The company in question, First Republic, is not yet out of the woods, its share price still losing nearly 25% on Wall Street on Friday.
But by pledging to deposit $30 billion in First Republic’s accounts, eleven major US banks gave it a lifeline.
Jamie Dimon, 67, was heavily involved in implementing the plan.
The boss of the largest American bank by its assets had already come to the rescue in the midst of the financial crisis in 2008, by buying Bear Stearns and certain assets of Washington Mutual. Its prudent management had allowed JPMorgan Chase to resist the convulsions of the banking system rather well.
These acquisitions made the firm grow but also earned it a slew of complaints related to the toxic financial products recovered in the process, and billions in legal costs. Jamie Dimon has repeatedly said he probably shouldn’t have taken over Bear Stearns.
There was no question this time of acquiring a bank in difficulty again. But Jamie Dimon spoke by phone this week with Economy Minister Janet Yellen and with Central Bank President Jerome Powell, according to three sources familiar with the talks.
“Highly respected”
The goal of their talks: to find a way to revive confidence in the banking system, shaken after the successive failures of three banks in a few days, including that of Silicon Valley Bank, the biggest bank failure since 2008.
Jamie Dimon also met in his office with Deputy Economy Minister Wally Adeyemo at the start of the crisis on March 10, according to the New York Times.
The government put in place strong measures on Sunday to avoid contagion, JPMorgan already accepting in passing to provide cash to First Republic.
US President Joe Biden assured Monday that he would do “whatever is necessary” to keep the banks strong.
But the situation remained fragile.
Janet Yellen suggested bringing in the banks themselves, together, according to a source familiar with the discussions.
Once the idea had been sketched out, the interested parties had to be persuaded.
Bank of America, Citigroup and Wells Fargo quickly gave their agreement, according to sources close to the discussions who revealed behind the scenes of the negotiations.
To persuade other bosses, less convinced of the interest of helping a competitor or of the effectiveness of such a measure, Jamie Dimon and Janet Yellen took their phones.
Joe Biden’s chief of staff, Jeff Zients, and Lael Brainard, director of the White House National Economic Council, were regularly updated.
On Thursday, as First Republic’s stock plunged again and after a congressional hearing with Janet Yellen, Jamie Dimon met the minister in her office to discuss the final details.
A press release announcing the concerted action of the banks was released shortly after.
Jamie Dimon “is highly respected by his peers,” notes Jeffrey Sonnenfeld, a specialist in leadership and corporate governance at Yale University.
“He speaks with expertise, authority and rare clarity,” he explains. “And he’s been doing it for a very long time.”
At the head of JPMorgan since 2005, Jamie Dimon is in fact the only boss of a major bank to still be in place after going through the financial crisis of 2008.
“Nobody else has his authority and credibility. Everyone picks up when he calls, especially in finance,” says Sonnenfeld.
His intervention for First Republic recalls that of the founder of the bank he now heads, John Pierpont Morgan, in October 1907.
A prominent figure in American finance, he had contributed substantial funds to try to prevent the spread of the first signs of a bank panic.
As the crisis dragged on, he had managed to coordinate the bosses of major financial institutions and the Treasury Department, notably bringing together several dozen of them one evening in his library and not letting them leave before obtaining an agreement.
The episode indirectly led to the creation of the Federal Reserve (Fed) system in 1913.