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Originally published September 26, 2008 at 12:00 AM | Page modified December 1, 2008 at 4:34 PM

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On the Economy

WaMu fall devastating for Seattle

With JPMorgan Chase's acquisition of Washington Mutual — nuptials probably performed at the end of a shotgun held by panicked regulators — Seattle will no longer be a major banking center. It will be a market, one of hundreds in the JPMorgan Chase empire.

Special to The Seattle Times

With JPMorgan Chase's acquisition of Washington Mutual — nuptials probably performed at the end of a shotgun held by panicked regulators — Seattle will no longer be a major banking center. It will be a market, one of hundreds in the JPMorgan Chase empire.

JPMorgan Chase is a good corporate citizen everywhere. But it is not a headquarters company, and the cities on the losing end of deals will feel the pain for years.

The entirely predictable consequence of this deal for Seattle will be the loss of thousands of well-paid jobs, hundreds of thousands of square feet of office space emptied out, and a serious downshifting of local giving. It's through such bloodletting that the numbers make sense for these mergers.

Less quantifiable but equally important will be the loss of a major headquarters as a center for decision-making with national influence, and the ability to attract capital and talent. Instead, through WaMu's bad management and bad luck, Seattle has attracted Jamie Dimon.

A few years ago, JPMorgan Chase Chief Executive Jamie Dimon was riding around Phoenix with the governor of Arizona when he started waxing enthusiastically about Wal-Mart and all that it had to teach U.S. business.

Knowing well about Wal-Mart's low wages, part-time jobs, ravaging of local businesses and poor benefits, the governor was horrified. Dimon backed off. But you get the idea.

Dimon's company, as Bank One, had several years before purchased the largest bank in Arizona and the state's most important corporate citizen. Savage cuts in jobs and influence started then, and have continued even this year.

Or ask Chicago, the former Bank One headquarters — a burg Dimon couldn't wait to blow and get back to New York once he engineered the Morgan deal. Dimon is a New York guy and he could ride back in triumphal laughter, probably laced with his signature profanity. If Dimon curses at you, he likes you.

The business press defines Dimon by his surrogate-son relationship with financier Sandy Weill. The pair took Commercial Credit, then Travelers Insurance, and used acquisitions and the deregulation fever of the 1980s and 1990s to forge Citigroup, which for a while was the nation's largest financial-services outfit. Weill reveled in the spotlight, but Dimon was the brilliant deal guy behind the scenes.

Dimon left after losing a succession battle at Citigroup, which went on to play a major role in the scandals of 2001 before going into a prolonged swoon.

Dimon, meanwhile, went to Chicago. There he took over a so-so regional bank and built it into a lean and fast deal machine, using many of the tactics he had perfected while working with Weill, but taking them to a much higher level. By the time he arrived at the House of Morgan — which a hundred years earlier, before the Federal Reserve existed, was called upon to save the U.S. economy — Dimon was very much his own man.

In interviews, Dimon is blunt and smart, with a wide command of both details and a vision of what he wants to do. He doesn't need to act like the smartest guy in the room. He usually is, and in any event, he's got the power.


That power only increased with the financial crisis that began a year ago, going from a subprime collapse to the near-death experience of the past two weeks. JPMorgan Chase was one of the few big banks healthy enough to help the feds dispose of investment bank Bear Stearns and now Washington Mutual, a company he's long been eyeing.

Weill sought to build the so-called universal bank with Citigroup, offering everything from consumer banking with the old Citibank to investment banking and retail brokerages at Smith Barney to insurance with Travelers. It was a model of the 1990s, sought with less success by the old First Union (now embattled Wachovia), and even Bank of America.

The vision turned out to be flawed, not only because of the costs and difficulty of buying and integrating so many large, formerly independent, companies, but because of the incompatibility of cultures. Bankers and brokers can barely even drink together. The universal bank was so '90s.

Dimon saw this coming and focused on the basics: consumer banking at Chase, and investment banking at JPMorgan. He is legendary for holding down costs — and that means holding down staff size while pushing growth that never morphs into that dangerous variety that we in Seattle might call Killinger's Disease.

Yet even JPMorgan Chase should raise questions for policymakers once the financial emergency passes. In only two decades, deregulation and lack of antitrust enforcement has taken America from a nation with hundreds of sizable, locally focused banks to one with a handful of behemoths.

This has done more than take away jobs and stewardship from cities, concentrating banking in New York and Charlotte. It has created institutions that by their very size are too big to fail. In other words, officials, using the taxpayers' money, can't allow these institutions to go down.

Such huge institutions were defended in the era of deregulation as safer than a universe of smaller banks, even as the woes of Japanese mega-banks were prolonging that country's long, real-estate-based recession. Now size has failed to prevent the present calamity and arguably added to it.

It was the big-banking conglomerates, after all, that successfully lobbied to remove the Depression-era walls and safeguards that would have helped avert this mess. They gambled, backed by federally insured deposits, while paying themselves huge executive compensation packages.

That JPMorgan Chase avoided the worst of this is as much luck as it is Dimon's leadership. Ultimately, some failure is essential for a market economy. This is how the business cycle cleans itself of bad bets before the next upswing can begin.

In banking, depositors are protected. Speculators and bad bankers shouldn't be. Now, with banks too big to fail, the only giant big enough to prop up the contraption is us, the taxpayers.

Jon Talton is a journalist and author living in Seattle. For more than 20 years he has covered business and finance, specializing in urban economies, energy, real estate and economics and public policy. You may reach him at

Copyright © 2008 The Seattle Times Company

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