Jamie Dimon and the boring secret of JPMorgan’s success

At the start of the 2008 financial crisis, the Federal Government reached out to one company they knew could handle the catastrophically managed Bear Stearns. They knew JPMorgan would be able to handle a massive administrative and financial challenge even as others faltered. JPMorgan still suffered from the 2008 crisis, but far less than most other banks. Their resilience was unique among companies in that time, and particularly among large banks. Some have criticized the bank for being too big to fail, but their unique strategies have earned them the market share that they possess. Of course they have benefitted from countless regulatory protections for the banking industry, but rather than using that as an excuse for poor management, they have clad their institution with strength instead. Jamie Dimon has worked tirelessly to structure the bank using a more rigorous set of evaluative principles than most others in the financial industry use. His long vision for management and stability differ from the competition, but have stood the test of time.

JP Morgan separated itself from the competitors first in its desire to shift away from high return,  high-risk assets. American government-enabled banking in general is rife with fundamental and  practical criticism from a true free market audience, but Jamie Dimon takes the risk of the profession with the utmost seriousness. Rather than taking bets with depositors’ money to seek short term gains, Dimon takes every pain to vet risky assets because he knows that in the banking business, even one fiasco has the power to strip credibility. Long before the 2008 crisis JPMorgan had gradually shifted away from subprime mortgage back securities. They seemed too good to be true, because they were too good to be true. However, most banks followed the examples of others and did not question their validity. JPMorgan’s low exposure to subprime mortgage back securities meant that they were compromised far less than the rest of the industry. To this day, they have continually sought to heavily vet then protect their more speculative assets with more stable items. They have recognized that long-term growth can only be pursued while protected from short term instability.…