A decade ago, a J.P. Morgan Chase executive stood up before a roomful of investors and appeared to commit career suicide.
The manager, a retail banking head named Charlie Scharf, had bad news. Mortgages were imploding at a rate far worse than expected, especially among the bank's $95 billion in home equity loans, Scharf told the audience in February 2008. Mea culpas came fast and hard: Scharf hadn't anticipated how bad the housing downturn would be and didn't act quickly enough as signs emerged, he said.
"Some of us in the audience were like, `This is the end of Charlie's career,'" said Mike Mayo, a veteran bank analyst now working for Wells Fargo. "He's leading off their investor day by spending an hour on how much his business messed up."
But the episode showed Mayo that at J.P. Morgan, led by Jamie Dimon since 2005, managers owned their mistakes rather than sweeping them under a rug. The history of American finance is littered with examples of executives who delay recognizing errors until it's too late, as the collapse of Lehman Brothers later that year attested to. Under Dimon's watch, here was a lender who prized independent thought and taking responsibility for mistakes.
"That culture," Mayo said, "allowed J.P. Morgan to be prepared for the crisis and navigate it far better than the others."
Instead of getting fired, Scharf went on to spearhead J.P. Morgan's acquisition of Washington Mutual's banking units six months later. (He later became CEO of Visa and now runs Bank of New York Mellon.) That crisis-era takeover, along with that of Bear Stearns, helped create a juggernaut: A national bank with branches from coast to coast melded to a top Wall Street trading and advisory firm.
Nearly any way you look at it – stock performance, revenue, share in businesses from deposits to bond trading – Dimon, 62, has outdone his rivals among big U.S. banks.