Teeka Tiwari

Does the Government Owe JPMorgan?

    Tweet This

Free Trading Guides

Talk about a case of mania! How are we down 7% one day and up almost 5% the next? Aren't emerging markets supposed to act like this?

Right now it's the Wild, Wild West out there. Wall Street is running around like the proverbial chicken without a head.

There are some astute players though that are making moves today that will position their companies for success tomorrow. Citigroup (C) and Bank of America (BAC) are making their play through Wachovia (WB) and Merrill Lynch (MER), but the smartest guy in the room appears to be the CEO of JPMorgan Chase (JPM), Jamie Dimon.

Jamie Dimon made his name helping Sandy Weill build the company Commercial Credit into the giant financial supermarket that we know today as Citigroup. After a series of disagreements with his friend and mentor, Jamie was kicked to the curb shortly after the landmark Travelers deal of the late 1990s.

Dimon ended up over at Bank One as their CEO and ultimately became JPMorgan's CEO after JPMorgan's buyout of Bank One. Dimon has a unique understanding of the cyclical nature of lending and banking in general. Which is why he stayed away from structured investment vehicles (SIVs), a move that saved the bank tens of billions of dollars in potential losses.

In 2006, he largely exited the subprime business just as the rest of the countries' banks were doubling down their subprime bets. These moves were not applauded by the Street. In fact, the company had to sit and watch as their stock languished while their competitors booked billions and billions in fees. Talk about having the courage of your convictions!

Dimon's Credit Crisis Coups

Coup No. 1: Bear Stearns

Fast forward to today and we see Jamie Dimon striding across the smoking ruins of America's most storied financial franchises. He essentially bought Bear Stearns for free -- his cash outlay was covered by the existing cash in the firm and he received government guarantees on Bear's bad debt. It was as close as you could get to a risk-free trade.

Putting aside Bear's subprime blunders, it is a very, very sharp crowd over at Bear Stearns. An incredible franchise with a deep pool of talented market professionals that will pay dividends for JPMorgan for many years to come.