Too Big to Fail [44]
A more injurious slight came after the $83 billion merger with Citicorp, the deal that rewrote the rules of the U.S. financial system as the last Depression-era barriers between commercial and investment banking—passed as the Glass-Steagall Act of 1933—were removed by a bill introduced by Republican senator Phil Gramm of Texas and Republican congressman Jim Leach of Iowa. Dimon had worked tirelessly to bring the deal to completion, yet when the time came to split the eighteen board seats of the merged company between Travelers and Citicorp, he found himself left out. He was made president of the company, but had only one direct report, the chief financial officer, Heidi Miller.
The untenable situation finally came to a head a few days after the new Citigroup reported a disappointing third quarter, the result of a summer of turmoil as Russia defaulted and the hedge fund Long-Term Capital Management nearly collapsed. That weekend had been set aside for a four-day conference for executives at the West Virginia resort of Greenbrier, capped by a black-tie dinner and dance. Around midnight a number of couples were trading partners on the dance floor. Steve Black, one of Dimon’s closest allies at Smith Barney, approached the Maughans and offered to dance with Maughan’s wife, a gesture that was intended as something of an olive branch, given the clashing factions within the company. But Deryck Maughan did not reciprocate, leaving Black’s wife standing alone on the dance floor. A furious Black stomped off to confront Maughan.
“It’s bad enough how you treat me,” he shouted. “But you’re not going to treat my wife like that!” On the verge of hitting him, Black threatened, “I will drop you where you stand.”
Dimon attempted to intervene, tracking down Maughan as he was about to leave the ballroom. “I want to ask you a simple question. Either you intended to snub Blackie’s wife or you didn’t. Which is it?”
Maughan said nothing and turned to walk away. Incensed, Dimon grabbed him and spun him around, popping a button on his jacket in the process.
“Don’t you ever turn your back on me while I’m talking!” he shouted.
When Weill learned of the incident, he judged it as inappropriate. A week later, he and his co-CEO, John Reed, summoned Dimon to the corporate compound in Armonk, New York, where they asked him to resign.
It proved to be both the worst and best thing that ever happened to Dimon. Just as Weill had done after leaving American Express, he took his time finding a new job, turning down a number of suitors—including, reportedly, the Internet retailer Amazon. Dimon knew little else outside of banking, and he waited for an opportunity in his field, finally accepting the top job at Bank One, a second-tier, hodgepodge operation based in Chicago. It was the launchpad he had been looking for, and he set out to streamline its operations and repair its balance sheet, to the point where he could engineer a deal with JP Morgan in 2004 that would put him in line to succeed William Harrison as CEO.
Once the proudest of Wall Street institutions, JP Morgan had fallen into the middle of the pack as its competitors had begun to outdo it. Dimon brought in his own team of expense cutters and integration experts, and went to work. Salaries for the bank’s managers were slashed. Gyms were ordered closed. Phone lines were ripped out of bathrooms. Daily fresh flowers were eliminated.