinction
between regulation
and red tape so thank you regulators for
making the bank industry stronger than
it's been
in a few decades and they've done it
with very clear rules
okay you won't have as much leverage
which means more capital
and capital protects banks from
unexpected problems during tough times
but it hasn't always been completely
smooth sailing for diamond at the helm
of jpmorgan
the annual shareholder letter from
jpmorgan chase ceo jamie dimon
it addresses the london whale issue
right off the bat he says it was an
extremely embarrassing episode the most
embarrassing episode that he has ever
dealt with and it also cost the firm
money
the company lost more than six billion
dollars on the trade
and diamond was marched in front of
congress again
this man
well i went to the annual meeting after
jake morgan had the london whale
incident it was down in tampa florida
and i went
to ask questions of the lead director to
find out
how much the board was overseeing jamie
dimon and the rest of the management
team so it was certainly an issue and
you know jp morgan chase said you know
oh it's we still earn money that quarter
yeah that's kind of like okay you're
you're texting while driving never do
that
you hit the guard rail and you cause
like you know 500 worth of damage to
your car see it was only 500
no the point is you could have gone off
the edge and killed a few people okay it
could have been much
greater damage than it was and in 2013
jp morgan settled with the department of
justice
the charges were that the company
overstated the quality of mortgages
it sold to investors in the run up to
the financial crisis
it cost the company 13 billion dollars
overall jpmorgan chase has settled more
than a dozen government cases and
private lawsuits in connection with the
financial crisis
that's according to a cnbc analysis of
kbw's litigation tracker
some of the settlements were liabilities
from the bear stearns and wamu
acquisitions
in total though they've cost the company
more than 30 billion dollars
while there still is some outstanding
litigation for the most part
the company has put the crisis behind it
jpmorgan chase has gained market share
it's now
they're now ranked number one in global
investment banking and trading activity
that's from a second and third class you
know status a couple decades ago now
they're number one
on the retail side jpmorgan chase
especially chase the
retail brand name you know they rank
number one two or three in most
categories
and they're ranked number one in digital
banking an area of
you know tremendous growth so now you
look at it and for the last 10 years
despite flat market share
jp morgan has improved its deposit
market share nationally
from 7 to over 10 percent who's using jp
morgan chase
more than ever before young people
millennials
they're taking all these processes that
used to be very paper heavy or very
sort of people heavy like you have to go
to a to a branch
and they're turning that to digital and
they're putting it so that if you wanted
to
if you want to apply for a mortgage you
could do it through your your mobile
phone
if you wanted to trade stocks easily and
for free you could do it through the
mobile phone they
also have something called sapphire
reserve it's a hugely popular
credit card that they rolled out in
2016. tons of millennials
have bought into that primarily because
they get extra points reward points
for things like dining out and travel
things that
millennials supposedly like to do a lot
this is a play to get people
relatively early on in their in their
financial lives i mean is it
do you think millennials wake up and say
oh we want to do business with a big
institution
a big bank that's not the thought
process the thought process is
hey they have bid better digital banking
they have better online banking
they make our lives easier let's go to
jpmorgan chase you're seeing this at
some other banks too but jpmorgan chase
certainly is a leader in that category
and what would jp morgan think of the
company bearing his name being back at
the top of banking
i think that was perfectly appropriate
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you