Jamie Dimon – A CEO Others Can Learn From

First Bear Stearns collapsed. Then Lehman Bros. But during an extremely difficult recession, JPMorgan Chase has emerged as a leader both as a commercial and investment bank. This month, the bank posted its 20th-consecutive quarterly profit of $2.7 billion with record revenue of $27.7 billion. In fact, it was the only large financial institution that posted a profit during the financial crisis. So, what did they do differently?

JPMorgan Chase adhered to a conservative approach going into the recession – in sharp contrast to the majority of its peers engaged in risky, highly-leveraged bets aimed at achieving outsized returns. This approach gave the financial institution a strong capital position that enabled it to weather the current downturn. Among the largest banks that received $25 billion each in TARP funds, JPMorgan Chase is the only one that repaid the government. Citigroup and Bank of America went back for an additional $20 billion in funds. Former investment banks Goldman Sachs and Morgan Stanley also repaid TARP funds.

Many attribute the bank’s stability to Dimon’s attention to its capital and balance sheet, an effort that proved beneficial on a variety of fronts. First, it helped the bank repay TARP funds before any of its peers. Second, it enabled the bank to maintain solid capital levels during the downturn when most of its rivals struggled to maintain healthy balance sheets.

JPMorgan Chase continues to benefit from Jamie Dimon’s series of intelligent decisions. However, the financial institution is far from perfect. The decision to hire third-party mortgage brokers in an attempt to capitalize on the real estate boom resulted in billions in credit losses. It had its share of poorly written mortgage loans. But other CEO’s can take a page out of his book when designing and implementing risk management policies. Perhaps individuals can as well. During the next recovery and subsequent boom, maybe more people will adopt a conservative approach to their personal finances to help weather the storm during the next downturn.

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