Jamie Dimon As Heir To JP Morgan?

This morning's Wall Street Journal's Money & Investing section featured heavy doses of Chase bank CEO Jamie Dimon.

I didn't know whether to laugh or become sick to my stomach at the graphic, on an internal page of the section, depicting Dimon 'high fiving' the legendary American financier from the turn of the last century.

To compare Dimon, essentially a large-corporate bureaucratic hack, Sandy Weill's one-time bag man, to a truly titanic figure from America's past, is ludicrous.

Yes, thanks to the merger of many mediocre commercial banks, Dimon heads a firm which contains, as part of its name, that of Morgan's commercial bank element. Mind you, that part was added in an almost-trivial merger, so moribund had the once-proud JP Morgan (commercial) & Co. become.

The front page of the section presented Dimon as newly-anointed chief economist of the financial sector. Do tell.

I guess it slipped my mind that Dimon had been trained and practiced as a generally-acknowledged economic seer. His forecast is that maybe we've turned a corner on the recession. He sure hopes so.

Wow, is that impressive.

Actually, I had the occasion to talk recently with someone who has met Dimon and many of his colleagues. This person's overall take on Dimon is that he's intelligent and detail-focused. However, unlike the original J Pierpont Morgan, "vision" is not a quality she said she would attribute to Dimon. Her description of the Chase CEO was pretty much what you'd expect of a guy who cut his teeth in business carrying water for the rag merchant of the old Wall Street, Sandy Weill. Weill's greatest and, arguably, only real financial success was merging a succession of old wire houses, via back-office consolidations, into the precursor of the now-failed Shearson Lehman.

Vision wasn't exactly Sandy's strong suit, either. Once he got hold of IDS and Primerica, then went after Citigroup, things got out of hand.

What elements of that tale would have served as the font of Dimon's newly-found strategic and visioning skills? Nothing.

No, Jamie is generally credited with being an obsessive detail guy. Cost-cutting and operational in the extreme. Just like his old mentor and long-time boss.

The woman also didn't disagree with my, and my fellow, former-Chase colleagues, that the main reason Dimon is viewed so positively now is that the Chase he found when he became CEO was so late to mimic the excesses of Merrill Lynch, Morgan Stanley and Citigroup that Dimon didn't have time to get the bank into as much trouble. Typically late to any really good, profitable party, Chase was luckily absent from the scene when the mortgage sector meltdown struck. It wasn't wisdom, but ineptitude and lack of speed that saved Chase and Dimon two years ago.

The most interesting Chase- and Dimon-related piece, however, was the back page article. It noted the potential decrease in the high loan loss reserves of recent quarters at the bank. However, noting potential changes in capital requirements for derivatives, and Chase's rather high capital levels, the piece cautioned that producing prior peak levels of returns on capital will be a challenge for Chase going forward.

This dovetails with something I wrote some months ago regarding capital allocation in banking. Often, businesses don't wish to accept the internal allocation which completely spreads regulatory capital bank-wide. I've seen this myself during my days at Chase.

The situation becomes one of regulatory capital levels exceeding the needs of the business, depressing returns on that capital. This would be a natural and expected consequence of the hand-wringing over capital adequacy, and the continuing witch hunt for guilty bankers, in the wake of the 2007-08 financial sector meltdown.

Let's just say that today's Chase is hardly, by any measure, your grandfather's integrated JP Morgan & Co. And it's CEO is similarly not a modern-day J. Pierpont Morgan, either.