One day Posner found Dimon scribbling meticulously away on a single 8½ by 11 sheet of paper and asked him what he was doing. It was the list Dimon had kept for years, and he kept it still, despite not having a lot to do at that point in time. To this very day, he redoes the list every two days, once he runs out of space on the page.
Dimon gave Posner a piece of advice. “Rule number one,” he said. “Return every phone call, every e-mail, within 24 hours. Especially now. Especially when you’re out of work.” Posner found Dimon religious about such things, about the necessity of conducting oneself in a certain way, and it made an impression on him that resonated for years.
Meanwhile, the honeymoon between Weill and Reed came to a swift end. By July 1999, the two men admitted that they were not getting along, and decided to split duties atop Citigroup. Reed took the “soft” ones—technology, legal, and personnel—and Weill maintained control of the company’s financial and business operations.
On October 22, the Glass-Steagall Act was repealed. Reaching perhaps the height of his megalomania, Weill thought it prudent to issue a statement “congratulating” Congress and President Clinton for having done so. A mere three days later, Secretary of the Treasury Bob Rubin resigned his position and joined Citigroup as an adviser to the co-CEOs. Dimon, by this point, had found enough distance in the year since his firing to hit the lecture circuit. In a guest lecture at Columbia on the topic “The Trusted Lieutenant,” he used more Shakespearean analogies. In a thinly veiled shot at Deryck Maughan, he told the students they must be vigilant about spotting the Iagos in their midst. Moving from Othello to King Lear, he also advised that the earl of Kent might have been more diplomatic while still being honest in his criticism of the king. In a later lecture at the 92nd Street Y, he told the audience he had every intention of returning to the financial services industry, and that he hoped to find a job he could focus on for the next 10 years.
That same month, Fortune’s Carol Loomis wrote an echo of a story she’d written 13 years before. The headline: “Exp’d Mgr, Fin’l Svcs, Seeks Position; Jamie Dimon Waits for the ‘Fat Pitch.’” Loomis went on to call Dimon the most famous unemployed person in the country.
• • •
A year after his dismissal, Dimon was also ready to put his anger at Weill behind him. One morning in December, Theresa Sweeney noticed him shuffling around the office, walking back and forth in front of her desk. “What’s going on? You’re as nervous as a cat,” she said. Dimon asked her to take a seat in his office. “I’m going to ask you to do something, and I don’t want to hear one word about it again,” he said. “I want you to get Sandy Weill’s office on the phone. I want to talk to Sandy. I’m asking him out for lunch.”
Like her boss, Sweeney had no love for Weill, but she did as she was told. She didn’t want to speak to Weill, however, so when his assistant said that she would get him, Sweeney told Dimon to wait on hold himself. When Weill got on the phone, Dimon was brief. “Isn’t it time we break bread?” he asked. Weill accepted the overture, and the two agreed to meet at The Four Seasons for lunch on December 16.
After hearing Dimon hang up, Sweeney picked up her purse and headed for the office door to go grab a coffee. She was enraged that he’d decided to make peace with the man who’d betrayed him so profoundly. Dimon was right behind her. “Aren’t you going to say anything?” he said. “I can’t believe you’re not going to say anything.” Not even bothering to remind him that he’d made her promise not to do that very thing, Sweeney replied, “Make sure the press knows that you initiated the call.”
At lunch, Dimon opened the discussion by telling an obviously nervous Weill to relax. He then said that he wanted to talk about the past for two minutes, and two minutes only. “Sandy, I would never have done what you did,” he said. “I don’t think that you firing me was in the best interests of the company. But I want you to know that I share a lot of the blame. It doesn’t make sense to apportion the share 60-40 or 40-60. I’m not sure it matters.” Dimon then offered a list of his own mistakes. Weill’s reply: “Thank you very much for saying that.” A moment later, a half admission: “It takes two to mess up a relationship like we did.” And that was it. The conversation turned to Dimon’s job search and the state of the world.
The Four Seasons is a place to be seen, and seen they were. The next day, the Financial Times told the world of the rapprochement, under the headline “Season of Good Weill as Feud with Dimon Ends.” (“It was pretty funny,” Dimon recalls. “The front page of the paper said ‘Heavy Russian Casualties in Chechnya, Record U.S. Trade Deficit, and … Dimon Has Lunch with Weill.”)
Much of the credit for the thaw in relations was Dimon’s. Even though he has always maintained that Weill did the wrong thing, he chose to swallow his pride and apologize to the man who fired him, a man, it should be pointed out, who could not bring himself to express an apology in return.
Still, at the start of 2000, it wasn’t clear yet that Dimon would find that next job he sought in financial services. In January, he was among a consortium of investors who put $33 million into Lions Gate Entertainment. He invested with the former Goldman Sachs banker Christopher Flowers in Japan’s Shinsei Bank—an extremely lucrative move. He briefly considered spending his time merely investing his own substantial fortune, but his heart wasn’t in it. Dimon needed action, the ebb and flow of a real company doing real business. In the meantime, though, he was hanging around the Seagram Building, writing and erasing plans for the next great financial services company on his whiteboard with Campbell and Posner.
Then, one day, Dimon started apologizing to Campbell for wasting his time. “I’m not sure we’re going to be able to do our little dream of creating a next-generation financial services firm right away,” he said. “I think I’m going to take a job.” Campbell laughed. “Jamie, stop apologizing,” he said. “You’re a young guy. Operating companies is totally different than doing deals. And you want to operate a company. It’s a completely different undertaking. And you get a completely different payback.”
9. THE OUTSIDER
During his hiatus, Jamie Dimon had been courted by some of the most respected companies in the country, but when it finally came time to commit, he went for a familiar type: another boring bank in another financial services backwater. As he had done with Sandy Weill 15 years before, Dimon had sniffed out a financial institution in distress that could be the platform on which to build an empire. Jamie Dimon had found his own Commercial Credit. It was called Bank One. And it was in Chicago.
Though it had austere roots going back to 1863, Banc One had evolved into a rather unsightly beast—a decentralized collection of regional banks built through a decade-long string of deals, the last significant one being the $29 billion combination of Banc One of Columbus, Ohio, and First Chicago NBD of Illinois. That deal had been completed in 1998, when the Travelers-Citicorp union set off a wave of consolidation in the industry. But neither institution had wanted to entirely cede its identity, so a compromise had been reached. The headquarters would be in Chicago and the partner from Ohio would provide the name (albeit with a k instead of a c).
Before Dimon arrived, the merger had largely failed to take. Though the institution ranked as the fourth-largest bank in the country, the combined operations were beset with problems from the start. The Ohio side had been a hodgepodge. Run by John McCoy, whose family had taken over City National Bank in Ohio in 1935 and had proceeded to make 130 acquisitions in 20 years, it had been built by means of a strategy that was as laissez-faire as any. Banc One’s modus operandi had been the “uncommon partnership”: competitors were bought up with the promise that they’d be allowed to just keep on doing what they were doing, so long as they signed on the dotted line. It was an attractive proposition to sellers, but the unfortunate result was that the company failed to take advantage of synergies or scale. It was the antithesis of the Weill/Dimon acquisition model.
First Chicago NBD, still struggling to complete a
1995 merger between First Chicago and Detroit-based NBD, wasn’t in much better shape. Although it predated the great Chicago fire, the bank, which was primarily focused on corporate customers, had a shabby reputation for serving consumers. It desperately needed to get a leg up in the retail game, and its board saw a merger with Banc One as a means to that end.
To the banking community, the combination looked akin to two drunks leaning on each other to stay upright. In an increasingly competitive national landscape, for example, Banc One had a certifiably random collection of geographical strengths—Illinois, Louisiana, and Arizona—as well as disparate and incompatible systems. Then there was a pronounced clash between the entrepreneurial culture of Banc One and the buttoned-down tone at First Chicago. There had been a lot of turnover in the executive ranks. These problems were manageable as long as the numbers held up, but just a year after the union, the company fell short of Wall Street’s earnings expectations for what would be the first of four quarters in a row.
The troubles were concentrated in First USA, the credit card unit which Banc One had bought for $8 billion in 1997 and which was in the process of imploding. The unit had mistreated its customers in the wake of the merger, jacking rates from 4.5 percent to 19.9 percent, for example, if they paid one day late more than once. Customers complained about rude service and being incorrectly docked for late payments—First USA was the worst-rated bank in terms of complaints in 1999, with three times as many as number two, which was Citigroup—and customers started to leave en masse. That year, a whopping 16 percent of them canceled their cards. Once the driving engine of the company’s earnings, First USA had become a serious drag by the summer of 1999, forcing McCoy to surprise investors with a preannouncement of negative earnings in August. The company’s consumer lending and credit card division, he told analysts, was likely to earn $500 million less than expected.
McCoy’s management style, much lauded by Wall Street when he was on the way up, was now seen as a liability. His nickname became “Fly-By McCoy.” After the earnings surprise, he refused to cancel a European vacation, and the situation ultimately came to a head in November, when the company had to preannounce yet again. With the stock in free fall—it tumbled from a high of $63 in May to half that—the board ousted McCoy and replaced him on an interim basis with Verne Istock from the First Chicago camp. Two board members—John Hall and James Crown—became interim cochairmen and leaders of the search for someone with a proven record of providing stability and coherence to a company built by acquisition.
• • •
In his farewell speech to the company, McCoy said he hoped that it would be able to attract a replacement such as Marc Shapiro, who had built and then sold Texas Commerce to Chemical Bank, or Jamie Dimon. So even though the executive search firm Russell Reynolds was hired to formally conduct the process—it contacted some 150 people about the position—Dimon’s name was on the short list from the very start.
The only questions for the search committee: Was it prudent to hire a man who’d just been fired by the reigning emperor of finance? And if they could get past that, how on earth could they persuade the native New Yorker to move his family to Chicago? Dimon’s response when he was first contacted about the opportunity wasn’t encouraging: “Chicago? … Chicago?” Contrary to the popular version of the story—in which he showed up and wowed his prospective employer from day one—Dimon had an initial meeting with the board of Bank One in Chicago for which he admits he was unprepared, a rare occurrence and evidence of his noncommittal outlook at the beginning of the discussions. Luckily for him, his energy impressed the board, which kept the discussions ongoing.
The first issue was settled in a series of meetings that began in November 1999, when Dimon first met with Charles Tribbett III and Andrea Redmond of Russell Reynolds, and culminated in a two-hour presentation Dimon made to the board in Chicago in late February. He had come to town with a list in his pocket of what he would do in his first 100 days on the job, much of it revolving around vigorous cost-cutting that included write-downs and layoffs. At this point, the board members understood that they needed a leader willing to do the deferred dirty work of integrating all their acquisitions, and Dimon blew them away with his focus and attention to detail.
James Crown, who had come back to Chicago to work for his family’s investment business in 1985 after working for Salomon Brothers, called his own connections in New York for the “book” on Dimon—an extremely demanding boss, white-hot intelligence, did not suffer fools gladly, a strong leader who wanted a strong team. Although Dimon was known to be combative, Crown heard that he also welcomed being told he was wrong. Finally, and perhaps most important, Dimon refused to play office politics. He didn’t give a whit where people came from and cared only that they had the ability to do the job at hand. For an institution paralyzed since its inception by two hostile camps, this was a major draw.
On the other question—whether Dimon would actually move to Chicago—the board members faced a challenge. He was already rich enough never to work another day in his life, so they couldn’t necessarily tempt him with money. And although Chicago has its charms, asking any longtime New Yorker to move anywhere is a notoriously difficult proposition.
The board members understood that they might win by appealing to Dimon’s strong desire to be his own boss and prove to the world that he was no mere Sandy Weill apparatchik. The question they put to Dimon was simple. What other major U.S. bank would be ready to bring in an outside CEO within the next five years? Citigroup was obviously off the list, and there didn’t seem to be imminent job openings at the top of Bank of America, Wachovia, or Wells Fargo. If Dimon wanted back in the game, Bank One was his best shot. Dimon was sold.
Still, the board members had reservations. They were concerned about the effect of a hardened New Yorker on their proudly midwestern institution. And they certainly didn’t want to be a mere vehicle for Dimon’s larger ambitions, which would surely take him back to New York in due course. Dimon insisted that he was prepared to make a total commitment to the bank, but the board had heard that before. In the 1980s, First Chicago had hired Barry Sullivan as CEO, only to see him keep his residence in New York and commute to work. Midwesterners didn’t much care for that.
Meanwhile, Dimon had to deal with his own family. Asking three teenage daughters to move to Chicago was no small request. In this, he proved to be as shrewd a manager as he was in the office. As the parent of three children, Dimon had discovered that it was important to spend chunks of time alone with each one, in order to bond. And so, when his daughters started complaining that they didn’t want to move to Chicago, he proposed that the eldest of the three, Julia, then 15, accompany him on his next trip to see the board. They spent several days in Chicago; Julia even came to the Bank One office and attended the press conference announcing his hiring. Judy Dimon remembers a phone conversation in which Julia said, “Mom, we have two choices for school, but I think we should go to the Latin School of Chicago. I spent a day there, and I have the applications filled out for all three of us, but I need to fill in the ‘parents’ comments’ section. So … what do you want to say about us?’”
The board was split, with the 10 members who came from the First Chicago side supporting their own man, McCoy’s interim replacement, Verne Istock, who had been with the company since 1963. But they were at a mathematical disadvantage. Eleven members came from the Banc One side. The unemployed Dimon ultimately beat out four other outsider finalists, including Lewis Coleman, then chairman of Bank of America’s investment banking arm, as well as Marc Shapiro.
Dimon told the board he believed in “eating his own cooking” and rewarded their confidence in him by purchasing 2 million shares of stock at $28.37 a share, for some $57 million, the day before his appointment was announced. The move showed he was all-in and from that day forward, nobody questioned his commitment to the job. On March 27, the press conference was held, and Bank One shares promptly rose 12.2 percent,
giving Dimon a paper gain of $7.25 million. By the end of the week they were up 30 percent. In interviews with reporters, he joked about his departure from Citigroup, saying that he hoped it would be the last time in his career that he exited a job in such a way. But when asked how he’d fare without Weill by his side, he was curt. “I couldn’t care less,” he replied. “That’s not me. I want to be happy and do the best thing for my family.”
• • •
Jamie Dimon might have been unemployed for more than a year after leaving Citigroup, but he understood the value of his own talents. So he drove a tough bargain when negotiating, hiring the New York lawyer Joseph Bachelder to negotiate a generous pay package. They ultimately came to a five-year deal with the board that included a $1 million base salary and a bonus of $2.5 million in the first year and up to $4 million a year thereafter. Dimon received 35,242 shares of restricted stock, options on another 3.24 million shares, and a guarantee that he receive at least $7 million in annual stock grants. He won the right to cut the size of the board, as well as install himself as chairman, in addition to CEO. Dimon, at long last, was his own boss.
Three early moves showed a political astuteness for which he had not been known. First, he called John G. McCoy, who had run Banc One from 1958 to 1984 before handing over the reins to his son. “Your son has built a fabulous institution,” Dimon told him. “And I hope what I do makes you proud of me.” When asked who his model would be for turning around Bank One, he didn’t hesitate: “Sandy Weill.” He also went to meet Chicago’s mayor, Richard M. Daley, the day after his appointment, and said he planned to be a good citizen of Chicago.
Last Man Standing Page 17