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…f the system, had the same incentives, but you changed the incentives for pretty much every team within the company. Okay, all right, we've got to go to 2008. March 13, 2008. Thursday, March 13, 2008. It's Thursday night. You got a call from Bear Stearns' CEO. The stock closed that day at $57 a share. It was like $150 a couple months before. Three days later... God, I remember it like yesterday. I was working on Park Avenue on Wall Street. I remember that night: $2 a share. You're buying Bear Stearns. Tell us the story. So I was at Avra on 47th Street—my parents' favorite restaurant. My whole family was there. It happened to be my birthday. I don't normally get emergency calls. Yeah. And Alan Schwartz, who was the CEO, we'd seen their stock go down. I knew they had some real problems because we saw the hedge funds and some of the things that were taking place there. And he said, "Jamie, I need $30 billion tonight before Asia opens." I said, "I don't know how to get $30 billion for you." "And have you called Paulson? Have you called Tim Geithner?" So we all called. I called up the management team. I went back in; I probably had a bite and said goodbye, then went back to the office. Probably had 100 people come in that day—that night. They all got dressed, they went back to work. It was an emergency. We rang all the bells for an emergency. Bear Stearns went bankrupt. I spoke to the Fed about, "Let's just get them to the weekend." We had one day, and we needed Saturday and Sunday. We concocted this loan so we couldn't lend the $30 billion, and the Fed technically couldn't lend the $30 billion, but the Fed could lend to us technically, and I could technically use the collateral of Bear Stearns. So we got the literally one-day loan, and then the next day, we had thousands of people come in for due diligence. And we went through every loan, every asset, every balance sheet, all the derivatives, all the lawsuits, and all the HR policies—like real due diligence—over a two- or three-day period, and bought the company that night for $2 a share. Hank Paulson was saying, "Why are you paying anything for it?" I said, "Well, I do have to get shareholder votes." And which became right, because you need... Bear Stearns shareholders to approve the deal. It was a public deal. And the worst part of it is, I was going to get the lawsuit from the Bear holders. I knew that you didn't pay enough. But we couldn't let it go bankrupt.It wasn't like an industrial company you can buy in bankruptcy. It would have been gone, and the crisis would have just unfolded.So we paid a billion dollars for a company that had been worth $20 billion recently. The building we're in now was worth a billion dollars on the balance sheet for zero. And we got some very good people and we got some good businesses. But it was an extremely painful process. I've seen estimates that in the fullness of time, after really dealing with unwinding all the stuff there, it cost you 15 to 20 billion dollars. The $12 billion we wrote off didn't cost us. We didn't really pay for it.And then the government sued us on the mortgages, which I was quite offended by, and I really was. ou 15 to 20 billion dollars. The $12 billion we wrote off didn't cost us. We didn't really pay for it.And then the government sued us on the mortgages, which I was quite offended by, and I really was. I thought it was his problem.And then, this is the government. When, whatever government you did a deal with, that's not the government down the road that decides, "I don't care, we're going to come after you anyway."So, while we kind of saved the system a lot, we bailed a lot of people out. They made us pay $5 billion on the bad mortgages that Bear Stearns had done. And that's what made me make the statement I wouldn't do it again. I wouldn't put it this way. I don't know how to say this: I wouldn't really trust the government again. Okay. I've got to ask a follow-up question to that. Is that a structural thing, just the way that we're set up with a new administration every four years? Yeah. They don't feel obligated to what the prior administration did. And even some contracts were violated in this thing, which I won't go through, literally, contract. I mean, it would have been tortious interference had it been company to company. But they basically, since you operate under their laws, they can basically take you down.So, I went to see Eric Holder trying to settle this mortgage stuff, which we settled. I put my lead director... He expected me to come and be pounding my chest. And I went in and said, "Eric, I am here to surrender. I cannot fight and I cannot win against the federal government. You know that a criminal indictment can sink my company. I will not do that to my company or my country. I'm here to surrender. "Before I surrender, I want you to know the circumstances by which we bought WaMu and Bear Stearns, because 80% of what they're asking for related to Bear Stearns and WaMu, not JPMorgan Chase. And I went through the whole thing. He said, "Thank you, I'll take it into consideration." But they never gave me the accounting, so I don't know what they did. And so it is what it is. It was quite painful, but I've got to move on. We'll move on from this. We won't keep you. Well, we'll move on from the specifics. David's like, I do have one more thing. Whether you would have done it again, or wouldn't have, it's very clear. It was not a great deal on paper for JPMorgan. But as we look at it now, the reputational value that JP... the reputation of JPMorgan now is unlike any other in the industry. Part of why you're worth $800 billion is that reputation. A lot of what created that reputation... Was that weekend. Yeah. Yes. And I know I say I wouldn't trust the government. If the government called me up... If they called me again and said, "We need your help to save our country," of course I'm going to. I'm a patriot that way.I would just try to come up with some ways to avoid the punishment by the next president. I would come up with something. You know what you need? Like a version of the merger agreement with JPMorgan Chase where 75% of Congress needs to vote not to sue you. The default is you're not going to get sued. All right, all right, all right. So Bear Stearns happens. Six months later, you get another phone call. WaMu is going under. needs to vote not to sue you. The default is you're not going to get sued. All right, all right, all right. So Bear Stearns happens. Six months later, you get another phone call. WaMu is going under. You do buy WaMu. Contrary to everything we're talking about with Bear, WaMu is actually a great acquisition. Right? Yeah. So this is a lesson about acquisitions. It's very hard. Remember, we bought WaMu a week after Lehman went bankrupt. And most boards wouldn't have touched that. At all, because the whole system feels... Like the whole system was in trouble. But WaMu put us in California, parts of Nevada, Arizona — no, not Arizona — Georgia, Florida, which we weren't in. So think of these really healthy states.And they had 2,300 branches. They had huge mortgage problems. But we had looked at it over and over and over. So we knew their mortgage books cold, and we wrote off losses. We bought it for... And this was all before... We bought it for $30 billion, discounted to tangible book value because they had debt, and we left the debt behind.And that $30 billion was approximately what the mortgage loss was going to be. So we bought the company. Think of it. We bought a company clean. We wrote off all that stuff. The books were clean.And then we did something unheard of, too. The next day or two days later, I went in the market, raised another $11 billion of equity, which I didn't really need. But again, this is my conservatism. I was like, "You know what? This can get even worse."And I don't want to be short capital or liquidity. So we raised that to make sure our balance sheet was just as strong after WaMu than it was before WaMu. And you already had the reputation to pull this off, right? I'm imagining in the worst month of the financial crisis, who can go out and raise $11 billion of equity? Yeah. People trust you. Well, yeah, we knew a lot of shareholders, and you earned your trust over time with shareholders.And we explained, we gave them a quick little presentation. Yeah. A lot of them stepped up and said, "This is great." They also know we can execute it because behind the Bear Stearns acquisition, people forget the work. The next day, you had 50,000 people consolidating 5,000 applications, branches, compensation programs, settlement programs, payment systems. It's a lot of work.But we obviously have the capability to do that, and we have the capability to do WaMu. I think we finished the WaMu consolidations in nine months — all of them. So that within nine months, they were all in the same systems, which allows you to start doing a better job in customer service and things like that. So this fortress balance sheet strategy, raising this equity capital, and having additional margin of safety and conservative accounting — in retrospect, it seems like the obvious right strategy for running a large financial institution. Why wasn't everyone else copying it? Have people changed, and does everyone else run their banks like this now? I think people are more conservative today. I think regulators are more conservative today.…

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