I spoke with business journalist Duff McDonald on the release of his new biography on Jamie Dimon, Last Man Standing. That day, the blogosphere was awash with conjecture about Dimon becoming Secretary of the Treasury. "I don't think so. Jamie Dimon does not have the temperament to be Secretary Treasury."
McDonald added, "To be the Secretary of the Treasury, you need to be political and have patience," McDonald said. "He doesn't suffer fools or have patience for those who waste time. He might go nuts."
If McDonald is correct, it would be a big loss for the US because we need person with practical experience, but also someone who will make well thought out decisions without pandering to the White House and Wall Street, or worse, worrying what other people are going to think about him. Dimon is staying put for now.
Even if he was interested in being the Secretary of the Treasury, the timing for a corporate Wall Street leader such as Dimon to make the move to the Hill would probably be political suicide for the Obama administration at this point. The president's approval rating is slipping, for now at least, and although they change faster than foreign exchange rates, he won't want to further hurt midterm elections.
Dimon is on record as being no fan of the anti-corporate populism that was in overdrive before the Presidential Election in March 2008. Dimon said "I'm a Democrat. Democrats are the worst" -- meaning the presidential candidates were playing to their audience or pandering.
Dimon had a passion for economics from his days in undergrad, sending Milton Friedman his paper on Friedman's Capitalism and Freedom and getting a handwritten letter back from the esteemed economist. After getting his MBA at Harvard Business School in 1982, he joined Sanford Weil in what would be the beginning of one of the most successful, if not the most inflammable, duo's in the history of corporate America.
No one can doubt that Weil was the visionary. However it's my contention that without Dimon, Weil's ascension might not have been what is was before the Citigroup collapse. Although McDonald disagrees with me on this, my opinion is that Weil was very aware of Dimon's ability and kept him deliberately at arm's length, knowing he'd get the younger Dimon to work harder for the attention and the esteem.
He got it, as the book's title suggests, and Weil's firing of Dimon and removing him from the succession plan led to a catastrophic loss of capital that rivals that of the AOL / Time Warner marriage. Weil has since admitted he blew that trade, but he is also quoted as saying "My real mistake, though, was that I repeatedly missed the chance in our early years together to curtail his aggressive behavior and mentor him into becoming a team player."
Dimon thinks like a trader. He understands things like mathematical expectation and it's in his thinking process. "...It's more important to do 10 things and get eight of them right, than to do five and get them all right." It's okay to be wrong, but you can't stay wrong.
Wall Street needs successful traders who have a history of keeping losses small running Wall Street firms, not lawyers and investment bankers. And although intelligence, academic achievement, and professional designations matter, emotional intelligence in handing other people's money is at the top of the list. That ability was sorely absent in recent years.
McDonald has substantial investigative chops in this regard. In the book he delineates how many Wall St. CEO's -- who had parts of their balance sheets levered 100 to 1 -- were walking around their offices like Fonzi at Arnold's Drive-In thinking "Things aren't that bad. We'll be ok." Maybe if I bump the squawk box, the music will change? These guys were clueless.
Dimon and his advisors held fast. When Warren Buffett sold long-term Put options on the S&P 500, a bullish trade, "he refused to post any collateral against the positions," according to McDonald, "the banks would just have to take his word, and they did -- except Dimon." JPMorgan Chase lost the business. The last investors who demanded "no collateral" were John Meriwether and Myron Scholes of LTCM. (Both Meriwether and Scholes have blown up at least twice).
To that point, it seems Buffett is conflicted: Dimon made the prudent decision that Buffett allegedly lives for, yet Buffett made the reckless trade and rewarded another firm for mandating collateral. The sub-prime morass is largely due to excessive leverage. With no collateral posted, your leverage is "undefined" mathematically.
Dimon has his loyal army of decision makers who although don't have cake-walk with Dimon given his drive, have his ear as they've earned his trust. One such advisor is Bill Winters. In the summer of 2004, Winters suggested that their firm blow out of an $8 billion SIV (structured investment vehicle) that they'd acquired through the Bank One deal. "We sold it to someone who thought the best way to manage the risk was to take on twice as much of it. Scale is the answer every time except in the tail." Someone has been reading their Nassim Taleb...
JPMorgan Chase had the fortified Balance Sheet due to Dimon's years with Weil and his understanding of disaster scenarios. "You don't run a business hoping you don't have a recession." Dimon and his team spent countless hours strategizing work-arounds for bear markets according to McDonald, such as 10% unemployment or a 10% move in currency exchange rates for example.
In the end, Dimon has a clear sense of self. When asked about his priorities in life, he said, "My family, humanity, my country, and the world. Way down here is JP Morgan."