You may realize 2020 marks a hundred years of the purpose driven business education. We believed in the power of a partnerships to inform and lead change. I would like to thank the cappelli center the cfa society of new york. The centennial series was designed to shine light on the merging and important trends one of the things that we had realized. Is it provides new insight into the current challenges that is disrupted and changed Business Models. Todays session focuses on the challenges that the leaders face and survived. As a scene in Nicholas Sargens latest book jpmorgans fall and revival. Im very proud to say that j. P. Morgan is a largest employer of the cappelli school of business graduates. Our session will take place in a few parts. He will introduce Nicholas Sargen and then they will discuss the fall and revival following the discussion david and i. Will facilitate audience questions. Near the bottom of the zoom screen. You will also be entered into a raffle to win the book. The winners will be notified by the end of the week. Before i turn it over. I want to take a moment to remind everyone the museum of American Finance rely on your philanthropy for your support. I ask that you consider making a gift to both of our organizations. Is great to be back with our friends. They are living in the history of the market since the 1970s. He started out at the u. S. Treasury and the federal reserve. What followed after that. He was a 25 year career with j. P. Morgans private bank. Nick was the cio of a western and southern and its a nick was the cio of a western and southern and its a washington advisors. Nicks background is economics he received both his masters and his phd in economics from stanford. He has written extensively on have a front row seat on the many decades of changes that have happened in the banks and markets. We will hear about that as he is interviewed by consuelo mac which is now in its 17th year congratulations on that. It is a program that has seen nationwide. And a pioneer in business television. They had been recognized including the first ever Lifetime Achievement award for women in print and financial journalism. Also received the force for Public Awareness of word. Award. And accolades as the best money tv host. My favorite accolade is that she is a valued interested member of the board of trustees of museum of American Finance. That is my favorite honor as well. Im thrilled to be here. History does matter a lot that is why we are here and nick has written a terrific book. I love the fact that it is a fall in revival. It really follows up and picks up where the classic left off. It is a much needed history. I am does delighted to have you here. I think thank you so much for joining us. Thank you so much. I really appreciate with the cappelli center they are doing and sponsoring it. As well as a cfa society. Let me add a little bit to what david said in your introduction. You had had top strategy positions at some major wall street firms. You did 2 cents at jp morgan before the merger 1978 to 1983. And also, i know between 1995 and 2003 when the merger happened in 2000 you have actually lived this history what compelled you to write this book. Why is the jpmorgans fall and revival a story that needs to be told. Think you so much. I think it was a journey. In the first stage of the journey was when i decided after 25 years on wall street to do something different. What struck me at the time is i was in an a reflective mood. They are completely different Corporate Cultures. What struck me as i entered the securities world. The two Corporate Cultures started to play in. When i went downtown to the headquarters. I just changed that much. The culture have changed a lot. In the business. The original idea was maybe write about how financial integration and culture mesh. She also is an author. I want the idea but it will be about to be too complex. I studied it for 15 years. Were now in the summer of 2018. I am with a reunion of former colleagues to celebrate the 70th birthday. You wouldve thought that we have just had a conversation the previous day or so. I have not seen some of these people from previous decades. Discussing the good old days at morgan and everybody delighted under jc morgan chase. You could still tell if only we didnt lose our independence. What that did work to the firm. I didnt really understand what happened. I started doing research and got documents. I was a way for 11 years. Let me stop you there. Youre talking about being with the alarm and how fond everyone who worked at the old morgan was of the culture lets go back to what j. P. Morgan represented. And you think of the bank at that time. They were critical to the financial solvency of this country. They bailed out the u. S. Government. The stock exchange. Its almost like they bailed on the world in various panics. That was chronicles. When you got there. The first time in 1978. What did it represent in finance when you got there in finance. I would just begin by saying im from the west coast. I it know what wall street was. A Bank Examiner one time the fed places to calls the first is to j. P. Morgan ceo. The have of the city bank. That really have an impact on me. At that time. Who was in trouble. In new york city. Who was leading is leading the charge on getting funding for new york city. What fascinated me was going for work in a bank. And of the world that morgan played in coming to the assistance the culture again it was all guard. You were a kid from the west coast as you said. It was a very different environment. A true fiduciary. They put the interests of the clients first. And also trusted advisors to wealthy families. There is another dimension to it. In the book. He describes it as a special place if you like the bankers to the government. It wasnt a retail bank. That was the history and what i found on the first day that you went to report you were given a video of the history of j. P. Morgan and the first thing you learned was our motto doing firstclass business in a firstclass way. That was important. I want to make sure that i am an institution that has the highest standards of integrity. I might add. A tremendous amount. There is a lot about the history of j. P. Morgan going back as well. Talk about the developing mark country places the bank was changing and there was an iconic leader who wanted to go international. What needed to change. What was changing at jp morgan when you got there. First of all. I would say two things. It always have a global presence. In the 70s. All the sudden especially in latin america that were running deficits on their international trade. You had been the money center banks. Scene wait a minute. The demand is down in the u. S. And lou preston. He have a prominent role in the london office. Morgan wanted his leader to be global. They came from humble roots like me. He rose to become a successor. They were instrumental in turning morgan into the International Lending and Foreign Exchange. And then in the early 80s we have the second shock. We have the invasion. On the oil deals. Its a long story to cut to the chase. They said hey, can you do a little upbeat story. Out of the Foreign Exchange reserve. We were supposed to be away a few weeks. His direct quote to me. Ive never seen dennis so scared and all of my life. He knows that the bank has roared its lungs out. For the first time we are in jeopardy. What happens after that. Did morgan along with everyone else. Did they do something that they wouldnt have done in the older days. Did they take risks that they normally wouldnt have done. Was it a mistake or that was just where the business was. And you kind of take your chances and hope it works out well. That is a great question and answer is yes. What i mean by that youre in the situation where all of your competitors there making money. You earn much more in the way of the spread. You have to do it for competitive reasons. That wasnt the problem. I think this would come back to haunt preston. Who was a revered leader how do you get to the situation where you allow the capital to match what the loans were. If you can say how did morgan come out of it. Morgan did have the strongest Balance Sheet of any of the mage searched. We are in a crisis. We have to keep the system together. What does this mean. If everybody gets scared. The banks all pull money. And then the Banking System goes belly up. We have to keep everybody in the syndicates running. Morgan was calling the shots along with the city and then they actually even worked with deutsche banks to make sure that the european institutions would keep it going. Bottom line as preston stepped into the breach once again they emerge in better shape than the competitors. I would argue it changed the decision making. More tentative as he have to contemplate how it my going to now had to change the Business Model because the multinational corporations are tapping into the commercial paperwork. The Business Model has to be changed. Explain how the Business Model was changed which then led to a completely different morgan when you got back into morgan in 1995. First of all. I mentioned morgan was a wholesale bank. It doesnt have a lot of it doesnt have a lot of morgan fund itself. Basically it borrowed in the capital market. Morgan then to the extent that it was making loans. It was to the elite corporations we can raise money cheaper in the capital market. What does he know and decide to do. We have to reinvent ourselves to make us more valid dash make valuable. We have to get to the underwriting business and the Investment Banking business. Guess what, weve a lot of people that cant do that. So basically what they do where can we change that legally. Morgan started building out the Security Platform and thats how it was gaining the expertise. Do you want to go retail, no. Not can happen. This firm and the entire history was never in the retail market. They have a guaranteed trust company. Morgan, will you take us over. Your neck in a do retail. What was unique that i talked about. Morgan said working to get into securities and Investment Banking. And were gonna do it from scratch. Nobody else. Let me ask you just to go back to the retail piece. At one point there was an opportunity to buy citibank . See my guess. You said it was a mistake that what if given them a Retail Business as well do you think them not getting into the Retail Business it was a mistake earlier on . I think they should have been open to it. But i argue actually that not taking a major stake. They were given the opportunity to have some managerial oversight. The reason i wanted to investigate this was again when i would talk to my friends and say what could be have done differently we have a chance to gain a major stake in our principal competitor. When i looked into it though. And i realize. Why did they do it. There were two reasons. Morgan simply felt it was management. We now had any experience in this. Were just not comfortable doing it. Most go back to corporate culture. Morgan and city were two polar opposite cultures. And the whole Business Strategy was completely different. My conclusion and they worried they might not be able to control what is happening in citibank. I tried to argue that it was not a mistake. But i do argue that they have other opportunities that would not have required them into go into retail banking. Those were the missed opportunities and the one i flag in particular. It could have expanded their presence and global custody. This could a beefed up morgan for the expansion in the security. In the early days. This would be under loop reston. They basically sacrifice some Business Opportunities to preserve the culture. The backdrop in all of this. Was there was a tremendous amount of change in the making opportunity. They wanted to build businesses from scratch. Was that the reason. Or was that a mistake. It was going to independence independent were those days over . I wish i could talk to preston and weatherstone. They would say that they were worried about the loss of this culture the question is was an excuse for inaction. Ever friend of mine i was was telling him this. The problem was the culture. Those of us that grew up in the regime and in the way of doing business. Hes basically saying that morgan is behind the times. Im kind of in the middle. Honestly i wish the culture could still be there but it cant. When you guys went back there in 1995. How have the culture change. Here is the way i think about it look of the challenges they faced. If her to do it from scratch. The first thing ive got a do is take bankers who are good at assessing credit risk and give them the training programs. Working to teach them to understand capital and security transaction. Thats a tall order. Nobody wanted to lead with morgan. We have something special. What im basically saying is that the first time in history. Theyre basically saying to some of the bankers sorry. Were moving in a different direction. This is hazy and all investment banks. And i have traders. Even if i dont want a culture crush. The lesson that really matters is compensation. In the old system said you know. The challenge we are to face is if you have two people working together and you give them a differential of 10,000. That was again the issue that you went from people saying i dont care about that. To the guy sitting next to me just made those challenges. The 1995 to 2003 when you were there. Was the hand writing on the wall that a merger had to happen and of course chase took over acquired jp morgan. Actually read the article about it dated september 14 was the handwriting on the wall. Absolutely not. The greatest indication as how did i wind up getting back to work. They wanted the elevator door open. The person i used to support who headed asiapacific. Hes telling me that we are looking for strategy. If i had known then that i was about to be acquired. The only thing i can say is that its like youre having an earthquake and you get tremors. I remember in january of 1995. And then all the sudden the have of equities announces that work and had to announce layoffs. Could this change our corporate culture. We really do not had control. That was the first symbol. If you put in context. From 1980 to 1990. Morgan is at the top. If you go to weatherstone. 1990. I would say the competition they had been hurt by commercial Real Estate Lending in the early 90s and those transactions. All the sudden theyre getting through that. Now youre starting to face more serious conversations. What i would say morgan gets off to a slow start of understanding the tech policy changes. Thats what we were observing. Maybe by 1999. The possibility is lighting the competition. Discussions are taking place and even Goldman Sachs they had approached morgan. In 1998. You guys are retail. Were not interested in retail. Was there a catalyst for the merger or was it just again this drip of liking performance and recognition that in order to continue it needed a Strong Partner into diversify . I think by then the chairman and ceo had to be under incredible pressure from his board they are observing at all. There was manager directing meeting in 2000. We got from our 20yard line he means in terms of becoming a firm of equity. And the big money was in the top three. If youre in the top five or ten. Youre doing okay. Your underwriting securities. So what they announced and this is where the rankandfile realized. Morgan had this new plan that is going to get us into Wealth Management like never before. Its going to open the doors. And anybody thats been waiting to get in. They actually took a vote. And made a mistake. Managing directors do think this is gonna work. And i think management was shocked with the answer. Afterwards, both of us in the room all said zero my gosh. We were never discussing openly. In front of that meeting. We had close relationships. I was pleased with chase. Going back to the New York Times article. The headline was chase. Were they driving to turn into a Global Financial powerhouse. Lets go over then. They had built up by then a very good capability in securities and Investment Banking. I dont want to say that chase was into that. It was predominantly retail. The idea of the food market. That is a nice concept. And even then. Could they pull it off. Basically my story is who was the ultimate. The real Management Team came from chemical back. I didnt even realize this myself. In new york in 1980. Pretty much by 1990. The mini hack manufactures. And then as a change. Chemical was good at acquisitions. That is how chase. It is consider the institutional side. And then they have the retail side. That was the ideal. How did it start off. As far as the merger of the corporate culture. If you were for morgan. Morgan does not want to be worked acquired by anyone. The rest from chase. As those morgan people are supremely arrogant and i used to see this. A little bit of truth from both sides. Dare we all get along. The bottom line is they have thought acquisitions were easy. It wasnt until jamie guided comes in. See mike i will give William Harrison a ceo at the time. He saw the opportunity there and when jamie came in at 2003. Things were already progressing and i will say that they also were American Finance and honored him a couple years ago. Jamie came in with the acquisition of bank one explained just how he have the revival of morgan of how he orchestrated that. How do you describe his success. I would say, that the thing he have going for him was working with sandy rall. And it was completely different. He did admire his culture. Hes a pragmatist and has to get the job done. What i did do was read all of the annual courts. And heres my take. What makes him different. Lets go back to