And moderated by cogswell omak. My name is donna rapaccioli. As you may realize, 2020 marks 100 years of purpose driven his education at fordham. Since our inception we believe in the power of partnerships to inform and to lead change. I very much would like to thank the Gabelli Center for Global Security and analysis and our wonderful partners, the museum of American Finance and the society of new york for sponsoring todays conversation. The centennial series was designed to shine light on emerging and important trends. One of the things we had realize is that reflecting on our history provides new insights into the current challenges that have disrupted and change industries and Business Models. Todays session focuses on the challenges that leaders at that j. P. Morgan chase and company faced, and survived, as is seen in jpmorgans fall and revival how the wave of consolidation changed americas premier bank. Im very proud to say that j. P. Morgan is a largest employer of Gabelli School of graduate i know many of them are on the webinar today. A few ground rules. Our session will take place in two parts. First, david allen, president and ceo of the museum of American Finance will introduce Nicholas Sargen and cogswell omak. The nick and cogswell both will discuss jp morgans fall and revival. All in the discussion and i will facilitate audience questions and will ask that you type your questions in the q a section at the bottom of screen. Ours acres what is the best to answer all of your questions. As as a participant in todays webinar will also be entered into a raffle to win a free ebook the copy of the book. The winners will be notified by the end of the week. Before i turn over to david to introduce nick and consuelo i want to take a moment to remind everyone that both the Gabelli School and the museum of American Finance rely on your philanthropy for our support and i ask you consider making a gift to both of our organizations. With that said im going to come over to david. Thanks, donna. Its great to be back with our friends at fordham as was the cfa. Nick sargen has been living the history of the market since the 1970s when you started out at the u. S. Treasury of the San Francisco federal reserve. What happened after that was a 25 year career at morgan guarantee, Salomon Brothers and jpmorgan private bank. From 2003 until recently nick was a cio of western and southern, and its affiliate of Fort Washington advisors were he served as chief economist. His background is economics. He received both his masters and his phd in economics from stanford and he has written extensively on International Financial markets and really has had a front row seat to the many decades of changes that it happened in the banks and markets, and will hear about that as he interviewed by consuelo mack, the anchor and executive producer of wealth track which is now in its 17th year. Congratulations on that, consuelo. Its a program that is seen nationwide and that pioneer in Telecom Business television. Consuelo has been recognized as many accolades including the first ever Lifetime Achievement award for women in print and electronic financial journalism. That was from the womens economic roundtable, also received forbes Public Awareness award in many magazines accolades as the best money tv host. But forget all that because my favorite accolade is that she is a valued and trusted never of the board of trustees of the museum of American Finance. Its my pleasure to turn it over to consuelo mack. Thanks, david, and that is my favorite honor as well and i am thrilled to be here with gabelli and also the museum of American Finance. History does matter of thought. Thats why we are here and nick sargen has written a terrific book, jpmorgans fall and revival and i love the fact its a fault and revival. It really follows up, it picks up where ron charles classic the house of morgan left off, so its a much needed history and nick, im delighted to have you here so thanks so much for joining us. Thank you so much, consuelo, david, and i really appreciate with the museum of American Finance and the Gabelli Center at fordham are doing sponsoring, wow, 100 years thats amazing as well as the cfa society. Over to you, consuelo. Let me give, at all of it to what davids introduction because you have at top economic and strategy positions at some major wall street firms, as he noted. But also you did to stand that jpmorgan before the merger, 19701983 during the developed country prices, debt crisis, and also another between 1995 and 2003 which is when the merger happen in 2000. Youve actually lived this history. I want to ask you what compelled you to write this book . Why is the fall and revival of jpmorgan a story that needs to be told . Thanks so much, consuelo. The way i think of it it was a journey, at the first stage of the journey was when i decided after 25 years on wall street to do something different. But but i had too much in betwen jobs before it with two [inaudible] what struck me at the time, i loved morgan, had been there twice but i let Salomon Brothers but they were completely different Corporate Cultures. What struck me over that 25 year stretch as morgan entered the securities world and salt and other Investment Banks entered the commercial banking world, is the two Corporate Cultures started to bleed. My second tour of duty at morgan when he went downtown, the headquarters, i said and and a Morgan GriffithSalomon Brothers . The change that much. The culture changed a lot. And the business. Right. Original idea was may be right about how immigration and culture mashed. I shared with my former boss susan bell, and she also is an author and said nick, i like the idea but dont get too complex. This book is got to be the more. I said thank you. I put it down for 15 years. Now we are now in the summer of 2018. I am in london with a reunion of former morgan colleagues to celebrate a birthday. You would of thought, consuelo, that we had just had a conversation the previous day or so. I had not seen some of these people for decades. Whats top of mind . Discussing the good old days at morgan, and everybody delighted under jamie dimon, Jpmorgan Chase is back and standing tall, the still you could tell if only we didnt lose our independence. And so with that did is i realized, i worked at the front and i said, i really didnt understand what happened. Right. I spoke with colleagues but also started doing research and got documents on the plans for jpmorgan, because i was away for 11 years when it went from being a bank, combined bank and Investment Bank. Let me stop you there because you are talked about being with the alarm and how fond everyone who worked at the old morgan was the obama lets go back to what jpmorgan represented really. When you think of jpmorgan himself financier and you think of the bank at the time i mean, they were critical to the financial solvency of this country. They failed at the u. S. Government. They feel that the new york stock exchange. Its almost like they bailed out the world in various panics, 11895 and one and one in 1907. That was before the was that was chronicled in rons book but what was jpmorgan from when you got there the first time in 1978 . What did it represent in finance when you got there in 78 . Excellent point. I would just begin by saying, im from the west coast. I didnt know what wall street was. When i was at the San Francisco fed, a Bank Examiner onetime told me, he said if anything goes wrong in the financial system, the fed places to calls. The first is to jpmorgan ceo two calls may be simultaneous. Simultaneous. The second is to that of citibank, then walter. That really had an impact on me. By coincidence headhunter contact me about a job there. At that time when it went up for the interview, 1977, who was in trouble . New york city. Who was leading the charge on getting funding for new york city . Pat patterson, the chairman and ceo of morgan served in that capacity. She would say what fascinated me was going to work for a bank but i was fascinated by the history of jpmorgan in the role that morgan played in coming to the assistance of Financial Institutions and the government. And also the culture again, when i think of jpmorgan, i am thinking number one it was old guard. You were a kid from the west coast, as you said, the son of greek immigrants. It was a very different environment. It was old guard blueblood rocksolid financially, a true fiduciary. They put the interest of the client first. Premier baker, Bluechip Companies and also trusted advisors to wealthy families. Thats what i think about it as, but theres another dimension to it, right . You were just describing. Yes. I would say in ron chernows book he describes it as a special place, i mean, it was like a bankers, to the governments come to the elites. It wasnt a retail bank. It didnt have branches around except for a few in new york city. That was the history. What i found on the first day that you went to report, you were given a video of the history of jpmorgan, and the first thing you learned was our motto, doing firstclass business in a firstclass way. That was important to me. I am a researcher and i want to make sure im in an institution that has the highest standards of integrity, and i found them. I might add it to look at Jpmorgan Chase website today, there was a tremendous amount when it said click on about as come theres a lot about his jpmorgan going back as well, and they have model but it is close. Motto. Talk about the developing country crisis, debt crisis, and you with it in the midst of it. The bank was changing and it was an iconic leader named lou i wanted to go international. Of course what international economist, one of the recent picture you went there begin with. But what needed to change what was changing at jpmorgan when you got there . First of all i would say two things. Even before i arrived on the scene, the bank which always had it at offices in paris and london going back to the time of the founding, but in the 70s when we have the first real shock, all of a sudden you many developing countries, especially in latin america that were running deficits on their international trade. You have been the banks multinational banks come money center banks, say wait a minute, demand for loans is down in the u. S. , but its very strong outside. Banks began to pour money into and lou, you mentioned, the action had a prominent role in the london office. That was iced a stepping stone because morgan wanted leader to be global. So the long story is he and the collie, dennis, who came from humble roots like me but was the horatio, he rose to become eventually the president successor. They were instrumental in turning morgan into International Lending foreignexchange and the like. Everything is fine and then in the early 80s we had the second shock when i ran, excuse me, we had the invasion of the oilfields. All of a sudden now the banks continued to land. Everything faceoff, we made it to the first crisis. So long story to cut to the chase morgan was moving along with everybody else. I still recall one minute i worked for the most Famous International economist. Our lenders to mexico said hey, can you get a little upbeat story . Aye on vacation, cape cod. All of a sudden i am reading the newspaper, mexico out of foreignexchange reserve. Then i read brazil out of foreignexchange reserves. Argentina. I came back and come over labor day, were supposed to be away a few weeks. Came back, whats going on . His direct quote to me is nick, i have never seen dennis so scared and all of my life. I go, what do you mean . Nick, he knows that the bank has more loans out then his magic our capital. For the first time we are in jeopardy. So i will stop there and if you want what happens after that. Did morgan along with everyone else, that caught a lot of people by surprise what happened with the developing countries, but was not a mistake did they do something they wouldnt have done in the old days . Did it take risks you normally wouldnt have done . Was it a mistake or was 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 the answer is yes. What i mean by that is, you are in a situation where all of your competitors are putting money in hand over fist. And making money. They are making money. You earn much more in the wake of the spread that you did lending to corporations or anywhere else. You have to do it for competitive reasons. That wasnt the problem. I think that the problem and ai think this would come back to haunt preston was a revered leader. How did you get to the situation where you allowed your capital to match what youre loans were . Salt wasnt that you made the loans. It was you took too much risk. That was the mistake. How did morgan come out of it. Morgan did have the strongest Balance Sheet of any of the majors. Preston sprung into action and said okay, we are in a crisis. We have got to keep the system together. Wike did, morgan came up with a strategy called managed lending. This means if everybody gets scared, the bank holds the money, then the Banking System goes belly up. You have to keep everybody in the syndicates come to basically morgan was calling the shots along with city. Been morgan actually even worked with Deutsche Bank ceo to make sure that the european institutions would keep it going. So bottom line is, preston stepped into the breach once again to save the system. Morgan emerged in better shape than its competitors because it wasnt as aggressive. It had a better Balance Sheet. But i would argue a change press tends decisionmaking. He became more tentative as he had to contemplate prestons have to change the Business Model because the country, the multinational corporations are tapping into the commercial paper market and the bond market. Our Business Model has to be changed. He knew that. That was the catalyst you write about in the book. 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 again, so we are clear, i mentioned morgan was a wholesale bank. Explained for people who are not banking what is wholesale banking. Wholesale bank, it doesnt have a lot of branches, it doesnt make consumer loans. That is called Retail Banking come individuals. So how does morgan fund itself . Basically it borrowed in the Capital Markets. Morgan was adept at that. Morgan then, to the extent it was making loans, it was to the elite corporations. As they say now theyre in the situation of saying morgan, we love you but we can raise money cheaper. Lets intermediate. The business changed a lot. Right. Preston, what does he know and what does he decide to do and not to do . Basically he says we have to reinvent ourselves to make us more valuable to our corporate clients. We had to get into the underwriting business and Investment Banking business. Hey, great, why dont we just merge with our old partner, morgan stanley. Guess what, weve got classic geek of us that do that. Wasnt repealed until 93. Yes. Basically what he does is he says okay but where can we underwrite the securities legally . Basically morgan started building out securities platform in london and thats that was gaining the expertise. You say you need for customers. You want to go retail . No, not going to happen. This firm in its entire history never was in the retail market. This firm in the postwar history at one merger with guaranteed Trust Company in 1959. And guess what. It didnt go after guaranteed trust. The board said morgan, would you take us over . That was their experience. So they are not going to do return. The bottom line was what was unique that i talk about is morgan says we are going to get into securities and Investment Banking. We will do it from scratch nobody else tried it that way. Morgan did it its way. Let me ask you to come back to the retail piece. There was an opportunity to buy citibank, right . Yes. In your book you say it was a mistake, that it did not, in fact, which would have given them a Retail Business as well. Do you think them not getting into the Retail Business was a mistake earlier on . I would say i think they shouldve been been open to it but i argue actually that not taking a major stake in citi, they were given the opportunity to buy 10 of citi and have some managerial oversight of citi. This was 199091. The reason i wanted to investigate this was again when i talk to my morgan friends and said what could we have done differently . Everybody said we blew it. We had a chance to gain a major stake in our principal competitor. When i looked into it though what i realized was, first of all, why did they do it . I think there were two reasons. One, morgan simply felt that its management, preston and weatherstone, without any experience in this and now were going to get