The Cutting Edge: JPMorgan Chase

JPMorgan Chase is the number five corporation on the Forbes 2000 World’s Biggest Public Companies list. The company has a market capitalization, which is a business’ outstanding shares full market value (Town), of $234.2 billion ("#5 JPMorgan Chase"). The enterprise is a holding company for its global banking and financial services (“The History of JPMorgan”). JPMorgan Chase, located in New York, is sixth largest bank in the world based on its total assets, and the biggest bank in the U. S. In 2016, the company is said to have $2.424 trillion in assets. The JPMorgan Chase hedge fund section, is the second largest U. S. hedge fund, behind Bridgewater Associates. The company has been involved in numerous mergers, acquisitions and permutations resulting in its current version. The current name was adopted in 2000 when J.P. Morgan & Co. merged with Chase Manhattan Corporation. There are three main brands that service different functions. The JPMorgan brand is the investment banking arm, which handles private banking, wealth management, asset management and treasury & securities. The second brand, the JPMorgan Chase Bank, N.A. is the trustee, and handles the fiduciary aspects for the wealth management and private banking components. The third brand, Chase, is the credit card component of the company and the retail and commercial banking provider (“The History of JPMorgan”).

JPMorgan Chase is an amalgam of several well known banks that merged, including Chase Manhattan Bank and J.P. Morgan & Co., in 2000; Bank One, in 2004; and Bear Stearns and Washington Mutual, both in 2008. In fact, prior to 2000, many banks came together creating numerous layers which ultimately established what is now JPMorgan Chase (“"The History of JPMorgan”). Some of the most notable were Chemical Bank, Manufacturers Hanover and the Bank of Manhattan, which was the second oldest bank in America at the time it was incorporated into the fold. In fact, Bank of Manhattan, was founded by Aaron Burr.

Corporate Responsibility

Supporting Youth and Adults to Acquire Skills. JPMorgan Chase is committed to helping people to gain the skills needed to compete in the workplace ("Closing the Skills Gap"). The company recognizes that achieving the skills required can transform a person’s life and change the character of a community’s economy. JPMorgan Chase established a program called New Skills at Work, a global $250 million initiative where the company is utilizing their vast resources, their acquired expertise and their worldwide contacts to stimulate and support adult skills training for demand-driven opportunities. Also, the enterprise has developed a program to enhance education programs that increase young people’s skills. Called New Skills for Youth, the initiative is a $75 million program to change the landscape for the crisis in youth unemployment ("Closing the Skills Gap"). There is a major contradiction afoot. Unemployment is high, while at the same time CEOs are concerned that they will not be able to find workers that can perform the jobs they have available and for which they need to hire people right now. It is imperative that the people who need jobs develop competencies in the skills that are needed in the 21st century. Promoting financial vitality is JPMorgan Chase’s core objective. Yet their clients, of all sizes and all sectors, regularly indicate that finding skilled workers is one of their main challenges ("Closing the Skills Gap"). 

In an effort to make a difference, JPMorgan Chase along with Shell Oil Company and the Greater Houston Partnership formed a taskforce (“New Skills at Work”). Stakeholders from the education and business communities came together for the purpose of identifying challenges and creating solutions. The result of the collaboration was UpSkill Houston. The program term is a five year period in which awareness would be raised about the opportunities available, avenues to educational training would be provided, and stakeholders would collaborate more effectively (“New Skills at Work”). JPMorgan Chase provided a $250,000 grant to UpSkill Houston, just a part of the company’s plan to provide $5 million to training workers in Houston. In addition, the corporation is providing help to Project GRAD Houston, which has provided help to low income students to get the credentials needed to get good jobs, through preparation, career training and college courses. JPMorgan Chase has helped with the creation of opportunity for those in the local community and preparing ready workers for the businesses they serve (“New Skills at Work”).

Christina Maldonado, a Project GRAD Houston participant is on his way to success (“New Skills at Work”). He joined the program very concerned about his future. He could not afford to go to college and he knew that this would impair his later opportunities. In the program Maldonado found out about the middle skill jobs that were out there and the long term possibilities that came with them. He was taught how to write a resume, and was given interview training and participated in mock interview drills. He was taught how to make a pitch to prospective employers, including, JPMorgan Chase client volunteers. He found out how to get the credentials he needed for the opportunities that interested him and how to go about getting them. Maldonado made a plan. His plan was to attend Lone Star Community College to become a tech operator. He expects that he will work for an oil company so that he can later become a petroleum engineer (“New Skills at Work”).

JPMorgan Chase is not limited to helping workers in the United States (“New Skills at Work”). New Skills at Work Europe is proving help through addressing European unemployment issues in an effort to help stimulate growth and economic recovery in France, Germany, the UK and Spain. The company starts by addressing each country specifically. It analyzes unemployment trends and finds the barriers to the existence of a vital and employed workforce. Collaborating with the Institute for Public Policy Research (IPPR), JPMorgan prepared a comprehensive study of jobs and skills in Europe. They will continue the process by identifying critical issues. JPMorgan has started making investments in companies and organizations that have unique and innovative workforce development programs, so that they can expand and help additional Europeans find work (“New Skills at Work”).

Volunteerism. JPMorgan Chase helps to coordinate the passions of the company’s employees with the needs of the communities the company services ("Global Philanthropy"). Annually, thousands upon thousands of JPMorgan employees give of their time and experience to assist people in low income neighborhoods and nonprofits. The overall goal is to establish programs that utilize the company’s strengths, abilities and expertise. The Technology for Social Good program uses the extensive technological capabilities of JPMorgan employees, and comes up with solutions for nonprofit organizations and businesses ("Developing Solutions That Benefit”). Technology can help a nonprofit to do more and do more better. Many nonprofits’ professionals do not have the technological expertise that they need, or they are confused or frustrated by technology, JPMorgan employees attempt to come up with viable solutions that make nonprofits and their professionals better at what they do. In some instances nonprofits are able to shift their focus from their technological needs to other aspects of their work that needs to be addressed while employees from JPMorgan perform technology services for them. The effort is a win-win situation. The nonprofits benefit from the expertise of the JPMorgan technology experts and the experts enjoy the sense of doing good work for a good cause. The Technology for Social Good program has performed volunteer collaborations and services to over 1,500 organizations since 2010 ("Developing Solutions That Benefit”). 

The JPMorgan Controversy and Bail Out

In 1994, during a company retreat on Florida's Gold Coast, at the Mediterranean styled Boca Raton Hotel, a group of “innovative” JPMorgan employees developed the credit derivative, among other financial products, during a brainstorming project, by the pool (Tett). A credit derivative is “privately held negotiable bilateral contract[]” ("Credit Derivative") that helps the implementer to control the amount of risk they are exposed to. A bank, for example, worried about a customer that may not be able to make payments on their loan, can insulate itself against the risk of loss, by giving the risk to another entity, while still maintaining the loan on their books ("Credit Derivative"). In effect, credit derivatives match those investors that want risk, with those that do not want risk. The brainstormers realized that this financial product had the potential to become huge. The credit derivative concept was not their original idea, but JPMorgan Chase was the first to create, what was in effect an industrial assembly line for massive credit derivative deals, so that a bundle of loans could be handled at once (Tett). The objective of these derivatives, was to circumvent regulatory strictures. The bank was able to hood wink regulators into believing that they no longer needed to set aside backup funds to cover potential defaults made by borrowers. Credit derivatives served two purposes, it shifted risk from JPMorgan Chase’s books, and it created a lucrative new market that made billions of dollars in fees for financial organizations (Tett).

It is arguable whether credit derivatives were the fulcrum that brought on the 2008 financial crisis (Hannon; Partnoy). JPMorgan Chase’s Bill Winters, CEO during the crisis, said that the failure was not due to credit derivatives, but to “bad mortgage lending” (Hannon) practices. Yet, Frank Partnoy, who traded with Morgan Stanley said that credit derivatives contributed to the intensity of the failure. But for credit derivatives, the problem would have been a manageable one (Partnoy).

The Bailout. In 2008, JPMorgan Chase’s strategies created an environment that required them to be bailout by the U. S. government, because they were considered “to big to fail” (Tett). They were so much a part of the fabric of America, that if they failed, the entire country would fail. As a result of the U. S. Treasury Department’s Capital Purchase Program, JPMorgan Chase, and eight other big banks received $25 billion from the Troubled Asset Relief Program (TARP). JPMorgan Chase was not as enveloped in the subprime mortgage securities as other banks were. They recognized early (though later ignored their initial reticence) that there were major issues associated with innovation in the subprime mortgage market. Despite their accurate initial perceptions, though, JPMorgan Chase, began to enter the market, and hit it as hard as they could, despite indications that there were signs of the beginning of a decline in the housing market (Tett).

Prior to the financial crisis the company was considered a middle of the road performer (Tett). However, the company is now a leader in almost every category. JPMorgan Chase’s investment banking component was praised for its ability to survive economic downturns based on its 2009 success. JPMorgan Chase returned the $25 billion obtained from TARP in June of 2009.

Works Cited

"#5 JPMorgan Chase." Forbes. Forbes, Inc. n. d. Web. 24 August 2016. <http://www.forbes.com/global2000/>.

"Closing the Skills Gap." JPMorgan Chase. JPMorgan Chase & Co. n. d. Web. 24 August 2016. <https://www.jpmorganchase.com/corporate/Corporate-Responsibility/new-skills-at-work.htm>.

"Credit Derivative." Investopedia. Investopedia, LLC. n. d. Web. 24 August 2016. <http://www.investopedia.com/terms/c/creditderivative.asp>.

"Developing Solutions That Benefit the Social Sector." JPMorgan Chase. JPMorgan Chase & Co. n. d. Web. 24 August 2016. <https://www.jpmorganchase.com/corporate/Corporate-Responsibility/technology-for-social-good.htm>.

"Global Philanthropy." JPMorgan Chase. JPMorgan Chase & Co. n. d. Web. 24 August 2016. <https://www.jpmorganchase.com/corporate/Corporate-Responsibility/global-philanthropy.htm>.

Hannon, Kerry. "Fool's Gold' blazes trail of understanding on credit crisis ." USA Today. Gannett Company, Inc. 16 June 2009. Web. 24 August 2016. <http://usatoday30.usatoday.com/money/books/reviews/2009-06-15-foolsgold-book-review_N.htm>.

"New Skills at Work: 2014 Year in Review." JPMorgan Chase. JPMorgan Chase & Co. n. d. Web. 24 August 2016. <https://www.jpmorganchase.com/corporate/Corporate-Responsibility/document/54876-new-skillsara2014-aw7-final.pdf>.

Partnoy, Frank. F.I.A.S.C.O.: The Inside Story of a Wall Street Trader. Westminster: Penguin, 1999 Print.

Tett, Gillian. Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe. New York: Free Press, 2009 Print.

"The History of JPMorgan Chase & Co." JPMorgan Chase. JPMorgan Chase & Co. n. d. Web. 24 August 2016. <https://www.jpmorganchase.com/corporate/About-JPMC/document/shorthistory.pdf>.

Town, Phil. "Market Capitalization Meaning: Why Price Doesn’t Always Equal Value." Rule. Rule 1 Investing.  n. d. Web. 24 August 2016. <http://www.ruleoneinvesting.com/blog/how-to-invest/market-capitalization-meaning-why-price-doesnt-always-equal-value/>.