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…e name and location. And I effectively had control from day one because, inside the merger agreement (and this is almost unheard of when we get the premium), it stated that for me not to become CEO... eighteen months later, 75% of the board would have to vote me out. But the default was that you were going to become CEO. To become CEO. And the board was eight Bank One people and eight JPMorgan people. But that was the agreement. They got sued for paying too much to buy me; I got sued for not taking enough. You get sued; you can't win in these situations. I think every shareholder is probably happy now. But it worked out. Yeah. When you were going through that process, and even maybe the couple years before you and Bill were talking, you were starting to think about JPMorgan as a partner. I'm curious: did the brand, did the name JPMorgan, factor into your thinking at all? Did you view that as an asset? I mean, the JPMorgan brand is a Tiffany name. I didn't value it in the deal. And when I looked at... I had told my board, "I think the first thing is to run your company well." And people thought I was going to start doing deals immediately. I was like, "No, we suck. We don't—we haven't earned the right to run someone else's company yet." When we're running a good company, we can merge with somebody. But the first thing I looked at was business logic, and that was for every business. We had a consumer business, they had a consumer business. We had a credit card business; they were both terrible. They had a credit card business, they had a big investment bank. We had a big U.S. Corporate Bank that needed some of those investment banking services. We both had a wealth management business. I knew we could save a lot of cost savings. So the business logic was pretty impeccable. Then there's the ability to execute: Can you actually get it done? Because you've all seen a lot of deals where they fall apart. They don't have management, they don't consolidate the systems, and they have infighting. It kind of happened at Citi, so you don't effectuate the merger. And then there's the price. So I knew we had a Tiffany brand, but I didn't value it because if everything else didn't work out, I don't think it would have mattered that much. Interesting. Okay, so I'm going to fast forward a couple years. It's 2006; you're officially chairman and CEO of the combined JPMorgan Chase. And 2006 on Wall Street is like, "Go, go, go, go, go, baby!" It's like the 1980s all over again. I think you had the same incentives as everyone else, but you behaved very differently. Am I missing something? Did you have the same incentives, or...? Did you pull JPMorgan back hard on the risk side in 2006? I did. So there were cracks out there in 2006; you may remember the "quants." There started to be a quant problem. Late in 2006, we definitely saw subprime getting bad. And I pulled back on subprime. I wish I had done more, because if you look at what I did, you'd say, "Okay, you saved half the money, but you would have saved more." You still had some losses. Yeah, but we also had, I'm going to say, less. had done more, because if you look at what I did, you'd say, "Okay, you saved half the money, but you would have saved more." You still had some losses. Yeah, but we also had, I'm going to say, less. Maybe a third of the leverage of the big investment banks and a lot more liquidity. So in 2006, I started to stockpile liquidity. And looking at the situation, I was quite worried. The leverage... you may not remember this, but the leverage, because of accounting rules and Basel III (and Basel I), for investment banks (particularly the big investment banks) went from 12 times leverage to 35 times leverage. And it was "go, go," with CMOs, bridge loans, the whole thing. Like in '07, the bridge book on Wall Street was $450 billion. Today it's $40 billion. JPMorgan can handle the whole $40 billion today, though we're not doing all $40 billion today. And they were much more leveraged deals; a lot of them fell apart, collapsed. And then, of course, that was before you had the collapse in the mortgage markets, which really took down a lot of these banks. But you did have the same incentives and you had the same access to information that a lot of these other folks did, but you didn't blow up. What explains this, because usually behavior follows incentives? Yeah. Well, first of all, if you work for me, I would tell you I don't care what the incentive is. Don't do the wrong thing, and don't do the wrong thing to the client. If you treat yourself—if you're the client—how would you want to be treated? And I had gotten rid of—I mentioned that one risk thing... There were multiple risk things like that. They were being paid to take the risk. All of these investment banks were doing side deals, private deals, three-year deals, five-year deals. I got rid of almost all of them. This is for comp. Almost all of them, senior bankers. So today at JPMorgan Chase, there are no—we do do things, and I know some of my partners are in the room here—but we all know about it. There are no winks, no nods, no side deals. There's almost no one paid on a particular thing. Because if you're paid on a particular thing, you can do the wrong thing. And meanwhile, you're not helping the company manage its risk or something like that. So we changed the incentive programs, and I'm quite conscious about incentive programs that they don't create misbehavior. But it's also very important. If you're in a company and you say the incentive program is doing that, you should tell the company: "This incentive plan is not incenting the right behavior versus the customer." And a lot of it was leverage. So if you look at the leverage in some of these securitization books and mortgage books, if you have 30 times leverage and you're getting 20% of the profits, you'll go to 40 times leverage. It's just going to... it's literally 25% to your bonus. So I got rid of the profit pool (20%) and the leverage. So. Yeah, and I lost some people in the meantime, too. It's funny. Yeah. JPMorgan, as part of 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. 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.…

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