Decision principleCase studyBankingCrises and market historyLeadership
Responsibility for a company's actions sits with its management, not its regulators
Jamie Dimon · JPMorgan Chase letter to shareholders, 2008 · 2009
The idea
JPMorgan's 2008 letter is a first-hand account from the bank that absorbed Bear Stearns over a weekend and Washington Mutual that autumn. It lists the causes of the crisis, the housing bubble, leverage throughout the system, structural risks and regulatory lapses, and credits avoiding complex structured products and holding high-quality capital for the firm's resilience. The sentence that outlasts the detail places responsibility for a company's actions on its management rather than its regulators. It is the opposite of the argument that rules were inadequate, and it is the standard a reader should apply to any firm that explains a loss by what it was allowed to do.
A firm that did what the rules allowed and lost has not been excused by the rules; management chose the position.
When it works
Banking interviews, risk culture questions, and any post-mortem that reaches for the regulator as the explanation.
When it may fail
A chief executive of a bank that came through 2008 well has every reason to make this argument, and regulatory lapses were real. The principle is about where accountability sits, not about whether rules matter.
How to use it
When a loss is explained by regulation, ask which decision the regulation forced. If none, the explanation is a choice described as a constraint.
Where it came from
Letter JPMorgan Chase letter to shareholders, 2008 · Jamie Dimon
What the source says. Dimon recounts buying Bear Stearns at the government's request over a weekend for $1.5 billion, lists the crisis's causes including the housing bubble and leverage throughout the system, credits avoiding structured CDOs and holding high-quality capital, and places responsibility on management rather than regulators.
Connected ideas
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A risk limit is a decision about who has to be woken upA limit is an escalation rule: it decides when a problem must move up the firm, not just how big it may be.
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Beware of geeks bearing formulas: a model built on calm history cannot see the stormAsk what period a model was fitted to, and whether that period contained the event you are worried about.
Concepts
Put it to work on L3VLUP
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