ALEX BRUMMER: JP Morgan boss Jamie Dimon plays a blinder

There’s nothing like a banking crisis to test the courage of leaders. It took a collapse on the US Pacific coast to push the Swiss financial establishment, led by Treasury Secretary Karin Keller-Sutter, to bail out Credit Suisse.

Ever since the bank reported £87bn outflows from asset management in 2022 in February, it was clear it was doomed.

A merger with UBS has been looming ever since the blunders at Credit Suisse began to pile up when the debacles of Greensill and Archegos came to light in 2021.

It was a solution advocated by discredited former CEO Tidjane Thiam, who might have been able to strike a much better deal for shareholders and bondholders.

Instead, a botched transaction took place in which the holders of cocos (bonds supposed to be converted into shares) were wiped out, while the shareholders received heavily discounted UBS shares.

Swiss authorities drove a carriage and horses through banking rules agreed upon in their own backyard in Basel, and may have suffered irreparable reputational damage.

Greater UBS may compete against Wall Street’s ambitions for asset management in Europe. It is not so clear that the US authorities have shrouded themselves in glory.

Efforts to deal with the fallout from Silicon Valley Bank and Signature have been far from clean. Treasury Secretary Janet Yellen’s solution dates back to 2008. Her answer is to secure all depositors to prevent bank runs.

That is not exactly the persistent approach that has been on the table since the great financial crisis, and exposes the system to moral hazard.

This allows bankers to make the most risky and stupid bets. And in turn, savers can invest risk-free in securities that are “too good to be true.”

Amidst the detritus of recent events, only one adult appears to have been in the room. Jamie Dimon, CEO of JP Morgan Chase since 2005.

That’s a longevity unknown in the City of London. And like his early 20th century predecessor J Pierpont Morgan, who rallied Wall Street during the banking crisis of 1907, he is leading the fight to save First Republic Bank from the flea market.

He has already mobilized some £20bn in aid from his fellow big beasts to keep the San Francisco bank afloat. Now he is leading the negotiations to provide new capital.

No doubt the US Treasury and Federal Reserve are involved, but Dimon is the go to person since SVB looked like it might sink under the waves.

Dimon, who has been an avid buyer of fintech companies, would like to gain access to First Republic’s tech clients if they haven’t fled like frightened rabbits. Its ability in a crisis compares favorably with the weary regulators and sclerotic politicians of the US.

Scottish fog

By Jamie Dimon’s standards, Scottish Mortgage Investment Trust (SMIT) chairman Fiona McBain’s feet have barely touched the ground.

Her announced departure follows harsh criticism of governance standards by former non-executive director Amar Bhide.

A director since 2009 and chairman since 2017, she was accused of exceeding the nine-year limit required by board experts.

As always with such high profile events, one must assume a long-standing bad blood between the libertarian Bhide and McBain, part of Scotland’s financial elite.

One wonders if McBain would have changed course so easily if SMIT, led by James Anderson, had grown by 200 percent in the three years to 2021 and nearly 2,000 percent in the past two decades, hadn’t lost its luster.

Drops in tech stocks last year, led by Tesla, caused SMIT to take a 30 percent setback.

And there could potentially be a further drop in the shock for tech banks SVB and First Republic.

Still, long-term investors have no reason to complain.

Goodie bags

What is the fascination with bankrupt banks? Hours after Credit Suisse’s merger with UBS, gold bars bearing the lender’s name appeared on online marketplaces.

Ski hats with the CS logo are selling like hot cakes for a whopping £166. SVB souvenirs are also skyrocketing in value. Lehman Brothers swagger is still in demand.

Lucky owners of hoarded goods from the Austrian bank Creditanstalt, which went bankrupt in 1931 and was a factor behind the Great Depression, could sit on staggering profits.