In the power of partnerships to lead change. I would like to thank the center for Global Security analysis and our wonderful partners in the museum of American Finance and the cfa society of new york who are sponsoring todays conversation. The centennial series was designed to shine light on emerging and important trends. One of the things we realized is reflecting on our history provides new insight into the current challenges that have disrupted and changed industries and Business Models. Todays session focuses on the challenges leaders at Jpmorgan Chase and Companies Face and survive as seen in the latest book jpmorgans fall and revival how the wave if consolidarion changed americas premier bank. I am very proud to say jpmorgan is the largest employer of business graduates and i know many of them are on the webinar today. The session will take place in a few parts. David cowan, president and ceo of the museum of American Finance will introduce Nicholas Sergeant and Consuelo Mack and they will discuss jpmorgans following revival. Following the discussion we will facilitate audience questions and ask that you type your questions in the q and a section near the bottom of the screen. Our speakers will do their best to answer all of your questions. As a participant in todays webinar you will be entered into a raffle to win a free ecopy of the book, the winners will be notified by the end of the week and before i turn it over to david introduce nick and Consuelo Mack, we rely on your philanthropy for our support and i ask that you consider making a gift to both of our organizations. With that said i will turn it over to david. Great to be back with our friends. Nicholas sargen has been living the market since he was at the u. S. Treasury and efforts to scope the federal reserve. What followed was a high profile 25 year career at morgan guaranty, Salomon Brothers and jpmorgan private bank. From 2003 until recently he was cio of western and southern and affiliated port of washington advises where he served as chief economist. His background as economics was he received his masters and his phd in economics from stanford. He has written next and civilly on International Financial markets and had a front row seat to the many decades of changes that have happened in the banks and markets. We will hear about that as he is interviewed by Consuelo Mack, executive producer of wealth track which is in its seventeenth year. Congratulations on that. It is a program that is seen nationwide and a pioneer in business television. Shes been recognized with 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 for Public Awareness award and money magazines accolade as best money tv host but forget all that because my favorite accolade is that shes of valued and trusted member of the board of trustees of the museum of American Finance. My pleasure to turn it over to Consuelo Mack. Thats my favorite honor as well. Im thrilled to be here with the museum of American Finance. History does matter a lot. Thats why we are here and Nicholas Sargen has written a terrific book, jpmorgans fall and revival how the wave if consolidarion changed americas premier bank. I love that it is the fall and revival and it follows up, picks up where the classic house of morgan left off so it is a muchneeded history and i am delighted to have you here so thanks for having us. Thanks so much. I appreciate what you are doing and sponsoring, 100 years, thats amazing as well is the cfa society. Over the years. Let me add a little bit to what david said in your introduction because you had top physicians at major wall street firms. You did two stints at jpmorgan, with the debt crisis. Another from 1995 to 2003 which is when the merger happened so you have lived in this history. What compelled you to write this book. Why is the fall and revival of jpmorgan a story that needs to be told . Guest thanks. The way i think of it was a journey and the first stage of the journey was when i decided after 25 years on wall street to do Something Different but i had two months in between jobs before i was to do that and what struck me at the time. I love morgan otherwise i wouldnt have been there and Salomon Brothers but they were completely different Corporate Cultures and what struck me over that 25 year strict will as morgan entered the securities world and other Investment Banks into the commercial banking world Corporate Culture started to blend. At morgan, when i went down to the headquarters i said on my at Salomon Brothers . Would change it that much. That was 1995. It changed a lot in the business. The original idea was may be right about how financial legislation and culture mesh. With my former boss susan bell, also the author and that i like the idea but wont get too complex. It has got to be about jpmorgan and i put it down for 15 years. We are now in the summer of 2018. I am at london with a reunion of former morgan colleagues to celebrate lisa sillys 70 year birthday. You would have thought that we had just had a conversation that previous day or so. I havent seen some of these people for decades, discussing the good old days at morgan and everybody delighted that under jamie dimon Jpmorgan Chase was back in standing tall but you could tell if only we didnt lose our independence. What that did is i realized i worked at the firm and really didnt understand what happened. I spoke with colleagues but i also started doing research and got documents on the plans that jpmorgan. I was away for 11 years. It went from being a bank to a combined bank and Investment Bank. Let me stop you there. You are talking about being with the alums and how fond everyone who worked at the all morgan was of the culture and lets go back to what jpmorgan are presented. When you think of j. P. Morgan himself, the financier and the bank at that time, they were critical to the financial solvency of this country. They bailed out the us government, bailed out the stock exchange, bailed out new york city. Almost like they bailed out the world in various panics, one in 1895 and one in 1907. That was before there was a fed. What was jpmorgans role when you got there, the first time in 1978. What did it represent in finance when you got there in 78 . Guest excellent question. I would begin by saying i am from the west coast. I didnt even know what wall street was but when i was at the San Francisco fed. A banking second told me if anything goes wrong in the Financial System for said place is to call, the first is to jpmorgans ceo and the second is the head of citibank and so that really had an impact on me. By coincidence, head hunter contact me about a job there and at that time. Who was in trouble, new york city . Who was leading the charge on getting funding for new york city, patterson, the chairman and ceo of morgan. As you say, what fascinated me was going to work for a bank but i was fascinated by the history of jpmorgan in the world jpmorgan played in coming to the assistance of Financial Institutions and the government. Host when i think of jpmorgan, number one, it was old guard. If you were a kid from the west coast, it was a different environment, blueblood, rocksolid financially, they put the interests of the client first, for a mere banker of Blue Chip Companies and trusted advisors to wealthy families. That is what i think about it as but there is another dimension to it but you were just describing. Guest in chernoffs book he describes it as a special place. If you like the bankers, to the governments, to the elites, wasnt a retail bank, didnt have branches except a few in new york city. That was the history and what i found on the first day you went to report you were given a history of jpmorgan, and the first thing you learned was our motto, doing firstclass business in a firstclass way and again, that was important to me. Because i want to make sure i am at an institution with the highest standards. Host if you look at Jpmorgan Chases website today theres a tremendous amount when it says click, theres a lot about the history of jpmorgan going back as well and they have a different motto but it is close so talk about again the developing crisis, debt crisis, you were there in the midst of it. The bank was changing, theres an iconic leader named luke preston who wanted to go international. You were an international economist, one of the reasons im sure you went there to begin with but what needed to change or what was changing at jpmorgan when you got there . I would say two things even before i arrived on the scene, the bank was always a Global Presence with offices in paris and london going back to the time of the communists, in the 70s, all of a sudden you have many developing countries especially in latin america that were running deficits on their International Trades and you have the banks, multinational banks, Money Center Banks, morgan city, cheese, the chemicals, saying wait a minute, demand for loans is down in the us but it is very strong outside, and Luke Cranston who you mentioned at a prominent role in the London Office because Morgan Jpmorgan wanted its leaders the global. The long story is preston and his colleague Dennis Weatherstone who came from humble roots like we do, horatio alger, rose to become present successor. They were instrumental in turning jpmorgan into International Lending foreignexchange and the like. Every thing is fine and then in the early 80s we get the Second Oil Shock when iran excuse me. We have the invasion. All of a sudden now the banks continue. We made it through the first crisis but long story to cut to the chase is jpmorgan along with everybody else, one day i worked for my boss, we were supposed to write a story on mexico. Our blend is to mexico, a little upbeat story. Go on vacation to cape cod. All of a sudden i read the newspaper, out of the foreignexchange reserves, argentina. I came back over labor day. We were supposed to be laid up a few weeks, came back with what is going on, direct quote to me is i have never seen dennis so scared. What do you mean . He knows the bank has more loans out that is matching our capital. For the first time we are in jeopardy. What happens after that. Host did jpmorgan along with everyone else, that what obviously happened with developing companies, was that a mistake, did they do something they wouldnt have done in the older days, did they take risks they normally wouldnt have done . Was it a mistake or that was just where the business was and you take your chances and hope it works out well . Guest that is a great question and the answer is yes. What i mean by that, we are in this situation where all your competitors are putting money in handlers, making money. You have much more spread than you did lending to corporations or anywhere else. So you have to do it for competitive reasons. This would come back to haunt a revered leader, how do you get to the situation where you allow your capital to match your loans . It wasnt that you made the loans but you took too much risk. That was the mistake. If you can say how did jpmorgan come out of this jpmorgan had the strongest Balance Sheet of any of the majors and preston sprung into action and said we are in a crisis. Weve got to keep the system to gather. Morgan came up with managed lending, if everybody gets scared, the Banking System goes belly up. We need to keep everybody in the syndicate, morgan was calling the shock along with city and morgan even worked with Deutsche Banks ceo to make sure the european institutions would keep it going so bottom line, preston stepped into the breach once again to save the system. Morgan emerged in better shape than competitors because it wasnt as aggressive as the better Balance Sheet but i would argue it changed decisionmaking, became more tentative to contemplate how am i going to i have to change the Business Model because the multinational corporations are tapping into commercial paper market and bond markets, he knew that. That is the catalyst you write about in the book. Explain how the Business Model was changed that led to a different morgan when you got back into morgan in 1995. So we are clear. I mentioned morgan was a wholesale explained to people who are not into wholesale banking. Doesnt make consumer loans, thats called Retail Banking. How does morgan fund itself . It borrowed the Capital Markets. Morgan was adept at that. Morgan to the extent it was making loans, to the elite corporations and they are in a situation saying we love you but we can raise money cheaper in the Capital Market then we can here. The business changed a lot. No. What does he decide to do and not do . Basically he says we have to reinvent ourselves to make us more valuable to our corporate clients, we have to get into the underwriting business and Investment Banking. Why dont we just merge with Morgan Stanley . Rehab glasssteagall. Cant do that. Wasnt revealed until 93. Yes. So basically what he does is where can we underwrite securities legally . Basically morgan started building its Security Platform in london and that is how was gaining the expertise. Thats point one. Second 2. You say you need more customers, do you want to go retail . Know, not going to happen. This firm in its entire history never was in the retail market. They had one merged with guaranteed Trust Company in 1959 and guess what, didnt go after guaranteed trust. The board of guaranteed trust said morgan, would you take us over. That was their experience. The bottom line, 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 so morgan did it this way. Just to go back to the retail peace. At one point there was an opportunity to buy citibank and you in your book say it was a mistake that they did not in fact, which would have given them a Retail Business as well. Do you think im not getting into the Retail Business was a mistake earlier on . They should have been open to it but i argue actually that not taking a major stake, they were given the opportunity about 10 to have the managerial oversight of city in 19901991. The reason i wanted to investigate this, when i talked to my morgan friends and say what could we have done differently or we. It, we had a chance to gain it a major stake in our principal competitor. When i looked into it, what i realized was first of all again, why did they do it and there were two reasons, one, morgan simply felt, its management, luke preston, we dont have any experience in this and now they are going to get involved so that was one point. The second point, the reason, go back to Corporate Culture. I was telling you sullivan and morgan were nice and safe. Morgan and city were two polar opposite cultures and their whole Business Strategy was completely different. My conclusion, they worried they would have a culture clash that they might not be able to control what is happening in citibank. I tried to argue it was nice a mistake but i do argue that morgan had other opportunities that wouldnt have required her to go into Retail Banking and i believe those were the missed opportunities and in particular, could have expanded their presence in private banking, global custody. This could have beefed up morgan or the extension. Do you think morgan in the early days, this would be under luke preston and Dennis Weatherstone that they sacrificed Business Opportunities in order to preserve the culture . The backdrop in all of this was a tremendous amount of change in turmoil in the banking industry, mergers happening, mega mergers happening left and right and they wanted to build businesses from scratch. Was that the reason and was that a mistake . Was going independence, where those days over . Yes. To talk to both preston and weatherstone they arent with us but my take is that they wouldnt say they were worried about the loss of this culture that they revered that the rank and file revered. The question, was it an excuse or an action . I have a friend of mine from the private bank, i was telling him, he said to me the probl