Last week, my editor and I had a discussion over use of the phrase "the house that Dimon built" when referring to JPMorgan Chase (JPM +0.17%). I had been using it as a way to inject some fun into stories that can otherwise be a bit dry, and to avoid writing the company's name over and over. His objection was that JPMorgan Chase is more accurately "the house that James Pierpoint Morgan built."
I dejectedly agreed to stop using my fun phrase. But with yesterday's news that JPMorgan's upper management is seeing yet another personnel change -- coming on top of nearly a year of drastic management changes in the wake of the London Whale trading debacle -- it will soon be hard to argue that JPMorgan Chase is anything but the house that Dimon built. This is a good thing.
Talk about bad timing
The New York Times is reporting that John Hogan, JPMorgan's chief risk officer, will be taking a "sabbatical." He took over the position just months before the London Whale trading incident came to light: a massive derivatives bet gone wrong that has so far cost the bank more than $6 billion to wind up.
An internal memo quotes Hogan as saying: "Later this month I plan to begin a sabbatical for a few months, returning to the firm in early summer in my current role as chief risk officer." Hogan's father passed away last fall, and after the year he had as chief risk officer -- trying to contain the damage caused by the London Whale -- if anyone at JPMorgan needs a sabbatical, it's him.
A rose by any other name...
Still, sometimes sabbaticals turn into reassignments, or "resignations," by which of course I mean "terminations in all but name." And another permanent shakeup at the top would certainly be in line with what's been going on at JPMorgan since the London Whale story broke.
Longtime Dimon lieutenant Ina Drew was the first major casualty of the botched trade. Drew had overseen the bank's chief investment office in London, where Bruno Iksil -- the London Whale himself -- worked. She left the bank in May, and was succeeded by Matthew Zames , who then became co-chief operating officer in July, alongside Frank Bisignano.
Michael Cavanagh, another young up-and-comer like Zames, was also promoted to co-chief executive of JPMorgan's corporate and investment bank in July. Zames and Cavanagh are among those seen as being groomed by Dimon for eventual ascension to CEO.
In November, it was announced that Marianne Lake, previously the bank's community- and business-banking CFO, would replace Doug Braunstein as uber-CFO. Braunstein was CFO when the London Whale scandal came to light, who infamously remarked he was "very comfortable" with said positions just weeks before all hell broke loose.
And just last week, it was announced that Cindy Armine -- a newcomer from Citigroup -- would replace Martha Gallo as head of global compliance and regulatory management: this, right around the time the Office of the Comptroller of the Currency smacked JPMorgan with two cease-and-desist orders regarding the bank's money-laundering controls.
Just what the doctor ordered
Whatever eventually becomes of the sabbaticaled Hogan, JPMorgan Chase is clearly Jamie Dimon's bank now. Anybody who's anybody in the top echelons of management are there because Dimon wants them to be. And not only are the most important current positions filled with Dimon's handpicked people, he's also handpicked several possibilities for the bank's most important future position: CEO.
Of course, Dimon himself is still CEO, even after the epic loss that cost so many below him their careers. Is this fair? Probably not. As captain, maybe Dimon should have gone down with his ship. Maybe he should have resigned. The board obviously didn't see it fit to fire him, either (though they did cut his 2012 pay by $10 million, no small punishment).
Fair or not, however, in the end, I think it's good Dimon is still with the bank.
It was his aversion to risk and naturally compulsive, controlling nature that kept JPMorgan from the worst excesses of the financial crisis, and brought it out of the crisis in far better shape than most. And while the London Whale trade did cost the bank more than $6 billion dollars, Dimon's famous "fortress balance sheet" was able to absorb it as easily as could have possibly been hoped for.
Consequently, the bank has, for the most part, been able to move on from the worst effects of the London Whale. From a numbers perspective, of natural importance to investors, JPMorgan is obviously doing well; its soaring fourth-quarter results are proof positive of that.
Maybe the London Whale was just what the doctor ordered. JPMorgan is almost unarguably a better, stronger bank than it was before May of last year: a tighter ship, with top managers that Dimon knows and trusts, and a culture that's probably even more risk-averse than ever before. Whatever you like to call JPMorgan Chase, in a post-crash world, that's the kind of thing both investors -- and the person on the street -- can rightly agree on and celebrate.
