Lowenstein then lauds Dimon’s exceptional risk-management skills:

That he manages to be the exception to the rule is a credit to his radar for trouble. Judy, his wife, whom he met at Harvard, claims he has an instinct for danger. Jay Fishman, who worked with Dimon in the ’90s (today he is chief executive of Travelers), says: “Jamie has a healthy regard for the idea that we will go through crises and that we will be lousy at predicting them. The flip side is he will run his businesses more carefully.” In the early ’90s, when banks were racking up huge losses in commercial real estate, Dimon ordered Fishman to study what would happen to Primerica if Citibank should fail. It was the sort of far-fetched risk that no other banker would worry about. A few years later, Primerica acquired Travelers, which had been weakened by Hurricane Andrew. Dimon demanded to see the catastrophe risk in every region the firm covered. Dimon did not have day-to-day control over insurance, but he routinely trespassed over organizational charts. He told Fishman to limit his exposure so that even a once-in-a-­century storm would not cost the company more than a single quarter’s earnings. That was a highly unusual, and unusually conservative, approach.

THIS FALL, DIMON SPOKE at a conference sponsored by Barclays Capital: a thousand people crammed into the ballroom at a Manhattan Sheraton to hear him. The master of ceremonies began by noting that Dimon was also the lunchtime speaker at the conference in 2006, just before the mortgage bubble burst. It was interesting to recall, he said, who else spoke then: Kerry Killinger, the chief executive of Washington Mutual; Michael Perry, chairman of IndyMac; as well as executives from the subprime lender Countrywide Financial and Lehman Brothers. “Jamie told us that day about subprime exposure — his was the first major bank to talk about that,” the master of ceremonies said. “All of those other firms disappeared.”


What Lowenstein doesn’t do, at this point, is talk about how all this only serves to underscore how weak the U.S. banking system’s risk-management systems are: JP Morgan Chase survived in large part thanks only because it was lucky enough to have Dimon at its helm. If Stan O’Neal had been in charge, things would have turned out very differently indeed. As a result, it becomes not only sensible but necessary to hobble JP Morgan more than Dimon feels is warranted. You don’t set speed limits on the basis of how fast the very best drivers can safely travel.

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Felix Salmon is an Audit contributor. He's also the finance blogger for Reuters; this post can also be found at Reuters.com.