The inside story: Sandy and the Glass-Steagall repeal
1998: As the 1990s came to a close, Euromoney spent time in the US with Sandy Weill and Jamie Dimon, watching as LTCM imploded and the Glass-Steagall laws were repealed (from the imagination of Jon Macaskill).
Euromoney was keen to immerse itself in the workings of Wall Street, so in the summer of 1998 an arrangement was made to shadow Jamie Dimon, who was number two to the empire-building banker Sandy Weill, and who helped to put together a merger of Travelers with Citicorp that year.
Euromoney effectively became the assistant to the assistant, with an inside view of a power struggle for the ages.
The tension between Weill and Dimon was immediately apparent. The New York Times even ran a story with the headline: ‘Jamie Dimon – taller and better looking than Weill.’
Sandy was furious and gave Jamie a new co-head in the form of Deryck Maughan, the dapper British banker who nominally ran Salomon Brothers until anchor shareholder Warren Buffett lost the firm to Weill in a card game in 1997.
Dimon was determined to undermine Maughan as a co-head before the serious work of integration with Citicorp got underway. He decided to check on hedge fund Long-Term Capital Management (LTCM), which was run by John Meriwether, the trader who had been the real power at Salomon before he was forced out by regulators.
“Maughan wouldn’t know a bond trade if it bit him on his Savile Row tuchas, so let’s find out what the Salomon dealers are copying from Meriwether,” Dimon told Euromoney, as we took a car from New York to LTCM’s headquarters in Greenwich, Connecticut.
The signs were not good when we arrived. Meriwether was sitting in the fountain outside the main lobby, pouring water over his freshly shaven head and muttering “the convergence, the convergence” to himself. Dimon didn’t even get out of the car.
“We need to head back and start unwinding whatever trades those bozos at Salomon have piggybacking on Mr Kurtz here,” he said.
“We could also call the Federal Reserve and see if they’ll help to coordinate a bailout across the whole Street,” Euromoney suggested. “The last thing we want is a crisis where the weaker investment banks collapse and people lose confidence in the entire system.”
The bailout of LTCM in September 1998 went surprisingly smoothly, but troubled waters lay ahead for the relationship between Sandy and Jamie.
Watch out though Sandy. Someone else might snap up JPMorgan while you are still busy pushing John Reed out of the door at Citigroup - Bill Clinton
Euromoney was serving drinks at the infamous black tie ball for senior managers just a few weeks later when Dimon finally lost patience with Maughan, who had inexplicably kept his position despite huge LTCM-linked losses.
“Don’t do it Jamie, he’s not worth it,” we called out. But it was too late: Dimon had pulled Maughan’s jacket over his head and tipped him into a pool of liquid chocolate set aside for dipping strawberries in the shape of the Travelers umbrella logo.
Weill, who was standing nearby, lost face in front of austere Citicorp chief executive, John Reed, and had no choice but to sack Dimon, his long-standing protégé.
Euromoney’s stint as a Wall Street executive assistant would end the following year.
Weill distracted himself from the wrench of dismissing Dimon by renewing his campaign to repeal the 1933 Glass-Steagall Act that separated commercial and investment banking activities in the US.
President Bill Clinton proved an easy sell. He had survived the Lewinsky scandal but liked to get out of Washington whenever he had the chance, which is how he came to be on the terrace of Weill’s apartment on an unusually balmy New York evening in November 1999.
Euromoney was helping to pour iced tea for the guests when Weill mounted a charm offensive that persuaded Clinton to endorse the bill that would repeal Glass-Steagall later that month.
“Watch out though Sandy,” said Clinton, after he was temporarily distracted by a passing waitress. “Someone else might snap up JPMorgan while you are still busy pushing John Reed out of the door at Citigroup.”
Weill wasn’t concerned.
“Even if Chase Manhattan or BofA buy them, what then?” he asked. “Nobody handles a bank merger like I do. Maybe Jamie could have – after all I taught him – but where is he nowadays?”
(Editor’s note: after a period running Bank One, Jamie Dimon in 2006 became chief executive of JPMorgan Chase, which is today the most valuable and profitable bank in the world.)