Dimon's Jewel

For

a guy who majored in psychology in college, Jamie Dimon has remarkably little patience for having his head shrunk. Ever since Dimon was pushed out of Citigroup in 1998 by CEO Sandy Weill, his mentor and friend, and became CEO of Chicago-based Bank One, Wall Streeters have speculated that he had something to prove. By turning the beleaguered lender into a financial-services powerhouse, the thinking went, Dimon would demonstrate just how essential he had been in helping build Citigroup. Perhaps he would even eventually merge Bank One with Citigroup and succeed Weill in a final act of redemption. But as recently as last summer, Dimon was dismissing this theory as nonsense. "Whoever says that I have something to prove doesn't know me that well," the fast-talking New Yorker told TIME. Last week, even after announcing Bank One's $58 billion merger with New York City — based J.P. Morgan Chase, Dimon was sticking to his lines. "It is all psychobabble," he said late last week. "I didn't need to come back to New York."

But come back he has, and by combining the retail network of Bank One with J.P. Morgan Chase's investment-banking power, Dimon is setting up what will arguably be the only broad, financial-services behemoth that can give his alma mater a serious run for its money. Although the two banks' retail customers shouldn't immediately experience any changes as a result of the marriage — Bank One's consumer business is centered in the Middle West and Southwest, J.P. Morgan Chase's in the Northeast, with an overlap only in Texas — shareholders are counting on Dimon to boost their fortunes sooner rather than later. Dimon won't get the top job until J.P. Morgan Chase's current CEO, William Harrison, steps down in 2006--at the very same time that Dimon's old boss Weill will be exiting stage left from his role as Citi chairman, having already given the CEO job to his anointed successor, Charles Prince. But Dimon will not be waiting that long to shake things up in the newly combined entity, which keeps the J.P. Morgan Chase name, and will be the second largest U.S. bank and second largest credit-card issuer after Citi.

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It has been a long, circular journey for Dimon, 47, who was born in New York City with financial data encoded in his genes. Dimon's Greek-American grandfather and father were stockbrokers catering to fellow immigrants in the city, and it was through his dad Theodore, who worked with Weill at Shearson, that Dimon met his eventual mentor. While studying economics (his other major) at Tufts University, Dimon wrote a term paper about one of Weill's earliest takeovers and used it to persuade the Wall Street veteran to give him a summer internship.

After earning his M.B.A. at Harvard in 1982, Dimon rejoined Weill, as his personal assistant, at American Express. Three years later, when Weill left American Express after losing a power struggle, Dimon followed his boss into professional exile rather than stay in a safe job. As they scouted possible acquisition targets, the brash 29-year-old was already speaking his mind. Michael Holland, a New York City money manager and acquaintance of Weill's, recalls hearing Dimon bluntly telling Weill that a veteran Wall Street banking analyst didn't know what he was talking about. "He was like a pit bull," recalls Holland. "I was just impressed with the tenacity of the guy, and I've never forgotten it."

By 1986, when Weill took over a third-rate consumer lender named Commercial Credit, Dimon was also demonstrating the painstaking attention to detail, ruthless cost cutting and savvy dealmaking that would become his trademark. Instead of just signing off on real estate leases, Dimon would pick some and read them line by line. The high-decibel debates that took place in the corridors between Dimon and Weill were legendary and "the most fun we had," says Robert Lipp, a former colleague and now a member of the Bank One board.

But over the next decade, as the stakes and Dimon's profile got bigger, those good-natured shouting matches between Weill and Dimon became more ill-tempered. It didn't help matters that Weill's daughter left the company after run-ins with Dimon. By the time of the April 1998 merger between Travelers and Citicorp, Weill had become openly critical of Dimon, who suddenly found himself without a seat on the new board. He left after just seven months, joining Bank One in March 2000. With his hard-nosed approach, Dimon instilled a much needed sense of urgency and accountability as soon as he arrived at Bank One, decorating his office with a trio of signs that read simply, NO WHINING. One of his first actions was to halt in midstream a major renovation of the elegant executive floor, and he quickly eliminated perks like cell phones and newspaper subscriptions. "Jamie doesn't care whom he pisses off," says a former Bank One executive. "As soon as he walks in the room, he is by his own estimation the smartest guy there." He moved to shore up the bank's balance sheet by tightening credit standards and dumping bad loans, and he wooed customers with free checking and online bill paying and eliminated fees for using a live teller rather than an ATM. Wall Street rewarded his turnaround of Bank One with a near 60% jump in its stock price, which hasn't hurt Dimon's bank account either: when he took over, he plunked down nearly $60 million of his Citi-made fortune to buy his new employer's beaten-down shares.