CEO Daily: The loophole behind Jamie Dimon's coup

From: Alan Murray - Tuesday May 02,2023 10:30 am

Presented by Deloitte

May 2, 2023

Good morning.

JPMorgan CEO Jamie Dimon dominates the American financial world like no one has since, well, J.P. Morgan.

It was the bank’s namesake who became de facto central banker and bailed out the U.S. financial system in the panics of 1893 and 1907. His protégé Thomas Lamont tried to play a similar role in 1929, although with less success. And of course, Dimon himself starred in the 2008 crisis, buying both Bear Stearns and then Washington Mutual. So no one should be surprised it was Dimon who stepped up this week to buy the operations of failing First Republic Bank.

For a brief time, the first J.P. Morgan was a target of Teddy Roosevelt’s trust-busting efforts. But in the end, he escaped largely unscathed. Why? Presumably because the powers-that-be decided he was more valuable as a friend than a foe. Dimon is now benefitting from a similar dynamic.

As Shawn Tully explains in this must-read Fortune piece, the federal law passed in 1994 allowing interstate banking limited the total share of the nation’s deposits that any one bank could hold to 10%. But that cap only applies to acquisitions. Since 2014, the nation’s three largest banks—JPMorgan, Bank of America and Wells Fargo—have all been over the threshold, in part because of their acquisitions in the last financial crisis, and therefore prohibited from buying other banks. JPMorgan’s share of deposits, prior to this purchase, stood at over 16%. But the 1994 act also included a loophole for banks rescuing other banks about to be shut down by the FDIC. And voila! JPMorgan’s coup.

Unlike the 2008 acquisitions, which happened as the financial problems were still gathering steam, this one seems to mark the end of the action. “I think the banking system is very stable,” Dimon declared in his comments. “This part of the crisis is over.” But it leaves JPMorgan bigger than ever, and Dimon as the man to see in a financial crisis.

More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

TOP NEWS

Teamwork training

PwC and Deloitte (which sponsors this newsletter) are giving extra training to junior hires in the U.K. whose university years were disrupted by the pandemic. The firms say such staffers are struggling with fundamentals like making presentations, speaking up during meetings, collaborating with colleagues, and networking. FT

New Qantas CEO

Qantas CFO Vanessa Hudson will replace the airline's longtime boss Alan Joyce, becoming the first female CEO of Australia's national carrier. Hudson, who will assume the job in November, will have to repair the airline's reputation after a drop in service. On Tuesday, she vowed to improve the company's often-fraught relationship with its unions. The Guardian

The A.I. tutor

Shares in online education company Chegg tanked on Monday after the company forecast a revenue decline for the second quarter. One culprit? A.I. "[S]ince March we saw a significant spike in student interest in ChatGPT," said CEO Dan Rosensweig. "We now believe it’s having an impact on our new customer growth rate." MarketWatch

CONTENT FROM DELOITTE

Accelerating gender equality in the workplace

What do 5,000 women in workplaces across 10 countries have to say about their experiences at work? Deloitte Global’s 2023 Women @ Work survey delves into topics ranging from mental health to flexible and hybrid work to identify what has changed for working women in organizations globally. Explore insights that can help leaders accelerate gender equality in the workplace. Read more.

AROUND THE WATERCOOLER

YouTube’s new pitch to advertisers: We’re the ‘home of Gen Z’ by Alexandra Sternlicht

Elon Musk flies private jets more than any other billionaire—releasing over 2,000 tons of carbon emissions in his wake by Chloe Berger

The skills gap is so big that nearly half of workers will need to retrain this decade. These 10 skills are most in demand by Jane Thier

‘The Godfather of A.I.’ just quit Google and says he regrets his life’s work because it can be hard to stop ‘bad actors from using it for bad things’ by Prarthana Prakash

A feared tech ‘earnings apocalypse’ hasn’t happened. But Apple and Nvidia could shake things up by Alexei Oreskovic

Microsoft chief scientific officer Eric Horvitz says few aspects of humanity will be replaced by A.I. by Jessica Mathews

This edition of CEO Daily was edited by Claire Zillman.

Subscribe to the weekly Trust Factor newsletter

How to earn, retain, and strengthen your trust with employees and customers

Trust has always been one of the cornerstones of successful business. But in today's rapidly changing economy, it's becoming the new KPI that executives need to succeed.

Join the conversation.