The story
History
JPMorgan Chase is the result of the combination of several large U.S. banking companies that merged since 1996, combining Chase Manhattan Bank, J.P. Morgan & Co., and Bank One, as well as asset assumptions of Bear Stearns, Washington Mutual, and First Republic. Predecessors included additional historic, major banking firms, among which are Chemical Bank, Manufacturers Hanover, First Chicago Bank, National Bank of Detroit, Texas Commerce Bank, Providian Financial and Great Western Bank. The company's oldest predecessor institution, The Bank of the Manhattan Company, was established on September 1, 1799, by Aaron Burr.
Chase Manhattan Bank
The Chase Manhattan Bank was formed upon the 1955 purchase of Chase National Bank (established in 1877) by The Bank of the Manhattan Company (established in 1799), the company's oldest predecessor institution. The Bank of the Manhattan Company was the creation of Aaron Burr, who transformed the company from a water carrier into a bank.
According to page 115 of An Empire of Wealth by John Steele Gordon, the origin of this strand of JPMorgan Chase's history runs as follows:
At the turn of the nineteenth century, obtaining a bank charter required an act of the state legislature. This, of course, injected a powerful element of politics into the process and invited what today would be called corruption but then was regarded as business as usual. Hamilton's political enemy—and eventual murderer—Aaron Burr was able to create a bank by sneaking a clause into a charter for a company called The Manhattan Company to provide clean water to New York City. The innocuous-looking clause allowed the company to invest surplus capital in any lawful enterprise. Within six months of the company's creation, and long before it had laid a single section of water pipe, the company opened a bank, the Bank of the Manhattan Company. Still in existence, it is today JPMorgan Chase, the largest bank in the United States.
Led by David Rockefeller during the 1970s and 1980s, Chase Manhattan emerged as one of the largest and most prestigious banks, with leadership positions in syndicated lending, treasury and securities services, credit cards, mortgages, and retail financial services. Weakened by the real estate collapse in the early 1990s, it was acquired by Chemical Bank in 1996, retaining the Chase name. Before its merger with J.P. Morgan & Co., the new Chase expanded the investment and asset management groups through two acquisitions. In 1999, it acquired San Francisco–based Hambrecht & Quist for $1.35 billion. In April 2000, UK-based Robert Fleming & Co. was purchased by the new Chase Manhattan Bank for $7.7 billion.
Chemical Banking Corporation
The New York Chemical Manufacturing Company was founded in 1823 as a maker of various chemicals. In 1824, the company amended its charter to perform banking activities and created the Chemical Bank of New York. After 1851, the bank was separated from its parent and grew organically and through a series of mergers, most notably with Corn Exchange Bank in 1954, Texas Commerce Bank (a large bank in Texas) in 1986, and Manufacturer's Hanover Trust Company in 1991 (the first major bank merger "among equals"). In the 1980s and early 1990s, Chemical emerged as one of the leaders in the financing of leveraged buyout transactions. In 1984, Chemical launched Chemical Venture Partners to invest in private equity transactions alongside various financial sponsors. By the late 1980s, Chemical developed its reputation for financing buyouts, building a syndicated leveraged finance business and related advisory businesses under the auspices of investment banker, Jimmy Lee. At many points throughout this history, Chemical Bank was the largest bank, either in terms of assets or deposit market share, in the United States.
In 1996, Chemical Bank acquired Chase Manhattan. Although Chemical was the nominal survivor, it took the better-known Chase name. To this day, JPMorgan Chase retains Chemical's pre-1996 stock price history, as well as Chemical's former headquarters site at 270 Park Avenue.
J.P. Morgan and Company
The House of Morgan was born out of the partnership of Drexel, Morgan & Co., which in 1895 was renamed J.P. Morgan & Co. J.P. Morgan & Co. financed the formation of the United States Steel Corporation, which took over the business of Andrew Carnegie and others and was the world's first billion dollar corporation. In 1895, J.P. Morgan & Co. supplied the United States government with $62 million in gold to float a bond issue and restore the treasury surplus of $100 million. In 1892, the company began to finance the New York, New Haven and Hartford Railroad and led it through a series of acquisitions that made it the dominant railroad transporter in New England.
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Built in 1914, 23 Wall Street was the bank's headquarters for decades. On September 16, 1920, a terrorist bomb exploded in front of the bank, injuring 400 and killing 38. Shortly before the bomb went off, a warning note was placed in a mailbox at the corner of Cedar Street and Broadway. The case has never been solved, and was rendered inactive by the FBI in 1940.
In August 1914, Henry P. Davison, a Morgan partner, made a deal with the Bank of England to make J.P. Morgan & Co. the monopoly underwriter of war bonds for the UK and France. The Bank of England became a "fiscal agent" of J.P. Morgan & Co., and vice versa. The company also invested in the suppliers of war equipment to Britain and France. The company profited from the financing and purchasing activities of the two European governments. Since the U.S. federal government withdrew from world affairs under successive isolationist Republican administrations in the 1920s, J.P. Morgan & Co. continued playing a major role in global affairs since most European countries still owed war debts.
In the 1930s, J.P. Morgan & Co. and all integrated banking businesses in the United States were required by the provisions of the Glass–Steagall Act to separate its investment banking from its commercial banking operations. J.P. Morgan & Co. chose to operate as a commercial bank.
In 1935, after being barred from the securities business for over a year, the heads of J.P. Morgan spun off its investment-banking operations. Led by J.P. Morgan partners, Henry S. Morgan (son of Jack Morgan and grandson of J. Pierpont Morgan) and Harold Stanley, Morgan Stanley was founded on September 16, 1935, with $6.6 million of nonvoting preferred stock from J.P. Morgan partners. To bolster its position, in 1959, J.P. Morgan merged with the Guaranty Trust Company of New York to form the Morgan Guaranty Trust Company. The bank would continue to operate as Morgan Guaranty Trust until the 1980s, before migrating back to the use of the J.P. Morgan brand. In 1984, the group purchased the Purdue National Corporation of Lafayette, Indiana. In 1988, the company once again began operating exclusively as J.P. Morgan & Co.
The Bank began operations in Japan in 1924, in Australia during the later part of the nineteenth century, and in Indonesia during the early 1920s. An office of the Equitable Eastern Banking Corporation (one of J.P. Morgan's predecessors) opened a branch in China in 1921 and Chase National Bank was established there in 1923. The bank has operated in Saudi Arabia and India since the 1930s. Chase Manhattan Bank opened an office in South Korea in 1967. The firm's presence in Greece dates to 1968. An office of JPMorgan was opened in Taiwan in 1970, in Russia (Soviet Union) in 1973, and Nordic operations began during the same year. Operations in Poland began in 1995.
Bank One Corporation
In 2004, JPMorgan Chase acquired Chicago-based Bank One Corp., bringing on board current chairman and CEO Jamie Dimon as president and COO. He succeeded former CEO William B. Harrison Jr. Dimon introduced new cost-cutting strategies, and replaced former JPMorgan Chase executives in key positions with Bank One executives—many of whom were with Dimon at Citigroup. Dimon became CEO in December 2005 and chairman in December 2006. Bank One Corporation was formed with the 1998 merger of Banc One of Columbus, Ohio and First Chicago NBD. This merger was considered a failure until Dimon took over and reformed the new firm's practices. Dimon effected changes to make Bank One Corporation a viable merger partner for JPMorgan Chase.
Bank One Corporation, formerly First Bancgroup of Ohio, was founded as a holding company for City National Bank of Columbus, Ohio, and several other banks in that state, all of which were renamed "Bank One" when the holding company was renamed Banc One Corporation. With the beginning of interstate banking it spread into other states, always renaming acquired banks "Bank One". After the First Chicago NBD merger, adverse financial results led to the departure of CEO John B. McCoy, whose father and grandfather had headed Banc One and predecessors. JPMorgan Chase completed the merger with Bank One in the third quarter of 2004.
Bear Stearns
At the end of 2007, Bear Stearns was the fifth largest investment bank in the United States but its market capitalization had deteriorated through the second half of the year. On Friday, March 14, 2008, Bear Stearns lost 47% of its equity market value as rumors emerged that clients were withdrawing capital from the bank. Over the following weekend, it emerged that Bear Stearns might prove insolvent, and on March 15, 2008, the Federal Reserve engineered a deal to prevent a wider systemic crisis from the collapse of Bear Stearns.
On March 16, 2008, after a weekend of intense negotiations between JPMorgan, Bear, and the federal government, JPMorgan Chase announced its plans to acquire Bear Stearns in a stock swap worth $2.00 per share or $240 million pending shareholder approval scheduled within 90 days. In the interim, JPMorgan Chase agreed to guarantee all Bear Stearns trades and business process flows. On March 18, 2008, JPMorgan Chase formally announced the acquisition of Bear Stearns for $236 million. The stock swap agreement was signed that night.
On March 24, 2008, after public discontent over the low acquisition price threatened the deal's closure, a revised offer was announced at approximately $10 per share. Under the revised terms, JPMorgan also immediately acquired a 39.5% stake in Bear Stearns using newly issued shares at the new offer price and gained a commitment from the board, representing another 10% of the share capital, that its members would vote in favor of the new deal. With sufficient commitments to ensure a successful shareholder vote, the merger was completed on May 30, 2008.
Washington Mutual
On September 25, 2008, JPMorgan Chase bought most of the banking operations of Washington Mutual from the receivership of the Federal Deposit Insurance Corporation. That night, the Office of Thrift Supervision, in what was by far the largest bank failure in American history, had seized Washington Mutual Bank and placed it into receivership. The FDIC sold the bank's assets, secured debt obligations, and deposits to JPMorgan Chase & Co for $1.836 billion, which re-opened the bank the following day.
However, Chase did not purchase any mortgages in the FDIC receivership as the loans had already been sold off into Washington Mutual-branded mortgage-backed securities long before the receivership happened on September 25, 2008. If Chase wanted ownership of any Washington Mutual mortgages, it had to purchase them from the FDIC by way of a Receiver's Deed or Bill of Sale. This could not occur, as there were no mortgages on Washington Mutual Bank's books at time of receivership. Any recorded Assignments of Mortgage claiming that Chase was "successor in interest" and that the transfer occurred "by operation of law", would be incorrect. The FDIC was "successor in interest" to Washington Mutual Bank. Chase's purchase of the bank from the FDIC was for Washington Mutual Bank only and it occurred by a Purchase & Assumption Agreement and not "by operation of law" from the receivership.
As a result of the takeover, Washington Mutual shareholders lost all their equity.
JPMorgan Chase raised $10 billion in a stock sale to cover writedowns and losses after taking on deposits and branches of Washington Mutual. Through the acquisition, JPMorgan now owns the former accounts of Providian Financial, a credit card issuer WaMu acquired in 2005. The company announced plans to complete the rebranding of Washington Mutual branches to Chase by late 2009. Chief executive Alan H. Fishman received a $7.5 million sign-on bonus and cash severance of $11.6 million after being CEO for 17 days.
First Republic Bank
On May 1, 2023, in what was now the second largest bank failure behind JPMorgan's acquisition of Washington Mutual fifteen years earlier, the company acquired "the substantial majority of assets" and inherited the deposits of First Republic Bank. Under terms disclosed by JPMorgan Chase, it will make a $10.6 billion payment to the Federal Deposit Insurance Corporation, return $25 billion in funds that other banks deposited with First Republic in March in a lifeline negotiated with the US Department of Treasury at that time, and will eliminate a $5 billion deposit it had made with First Republic. As a result of the takeover, First Republic Bank shareholders lost all their equity. The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion.
2006
In 2006, JPMorgan Chase purchased Collegiate Funding Services, a portfolio company of private equity firm Lightyear Capital, for $663 million. CFS was used as the foundation for the Chase Student Loans, previously known as Chase Education Finance.
In April 2006, JPMorgan Chase acquired Bank of New York Mellon's retail and small business banking network. The acquisition gave Chase access to 339 additional branches in New York, New Jersey, and Connecticut. In 2008, J.P. Morgan acquired the UK-based carbon offsetting company ClimateCare. JPMorgan Chase was the biggest bank at the end of 2008 as an individual bank (exclusive of its subsidiaries) during the 2008 financial crisis.
2008–2009
On October 28, 2008, $25 billion in funds were transferred from the U.S. Treasury Department to JPMorgan Chase, under the Troubled Asset Relief Program (TARP). This was the fifth largest amount transferred under Section A of TARP to help troubled assets related to residential mortgages. It has been widely reported that JPMorgan Chase was in much better financial shape than other banks and did not need TARP funds but accepted the funds because the government did not want to single out only the banks with capital issues. JPMorgan Chase stated in February 2009 that it would be using its capital-base monetary strength to acquire new businesses.
By February 2009, the U.S. government had not moved forward in enforcing TARP's intent of funding JPMorgan Chase with $25 billion. In the face of the government's lack of action, Jamie Dimon was quoted during the week of February 1, 2009, as saying:
JPMorgan would be fine if we stopped talking about the damn nationalization of banks. We've got plenty of capital. To policymakers, I say where were they?... They approved all these banks. Now they're beating up on everyone, saying look at all these mistakes, and we're going to come and fix it.
JPMorgan Chase was arguably the healthiest of the nine largest U.S. banks and did not need to take TARP funds. To encourage smaller banks with troubled assets to accept this money, Treasury Secretary Henry Paulson allegedly coerced the CEOs of the nine largest banks to accept TARP money under short notice.
In November 2009, J.P. Morgan announced it would acquire the balance of J.P. Morgan Cazenove, an advisory and underwriting joint venture established in 2004 with the Cazenove Group. Earlier in 2011, the company announced that by the use of field-programmable gate array-based supercomputers, the time taken to assess risk had been greatly reduced, from arriving at a conclusion within hours to what is now minutes. In 2013, J.P. Morgan acquired Bloomspot, a San Francisco-based startup. Shortly after the acquisition, the service was shut down and Bloomspot's talent was left unused.
2013
In 2013, after teaming up with the Bill and Melinda Gates Foundation, GlaxoSmithKline and Children's Investment Fund, JPMorgan Chase, under Dimon launched a $94 million fund with a focus on "late-stage healthcare technology trials". The fund will "give money to final-stage drug, vaccine, and medical device studies that are otherwise stalled at companies because of their relatively high failure risk and low consumer demand. Examples of problems that could be addressed by the fund include malaria, tuberculosis, HIV/AIDS, and maternal and infant mortality", according to the Gates and JPMorgan Chase led-group.
2014
The 2014 JPMorgan Chase data breach, disclosed in September 2014, compromised the JPMorgan Chase accounts of over 83 million customers. The attack was discovered by the bank's security team in late July 2014, but not completely halted until the middle of August.
In October 2014, J.P. Morgan sold its commodities trader unit to Mercuria for $800 million, a quarter of the initial valuation of $3.5 billion, as the transaction excluded some oil and metal stockpiles and other assets.
2016
In March 2016, J.P. Morgan decided not to finance coal mines and coal power plants in wealthy countries. In October 2016, J.P.Morgan unveiled its permissioned blockchain called Quorum, based on Ethereum's GO programming language. In December 2016, 14 former executives of the Wendel investment company faced trial for tax fraud while JPMorgan Chase was to be pursued for complicity. Jean-Bernard Lafonta was convicted December 2015 for spreading false information and insider trading, and fined 1.5 million euros.
2017
In March 2017, Lawrence Obracanik, a former JPMorgan Chase & Co. employee, pleaded guilty to criminal charges that he stole more than $5 million from his employer to pay personal debts. In June 2017, Matt Zames, then-COO of the bank, decided to leave the firm. In December 2017, J.P. Morgan was sued by the Nigerian government for $875 million, which Nigeria alleges was transferred by J.P. Morgan to a corrupt former minister. Nigeria accused J.P. Morgan of being "grossly negligent".
2019
In February 2019, J.P. Morgan announced the launch of JPM Coin, a digital token that will be used to settle transactions between clients of its wholesale payments business. It would be the first cryptocurrency issued by a United States bank.
2012 CDS trading loss
In April 2012, hedge fund insiders became aware that the market in credit default swaps was possibly being affected by the activities of Bruno Iksil, a trader for JPMorgan Chase & Co., referred to as "the London whale" in reference to the huge positions he was taking. Heavy opposing bets to his positions are known to have been made by traders, including another branch of J.P. Morgan, who purchased the derivatives offered by J.P. Morgan in such high volume. Early reports were denied and minimized by the firm in an attempt to minimize exposure. Major losses, $2 billion, were reported by the firm in May 2012, in relation to these trades and updated to $4.4 billion on July 13, 2012. The disclosure, which resulted in headlines in the media, did not disclose the exact nature of the trading involved, which remained in progress as of June 28, 2012, and continued to produce losses which could total as much as $9 billion under worst-case scenarios. In the end, the trading produced actual losses of only $6 billion. The item traded, possibly related to CDX IG 9, an index based on the default risk of major U.S. corporations, has been described as a "derivative of a derivative". On the company's emergency conference call, JPMorgan Chase chairman and CEO Jamie Dimon said the strategy was "flawed, complex, poorly reviewed, poorly executed, and poorly monitored". The episode was investigated by the Federal Reserve, the SEC, and the FBI.
On September 18, 2013, JPMorgan Chase agreed to pay a total of $920 million in fines and penalties to American and UK regulators for violations related to the trading loss and other incidents. The fine was part of a multiagency and multinational settlement with the Federal Reserve, Office of the Comptroller of the Currency and the Securities and Exchange Commission in the United States and the Financial Conduct Authority in the UK. The company also admitted breaking American securities law. The fines amounted to the third biggest banking fine levied by US regulators, and the second-largest by UK authorities. As of September 19, 2013, two traders face criminal proceedings. It is also the first time in several years that a major American financial institution has publicly admitted breaking the securities laws.
A report by the SEC was critical of the level of oversight from senior management on traders, and the FCA said the incident demonstrated "flaws permeating all levels of the firm: from portfolio level right up to senior management". On the day of the fine, the BBC reported from the New York Stock Exchange that the fines "barely registered" with traders there, the news had been an expected development, and the company had prepared for the financial hit.
From Wikipedia’s article on JPMorgan Chase, shared under CC BY-SA 4.0.8