Jamie Dimon Reprises 2008 Role as Rescuer of a Failing Bank

On March 10, just hours after Silicon Valley Bank collapsed, the hedge fund manager Bill Ackman hosted a dinner for about 20 people at his penthouse apartment in Manhattan.

The dinner had been planned, and the boldface names were there to discuss Ukraine. But before talk turned to the war, Mr. Ackman sought out the one person in the room who he thought might have a solution to SVB: Jamie Dimon, the chief executive of JPMorgan Chase.

Mr. Ackman asked Mr. Dimon, who had led the rescue of two banks during the 2008 financial crisis, if he would consider buying Silicon Valley Bank, according to two dinner attendees.

Not this time, Mr. Dimon said.

Four days later, on March 14, Treasury Secretary Janet L. Yellen pressed him into service. The previous day, shares of First Republic, the nation’s 14th-largest lender, went into free fall. If the bank collapsed, the financial panic that had started with the implosion of SVB, followed by Signature Bank, could spiral out of control.

Ms. Yellen and Mr. Dimon discussed a plan to rope in other banks to steady First Republic. As the chief executive of the nation’s largest bank, Mr. Dimon would carry it out. The plan, which some executives at rival banks privately called “the Jamie and Janet show,” involved 11 banks collectively depositing $30 billion into First Republic, and was meant to signal confidence in the teetering lender.

Whether the $30 billion loan helped steady the lender and stave off financial contagion — First Republic shares tanked the day after the announcement, and remain down nearly 90 percent for the year — remains an open question, even though its shares have moved a little higher this week, along with other bank stocks, as fears of a bigger crisis recede. First Republic is still seeking a buyer, and JPMorgan is among the suitors, a person with knowledge of the situation said.

But answering Ms. Yellen’s call gave Mr. Dimon an opportunity to reprise a role from 15 years ago.

“If my government asks me to help, I’ll help,” Mr. Dimon, 67, said in a recent interview.

Dressed casually in blue jeans, without a belt, and a blazer with an American flag lapel pin, Mr. Dimon was quick to come across as a patriot and a savior who had swooped in yet again to help stabilize a flailing financial system.

During the financial crisis of 2008, when Bear Stearns collapsed under the weight of toxic assets on its balance sheet, JPMorgan bought it for $10 a share under the supervision of regulators. Later that year, Mr. Dimon agreed to buy Washington Mutual, then the largest U.S. savings and loan. Those two deals allowed him to build JPMorgan into a behemoth.

Mr. Dimon is the only current chief executive of a big bank to have held that position during the 2008 financial crisis, giving him a long history with federal regulators and officials at the Treasury and the Federal Reserve.

He is “acting as a senior statesperson who is helping to shore up the financial industry in a time of crisis of confidence,” said Mike Mayo, a longtime banking analyst. “With that comes potentially higher prestige but also potential backlash.”

Although Mr. Dimon got a lot of publicity for orchestrating the $30 billion rescue plan for First Republic, he was hardly acting solely of his own volition. Both in 2008 and this month, the JPMorgan boss acted at the behest of the federal government.

“When the Treasury secretary suggests you do this, you have to think pretty hard before saying no,” said Kenneth Rogoff, a Harvard economics professor who has written on financial crises.

Still, Mr. Dimon was so scarred by his experience of the 2008 financial crisis that he lamented frequently about the billions of dollars in legal fees that JPMorgan saw in that era. For years after the acquisitions of Bear and WaMu, JPMorgan fought — and eventually paid — fines related to the new subsidiaries’ prior conduct. In his 2014 letter to shareholders, Mr. Dimon called those deals “expensive lessons that I will not forget.”

Those memories weighed heavily on his actions this time around. Even as he hashed out a plan with regulators and other bankers, Mr. Dimon made sure there was little chance JPMorgan would lose money or face.

The $30 billion bailout he arranged for First Republic took the form of refundable deposits that will be paid back, with interest, possibly in as few as four months. If the bank should fail, he and other bank executives expect to be reimbursed in full by the government as part of the plan — which would essentially make the First Republic rescue a backdoor government bailout.

“It’s silly not to be worried when you’re having a crisis like that,” Mr. Dimon said in the interview this week in his office in Midtown Manhattan. He also professed anxiety that the failure of smaller banks could shake confidence in his industry at large.

The spotlight on banks has been acute since March 10, when regulators took over Silicon Valley Bank, a favorite of venture capitalists and start-ups, amid a run on deposits. As depositors moved their money to the biggest banks, Mr. Dimon and leaders at other giants like Bank of America, Citigroup and Wells Fargo could see money flowing into their branches in real time.

So that day, when he showed up at Mr. Ackman’s penthouse, Mr. Dimon appeared relaxed, chatting with Mr. Ackman’s wife and others. Conversation over the meal focused on the crisis in Ukraine, two attendees said, not the brewing malaise closer to home. Only Mr. Ackman, who has personal investments in start-ups and venture capital firms that banked with SVB, was eager to discuss banks.

Things changed quickly that weekend. JPMorgan, Bank of America and other big banks received private letters from regulators asking executives to consider buying SVB and paying out depositors over the insured limit. Separately, business associates wrote to Mr. Dimon, asking him to step in.

Still, he said no. He spent part of the weekend in his office blocking out the outside noise and typing up his yet unreleased annual letter to shareholders. The crisis, he told colleagues, seemed mostly contained, and nothing like his memories of 2008.

Mr. Dimon was also monitoring First Republic, a longtime client of JPMorgan’s investment bank. He could track how swiftly billions of dollars were being yanked from First Republic. JPMorgan extended its client additional credit, and some bankers worked with First Republic to scope out potential buyers.

On Sunday evening, March 12, regulators announced that New York-based Signature Bank had failed. They said all customers of the two failed banks would be made whole.

As worried investors began to scrutinize First Republic, which had some of the same issues as SVB, shares of the lender cratered when markets opened Monday morning.

On Tuesday, March 14, Ms. Yellen told Mr. Dimon that she had been consulting with Jerome H. Powell, the chair of the Federal Reserve. The two suggested that Mr. Dimon could lean on his Wall Street peers to put together a rescue package using private money to pay out First Republic depositors.

Mr. Dimon was unsure if his fellow bankers would sign on, but he told Ms. Yellen that he would try. Within hours, he had chatted with his three biggest rivals, Brian T. Moynihan of Bank of America; Jane Fraser of Citi; and Charles W. Scharf of Wells Fargo, invoking Ms. Yellen’s interest during each call.

All three had questions. But they saw that First Republic’s collapse could threaten more banks, and none of them wanted to stand in the way of a request from regulators.

Each member of the group, which nicknamed itself the “core four,” agreed to deposit $5 billion with First Republic, giving the bank immediate funds to pay out withdrawals without selling off assets at a loss.

But $20 billion from the four largest banks was just a portion of the deposits that First Republic had lost, and the flight showed no sign of stopping. Mr. Dimon began calling smaller banks. Two banks said no — their boards would never approve it, Mr. Dimon was told — and they didn’t want to offer First Republic any special treatment.

Others bank executives, whom he called the following day, took some convincing. The chief executive of Goldman Sachs, David Solomon, whose bank had been criticized for profiting off SVB before its demise, told colleagues that he didn’t want to risk stirring up new controversy. Some veterans inside the bank recalled that, in 2008, Mr. Dimon discussed a similar idea — before he played the lone hero, rescuing Bear Stearns and WaMu and earning the title “America’s least-hated banker.”

Mr. Dimon kept Ms. Yellen apprised of his efforts several times a day.

When First Republic shares plummeted another 36 percent when the market opened on Thursday, March 16, most of the banks holding out jumped on board. Goldman and Morgan Stanley were in for $2.5 billion each, while five smaller names forked over $1 billion apiece. Ms. Yellen, in a group call with the bank heads and regulators, sealed the deal during market hours.

Shortly after its announcement, First Republic’s founder and chairman, Jim Herbert, called Mr. Dimon to thank him personally.

The relief was short-lived. On Friday morning, First Republic shares plunged more than 30 percent. The deposits appeared to have exacerbated fears instead of containing them by showing the limits of what the private and public sectors could do to safeguard smaller banks.

On Tuesday, March 21, five days after the $30 billion announcement, eight of the 11 bank heads huddled in the Jefferson hotel, in Washington, at a previously scheduled confab. Mr. Dimon proposed to his colleagues that they make similar deposits in other ailing banks for the near term, or even create a permanent lending facility. Nearly all said no.

He also mused that some of the money the banks had deposited in First Republic could be converted to an ownership stake in it. The other bank chiefs never took the suggestion seriously, but when the whisper of it leaked to The Wall Street Journal, shares of First Republic briefly rallied.

For all the effort, First Republic remains fragile. Its shares are down nearly 60 percent since the announcement of the big banks’ rescue plan. No buyer has emerged.

When colleagues and the other chief executives ask Mr. Dimon whether their plan worked, he has taken to saying: “I’ll never know.”

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