In today's episode, we delve into the remarkable story of how JP Morgan Chase became the largest bank in the world. From its humble beginnings to its rise as a global financial powerhouse, we'll uncover the key milestones, strategic decisions, and factors that propelled this iconic institution to its prominent position in the banking industry. Join us as we explore the vision, innovation, and determination that shaped the legacy of JP Morgan Chase.
JP Morgan Chase's journey begins in the late 19th century when a visionary named John Pierpont Morgan, known as J.P. Morgan, laid the foundation for what would become an influential banking empire. Through his shrewd business acumen and deep understanding of finance, J.P. Morgan navigated the rapidly changing landscape of the industrial revolution, capitalizing on opportunities that propelled him to the forefront of the financial world.
Throughout its history, JP Morgan Chase has demonstrated its ability to adapt and evolve, solidifying its position as a leader in the industry. From strategic acquisitions and partnerships to technological innovation and a relentless commitment to exceptional service, the bank has consistently stayed ahead of the curve.
JP Morgan Chase played a pivotal role in the face of economic crises, such as the financial downturn of 2008, and how the institution's resilience and prudent risk management helped it emerge stronger than ever before.
So, sit back, relax, and get ready to embark on an enlightening journey through the history, triumphs, and continued success of JP Morgan Chase.
Helpful Links:
In today's episode, we delve into the remarkable story of how JP Morgan Chase became the largest bank in the world. From its humble beginnings to its rise as a global financial powerhouse, we'll uncover the key milestones, strategic decisions, and factors that propelled this iconic institution to its prominent position in the banking industry. Join us as we explore the vision, innovation, and determination that shaped the legacy of JP Morgan Chase.
JP Morgan Chase's journey begins in the late 19th century when a visionary named John Pierpont Morgan, known as J.P. Morgan, laid the foundation for what would become an influential banking empire. Through his shrewd business acumen and deep understanding of finance, J.P. Morgan navigated the rapidly changing landscape of the industrial revolution, capitalizing on opportunities that propelled him to the forefront of the financial world.
Throughout its history, JP Morgan Chase has demonstrated its ability to adapt and evolve, solidifying its position as a leader in the industry. From strategic acquisitions and partnerships to technological innovation and a relentless commitment to exceptional service, the bank has consistently stayed ahead of the curve.
JP Morgan Chase played a pivotal role in the face of economic crises, such as the financial downturn of 2008, and how the institution's resilience and prudent risk management helped it emerge stronger than ever before.
So, sit back, relax, and get ready to embark on an enlightening journey through the history, triumphs, and continued success of JP Morgan Chase.
Helpful Links:
[00:00:00] Should I be worried about Bear Stears in terms of liquidity and get my money out there? No, no, no. Bear Stearn shares about 90% this morning and it's not just Bear. Pretty much every single bank is plunging in early trade this morning. The US economy right now is doing quite well. Consumers have a lot of money.
They're spending it jobs at plentiful. I think it's fabulous. By the way, the wages are going up to the low end. JP Morgan taking First Republic. It's a big deal. In today's episode of Things have Changed Podcasts. We explore the world of JP Morgan. The JP Morgan is acquiring First Republic directly from the F D I C, which seized and immediately sold a majority of first Republic's assets, including 173 billion in loans and 30 billion in security.
JP Morgan Chase, one of the world's largest and most influential banks, appears to be on a relentless path to owning everything in its way. First Republic will go down as the second largest bank failure in US history that's bigger than Silicon Valley Bank. With a series of recent bank acquisitions and a [00:01:00] surprising shift into the real estate market, the banking giant seems poised to become not only your trusted financial institution, but also your landlord.
So ultimately, this is about building confidence, and I think you built confidence, a, by having First Republic resolved, and B, by seeing that a very good operator who has strong capital, remember the fortress balance sheet that JP Morgan has always advocated that allows them to do the transaction. So today on t c.
We dive into JP Morgan's Ascent over the last decade and how its recent spate of acquisitions has taken its dominance to a whole new level. Us of kind right now is doing quite well. Consumers have a lot of money. They're spending it. Jobs are plentiful. I think it's fabulous. By the way, the wages are going up to the low end.
If you'd known how important the technology economy was 20 years ago, would you have done things differently? The internet, cell phones, The cloud and data [00:02:00] things have changed. We're here to talk about it. Hi, I'm Jed. Hi, I'm Shikar. Welcome to Things Have Changed Your New Economics and Technology Podcast
so recently as you guys. No, I've been looking at different types of jobs. I've been looking for like a transition. Um, and through that process I looked at a ton of companies. One of the largest companies that I was looking into was, uh, a well-known bank, Lil Bank called JP Morgan. In ten's. The only bank in the world.
Yo, I don't want, I don't wanna, I don't wanna jinx you there, but looking into these companies, I was looking for interviews for, you know, you do whatever you do when you're going through the interview process, which is you research the company a little bit, right? You kind of get to know how the company came in to be, what are the biggest [00:03:00] services, et cetera.
You read either 10 k if you're in finance or or accounting. You would read their 10 K to figure out like, what kind of assets do these guys have? You know, learn a little bit about the company's history. And today the internet has a shit on of things. You know, you can learn so much about a company's history these days, especially if they're as old as JP Morgan.
I mean, the first sentence when you read JP Morgan's Chase in Wikipedia is that they were a company that was founded in the 18th century. What the f? That's a long history. Yeah. Okay. It started out as a company. Would you believe that used to provide water to New York City Water a resource, right? Mm-hmm.
Throughout that process, becoming bigger and bigger, thought about banking as another industry for it to tackle. So it didn't even start in banking, dude. It didn't even start as a bank. JP Morgan. Morgan became a financier, [00:04:00] an American financier, and that history stemming from 1799 is a rich one. You know, riddled with, um, history of creating the central bank.
Even that was something that was during the time that JP Morgan was already a financier in, in the New York area. But I think for me, when it, when I really came to know JP Morgan, when I first came to the us, dude, it was right af So I came in the US 2011, right, right after the financial crisis. Which, by the way, was unknown to me.
I'm from the Philippines. Yeah. We didn't, we didn't get hit too hard by the financial crisis, although it was global. Um, I didn't know anything about these banks, these companies. Right. But when I had just came. Everything that I was reading about on the news and you know, all this, these banking reports that were coming out during the time were really focused on like the health of the financial system because the financial crisis had just happened, [00:05:00] right?
So all these rules started coming out. You know, these regulations started coming out and I remember during the time when I was learning about the American financial system, I had heard the story about JP Morgan during that time. And how it was one of, kind of one of those companies who outlasted its competitors during the financial crisis.
I mean, I don't know if you remember what happened during that time, but there was so much drama around that time. Yeah, all over the news. Lots of shows were coming out about it and you know, during that time, M and a started becoming a more familiar concept of me. Mergers and acquisitions, if you're not familiar.
Yeah. This, everyone was merging with everyone and acquiring everyone. Yeah, exactly. Dude. It was, it was big money out there. You know, there was a, it affected all parts of our lives because also politicians at the time were nonstop talking about this financial crisis, right. There were committees forum to regulate these guys and to, to think about the rules that we needed to have in place to prevent this from happening ever again.[00:06:00]
And you know, one of the things that I saw was, During this time, even if the financial banking, the banking system of the United States was kind of suffering, we also had the biggest financial institutions form during this period. The biggest, because these acquisitions were happening in banks, bigger banks were basically swallowing other bigger banks, which is, that's not what's happening today.
Yeah, right. Because we have. Other banks that are quite big depositors that are being bought by really big guys. But at the time it was all big guys, right? It was all big guys eating each other and notable transactions. I mean, I don't know if you remember this, but WAMU was one of those companies that were bought during that time, Washington Mutual.
Um, JP Morgan also bought, um, God, what was that other company that they bought that was so big? During that time beyond Wawa Bear, bear Stones, dude, the biggest, how could I forget? The biggest Bear Stearns, the big boys. Right? And I think they were pretty big investment [00:07:00] bankers at that point, right? Bear Stones.
Dude, bear Stones had a market cap of 67 billion. Yeah, what a discount, bro. How much did Chase buy them for pennies to the dollar, right? That's, that's the, that's the saying. If, if JP Morgan is buying you out, that means they're buying you out for pennies to the dollar. That's just the saying. That's what they do, dude.
That's what they do. Crises like these make behemoths like Chase so important. I mean, I always think back to that time and think why all of a sudden. Was there interest in JP Morgan doing these transactions? Because, I don't know if you remember, but when, when we went to school, a lot of what was being taught to us, cuz I was studying a lot of economics, I studied development economics.
One of the things that was taught to us in school is that during this period, I. The Central Bank and the Federal Reserve, the Federal Reserve of the United States, were helping to patch these systems up, right? They were like working with folks to patch these systems up, and one of the things that I noticed was that they [00:08:00] had approached the big banks that were stable during this period who were not overexposed to these credit default swaps during the financial crisis, which was pretty cool.
One of those big banks was JP Morgan, obviously. One of the biggest collapses that happened was Bear Stearns and the Federal Reserve went to JP Morgan and nobody else. Why is that? Um, I think throughout the years we've realized how important. And we say this a lot on C H C, how important a balance sheet is in robust balance sheet, robust, and they always have that.
So in times of desperation, they get those deals. They apparently bought Bear Stearns for 7%. Of its value. Two days before it was acquired, 7%, so that's more or less pennies to the dollar, like seven. Seven pennies to the dollar. That's what they got them for. I heard some joke where, um, they bought a. Bear [00:09:00] Stearns for the value of their headquarters in New York City.
Yes. Which was like, I think I, I think when they were putting out numbers, it was like 1.2 bill or something like that, and that was just the price of their headquarters at the time in New York. This gave them access to such an incredible investment banking clientele, like all the richest folks on the planet.
They just were able to acquire them just like that. Right. And then you had Washington Mutual, but they were one of the largest savings and loan associations in the US back then. So then that allowed JP Morgan to expand its retail banking presence. So in the span of that 2008, 2009 period, they got
They're hands into investment banking, retail banking, and just had access to this vast customer base across multiple like income levels. Yeah, it's just kind of crazy what they've been doing. And you know, it doesn't stop there. There, there's a lot of large companies that. Use acquisition merges an acquisition as a [00:10:00] play to grow bigger.
Right. It's just, for banks, it's a little interesting because their products are financial in nature. So when they're buying something, it's like, it's the balance sheet that they're buying, it's the deposit, it's a portfolio that they're buying. You know, it's not, yeah, necessarily technology or, or fixed assets.
It's not that. It's like literal portfolios, deposits, you know, the scope of your customers, for example, when they expand to other countries and other regions. They just buy up a bank in the region. It's kind of crazy, right? Yeah. They'll buy a business, they'll buy an entire investment banking business in Europe and just claim that entire area and have reach.
That's, I think, a unique advantage to really large institutions is, uh, They're capital dude, they're able to deploy that capital really well, really effectively. Especially cuz they're in this game of, of m and a themselves, right? Like that's their whole investment banking play as well. Like they do really, really large transactions.
So they are experts in this field, m and a. So when they make a purchase, it's generally quite good. I know they've been guiding a, getting a lot of flack lately [00:11:00] for, um, They're foray into the, the startup space. I don't know if you heard about that. Yeah, that little, I, I forgot what they call that company that they bought where apparently they were defrauded.
Two 50 Mill. Frank. Frank, that's what it is. Yeah. Frank, the two 50 mill deal thing. So some background, uh, JP Morgan bought this customer banking app called Frank, and then they realized everything was fudged. All the numbers were fake. And they found out only after closing the deal. And then they, they realized when they sent out emails, it all bounced back and then they were like, what is happening?
I understand. This is why we don't see JP Morgan in the start of space too often cuz this shit happens. You know, typically like, I don't know. Really big deals like this, it's, it's really tough cuz JP Morgan doesn't have experience in the venture capital space, although they want to. Right. They wanna be in that space too, cuz obviously there's a lot of money to be made there.
But it's just one of these things that, you know, it, it [00:12:00] gives a bad name to their due diligence process and lately the. That regulators are looking into that, they're like, Hey, why? How could you miss this detail, basically? So, I mean, that's honestly, that's gonna be good news for us. There's gonna be less fraudulent transactions if we come out with better regulations around this.
But, you know, really interesting use case there where it's one space that they haven't entirely figured out yet. JP Morgan is a massive company, but fast forward to. Recent times and the, the, the thing that you probably have read in the news in the last three weeks is this whole first Republic situation.
We, we saw this, uh, scenario play out where some of the regional US banks started seeing like a flee. Of customers withdrawing their cash, like it was just happening super fast. One of those companies, along with Silicon Valley Bank was First Republic Bank, and it was the second largest bank failure in [00:13:00] US history.
The first was actually Washington Mutual. That happened, you know, 15 years ago that JP Morgan bought as well. So what, what happened in this case? What happened with the First Republic is, It was seized and then JP Morgan Chase came in, uh, and bought all those assets again, pennies to the dollar. And Jamie Diamond was, was at the table acquiring all this and just licking his fingers because he knows now everyone and the appearance are going to be moving their money to JP Morgan Chase because it just feels like they're the most robust bank in the land.
Right. Um, and so JP Morgan was actually the largest beneficiary of this whole fiasco, SVB signature bank failures, all of that, because apparently, uh, there's an estimated 50 billion, uh, increase in their deposits since then. So the regional banks are shrinking and JP Morgan is growing by that much. [00:14:00] And, uh, the stock, I, I was just comparing the stock difference and JP Morgan's stock, since these bank failures has gained like 6%.
So that's, that's modest, right? 6%. Nothing to make like headlines, but when you compare it versus the 30% decline of regional banks, 50 billion in deposits is a big deal for a regional bank. Fall. JP Morgan. It's probably Gardner's. Drop in the bucket. Drop in the bucket, but it's, it's just reinforced that belief that JP Morgan Chase is the most robust bank in the land.
Speaking of land, no, I'm just kidding. Not, we're not there yet. We're not there yet. But just to provide some background on that. You know, I was talking to Scher last. A couple weeks ago about the whole s v B thing when it was collapsing. Right. You know, we were trying to find a way to, to talk about this nicely.
And I think of recent times when we were chatting about it. Um, I have a lot of friends who have started companies since graduating [00:15:00] college and we have them on the show sometimes, and I was on the cult call with one of my friends who is a startup founder. Who was pulling his money out of SVB before this entire fiasco happened, and I was on the phone with him and guess where he was?
He was in. JP Morgan, bro, opening up a bank account for his funds to transfer, right? Like this, dude, this stuff is close to the heart because when all this stuff, this is real life. Yeah, yeah, yeah. When all this stuff started happening, people were worried. And where do you turn to when shit like this happens?
Well, I. Trustworthy institutions, right? You put your money where you know it's still gonna be there and this flight isn't, it's not like it only happens to svb, like, we knew this was gonna hit other regional banks and it's gonna continue to do so, by the way, because all of these bank failures, and when I say all of these, these are quite massive.
Bank fails from SVB to First Republic being like Titans in terms of deposits, right? Um, them failing is not, is no like ordinary ordeal. So [00:16:00] these people are definitely worried about their money. They're going towards really trust institutions like Bank of America also is experiencing a rise in deposits.
Not as much as JP Morgan is. Um, but you know, you see that happen a lot during, during these period. And First Republic, dude, they got a lot of rich. Customer bases as well, which JP Morgan is very, very interested in. But, um, that's not, that's not the only thing they're buying isn't. One thing that really stood out is how aggressively they've been going into the real estate market and with the Fed, like tightening lending by increasing interest rates.
Right? The interest rates are higher, uh, mortgage rates are higher. It's becoming harder to. Get approval for the loan to then buy a home. Right. And you are seeing this across the board because regional banks are the ones that lend most to residential housing as well as commercial real estate. Just recently, just last week, we got [00:17:00] word that JP Morgan's starting to acquire these condominiums in Florida, which is Florida is the hardest market in the US right now.
Real estate market. Their robust balance sheet just allows them to then start doing other things, and this diversification is what makes them so robust enough. Uh, by venturing into like ownership, like property ownership, JP Morgan has set its site on not just becoming your financial service. Provider, but also maybe your landlord.
That's crazy. The landlord space. We've heard the story of big companies getting into to real estate acquisitions in the private equity space where you know, you got a ton of companies like BlackRock and KKR buying portfolios of commercial real estate companies. Yeah, really large portfolios across the board because unfortunately we have a lot of those in the us.
We have a lot of places where it's super hard to buy real estate, so folks tend to to rent, and that's what's happening these days, right? It's very, very expensive. So it's [00:18:00] interesting that JP Morgan is getting into this space as well, because they also have that unbeatable balance sheet and yeah, that health.
Of their balance sheet is, is a huge advantage when they're thinking about risk, wherever the money's at, areas where you can make money. Um, real estate has been there and these big companies have been buying into it like crazy. So we're gonna see this grow for sure. Yeah. Uh, JP Morgan's Asset Management Division, uh, announced that they are doing like a joint venture, like a half a billion joint venture to build homes to build rentals across the west and the southeast of.
The US and now they're just continuing that, that trend where they are, um, announcing deals with other, uh, real estate investment firms, uh, to buy single family rentals. And then now the news last week where they literally straight up bought a 180 5 unit like condo property, uh, for 60 million. [00:19:00] Now 60 million is not a big deal, but it's, it's.
There are very few asset management companies out there that can just drop 60 million at the worst conditions of, of, um, a housing market over the past five years. You know, because rates are so high, because even these reeds, dude, the thing is that these reeds still use banks, right, as leverage. Like even if they run these operations and they own these companies, they still often have something to pay for that.
That, yeah. Affects the interest rate, right? That is affected by the interest rate. So these banks themselves, I mean, They could use leverage, but they also have a pretty healthy balance sheet to drop. Shit. So if they wanna make an investment from what they currently have as cash, I mean they could do it.
It's very easy for them relative to the other companies that aren't, banks aren't bank holding companies. Right? Yeah. And think about this scenario, dude. Uh, as we close, uh, I was just thinking, I mean, chase already offers mortgage. It's just not as common because, um, people like to prefer they are [00:20:00] local lenders because the local lenders know the area, the region.
Uh, housing is a very local industry, so it's really important to have local, get better rates too, by the way, get better rates. But what happens when Chase with its incredible balance sheet can is buying up the regional bank that's providing you those great rates and so they can give you great rates now.
And close as fast because they've not. They, they just acquire the company and just leave them as a subsidiary. And so now they are lending for marketers. Yeah. But then on this side, they are actually building and renting out and selling condos properties. Yeah. There was a time when it wasn't so profitable to be in this game, like the lending, that's why it's like left to regional banks.
It's not, it's not a high margin game. But now the, the environment's changing a little bit, right? Rates are, are climbing like crazy and people have no freaking choice. So I feel like this is a play for them because of the current [00:21:00] economy as well. It makes sense right now for them to do that. Um, and yeah, as long as the rates keep going up, there's gonna be more and more incentive for them to, to, you know, deploy more capital in this space.
So we'll see what happens. But, um, Just another story of a company that's growing like crazy. All right, and so that wraps up our podcast episode with the latest breaking news, um, JP Morgan's audacious Plan to take over the world. Um, with our strategic bank acquisitions and newfound dreams of becoming landlords, JP Morgan is ready to be your one stop shop for financial services and property management.
But remember, folks with great power comes great regulatory oversight. It's essential to keep a close eye on competition. Fair practices and the wellbeing of consumers and communities. So yeah, thanks for joining us on this wild ride of banking, conquests and real estate ambitions. Um, as always here, things have changed.