jamie dimon's 2009 letter to jpmorgan chase shareholders

8/9/2019 Jamie Dimon's 2009 Letter to JPMorgan Chase Shareholders

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The past two years have been among the most extraordinary and challenging inrecent history or JPMorgan Chase, the nancial services industry and the globaleconomy. We have endured a once-in-a-generation economic, political and socialstorm, the impact o which will continue to be elt or years or even decades to come.As we see signs o recovery and the debates about nancial re orm wage on, itseasy or us to orget the ear and panic we elt a year ago. The market was down anastonishing 50% rom its 2008 highs to its low on March 9, 2009. More important,as I write this letter, our country has lost 8.4 million jobs in what has turned out tobe a more serious, sustained economic crisis than most o us have ever experiencedbe ore or may experience again.

For JPMorgan Chase, these past two years have been part o a challenging, yetde ning, decade. We began it as three separate companies: Bank One, Chase andJ.P. Morgan, with each acing serious strategic and competitive challenges. Today, ourstrategic position is clear, and JPMorgan Chase is a leader in all o its businesses.I you had been a Bank One shareholder rom 2000 to year-end 2009 (this representsapproximately 40% o the current company) and you held on to your stock, youwould have received a total return on your investment o 131%. Over the same time

period, i you were a Chase or J.P. Morgan shareholder, your returns would have been12% and 70%, respectively. By comparison, the Standard & Poors 500 Index wasdown 9% over the same period.

Throughout this decade, we made and executed on many trans ormative decisions.When the global nancial crisis un olded in 2008, the people o JPMorgan Chaseunderstood the vital role our rm needed to play and elt a deep responsibility to ourmany stakeholders. It is this sense o responsibility that enables us to move beyond the

distractions o the moment and stay ocused on what really matters: taking care o ourclients, helping the communities in which we operate and protecting our company.

It is because o this ocus even amid the daunting and ongoing challenges thatwe are able to weather this economic crisis and continue to play a central, i some-times misunderstood, role in rebuilding the U.S. economy. This is a testimony to thecollective strength o character and commitment o our people. Since those rstchaotic days in early 2008, many o our people have worked around the clock, sevendays a week, or months on end.

d a F ll s a l ,


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On March 16, 2008, we announced our acquisition o Bear Stearns at the requesto the U.S. government; on September 25, 2008, 10 days a ter the collapse oLehman Brothers, we bought Washington Mutual. We loaned $70 billion in the

global interbank market when it was needed the most. With markets in completeturmoil, we were the only bank willing to commit to lend $4 billion to the state oCali ornia, $2 billion to the state o New Jersey and $1 billion to the state o Illinois.Additionally and, requently, when no one else would we loaned or raised orour clients $1.3 trillion, providing more than $100 billion to local governments,municipalities, schools, hospitals and not- or-pro ts over the course o 2009.

Our industry and our country are continuing to ace some serious challenges, butwe believe that the strengths o our nation our resiliency, ability to re orm andinnovate, work ethic and culture will put us on the right track again to global

nancial soundness. JPMorgan Chase will remain ocused, and we will continuedoing our part.

In the ollowing sections o this letter, Ill talk about a range o issues that bear onour company, our industry and our country:

I. How our company ared in 2009 with a ocus on what we actually do as a

bank to serve our clients and customers and what we did to respond to thecrisis and help the communities in which we operate

II. How we manage our people JPMorgan Chases most valuable assetIII. Our support o nancial re orm that will strengthen the nancial systemIV. Our responsibility and Americas success

Jamie Dimon,Chairman andChie Executive Ofcer


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Overall results per ormance improved rom2008 but still was not great

o v a a a $100b ll , p $67 b ll 2008. t la

a v a p a l l ll a wa

m al (wam ) a a a ain revenue in our Investment Bank. Pro ts

$12 b ll , p $6 b ll p a b $15 b ll

a b a . w l l pa la p v v 2008, ll aan inadequate return on capital a return on

a bl q l 10%. r la v p , pa a x l

ll. w a l a lq a v - a ( a avbeen one of the few major global nancial

a v ). i ab l a al, v , l .

Maintaining our ortress balance sheet andcommenting on our dividend

d l a , a p a-v a av a

pa v ll. wa a k a a ;

-q al ap al; l a l v ;, a pa p ; a app -

p a l va v a . w a -a a x l t 1 ca , a 8.8% a a - . w

al a l a l v v a $23.2 b ll $31.6

b ll , a x l 5.5% all a a . o l l bala a al a abl p va lthrough tough times and seize opportunities

l v b .i v x l ll v p .

ea l 2009, a al vfrom $1.52 to $0.20 per share a drastic move

p b p pa ap l a p all bl .w p b abl a v a a al a $0.75 $1.00 p a . t

, l l k p app : v al a al p v -

u.s. pl ; a a - a - ( p v

a a a -al l a l v ); a a

a la q ba k

ap al l v l . P bl a ap al al q q a ll a axp p al a a a a

ap al . w p ll b la a .

ma pa a a abl l a l b a . w

. t l a a ala k a -

v l a wam p a (a

a a v ap al a ). w alp b a p k b -

backs in the near future. But our rst priority is and always has been to invest our

ap al b a all a ,a l , ak val abl a q . w

b ba k k l k a val a l la v val

pp . A k a a q , b a b l v

val a l a q al val v .

Increasing our e ciency

ov all, a a a pa a v a a , ll

JPMorgan Chase-Bank One merger. Since then, v l a v all all p -a pla , k a a a ,a av x ll l a b -

- la a al a k . w alav x p al l al, a , pl a ,

k, a a a a . t a ,

I . HOW OUR COMPANY FARED IN 20 09


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p v l v l p aa v p lla v -cantly lower than in the past. To give just

xa pl , al l a p a- a p a v a l b

a $9 b ll a a a p lla v

a 2005.

Continuing to invest

t pa a , v pp v . t a l

acquisitions, foremost among them Bears a a wa m al; v

a , l a -l ; p , xa pl ca

s v ; a a ba k ab a a l . t v

p a .

Preparing or tougher global competition

t p v la ap ap l a .ma pa ak a b a a all . w xp

b u s aa e p . w a v vb a k a a ( a ,

a a k a v all all

businesses). But we must be prepared for all p a ba k. w

a p a a pa l , al a app . w

ak l l .

Protecting the company in uncertain times

y a ab v a : l bala bala , al

b v a l , a a v a p al la

a , a . i l pa . r a , a pa v l

a l ll a

F ll a ap l b

l . i , i ll b a a a ba kactually , b .A a l , i p ll las I do that we have excellent franchises,focused on doing a great job for our customers( v ak ak ), a a

av b l a l b a l v .

Net revenue(in billions)

30

40

50

60

70

80

90

$100

20

10

20092005 20072006

$54.2

$71.4

2008

$67.3$62.0

$100.4

Pretax preprovision proft

Managed net revenue* by line o businessFull year 2009

(in millions)

InvestmentBank$28,109

Retail

FinancialServices $32,692

Card Services

$20,304

Commercial Banking$5,720

Treasury & SecuritiesServices $7,344

Asset Management$7,965

Corporate$6,513

26%

30%

19%

5%

7%

7%

6%

* For a discussion o managed basis presentation and a reconciliationto reported net revenue, see pages 58-59 o this Annual Report.


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Results by line o business:Great leadership amid great challenges

The Investment Bank reported net income of $6.9 billion with an ROE of 21%

Overall results

The Investment Bank (IB) delivered recordp a a b a : $6.9 b ll v $28.1 b ll . t

l l b b - v gl bal ma kv $22 b ll a v

banking fees of $7.2 billion. The IB generateda q 21% $33 b ll all a ap al, b l v a .w l a l b b -

p a a v l a l a a v l abl pa

a . i a k a , we achieved a #1 ranking in every major

l bal ap al- a l a abl a .w , v , ak p

a a a a a aa a k a ll b -

l b a . w b l v a a

25,000 pl , k a v l v a .

What we do in Corporate Finance

gl ball , av a 2,000 vba k , v p a a

5,000 a l . ma 1,000 l a v v -

, a a pal v , -a al q a - v a , p al ,

l a - -p ; a -all p a a a al .Our job is to help these clients nd appropriate

a , ak a a q v -, a lp a a bala a

other exposures such as exposure to interesta , x a p .

i 2009, a a a v , v ba k :

Advised on 322 mergers and acquisitionsglobally more than any other bank.

Loaned or syndicated loans of more than$200 b ll 295 pa , lp grow and create jobs.

Raised $620 billion of equity or bonds inp bl a k l a l .

Raised $178 billion for the nancial industry, a l 10% ap al b l a al .

Raised $102 billion for states, municipali -

, p al , l a - -p to help build roads and bridges, improve

al v , va l al p ala a p pl pl . t

a l $19 b ll a-tional organizations and $14 billion tohealthcare organizations.

Committed to provide nancing when others abl ; xa pl : $4 billion to California;

$2 billion to New Jersey; and $1 billion to Illinois.

Arranged $60 billion to restructure stressedpa a lp v (a k p

pl a k).

Invested in 58 U.S. wind farms spread across16 states. This portfolio can produce 5,843megawatts of capacity enough energy

p 1.6 ll u.s. . wal a a l a , v l pa a - ,p a l v cl a ca a e s .

i l , x l v l ap x l k a

l . F xa pl , 2008 a 2009, v app x a l $8.9 b ll - la l lato IB lending activities.


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billion in securities to us this is akin to thev a . w l a l a . o al aa l pla a al lp a a la , l q a ll-

a k , b a pabl all p k

ap al pla .

A l k 2009,

al a a a a a ka . w a a a k a p 10 pla F x i a

eq ma k b app x -a l 9% 2008 a 12% 2009.

d v l , p al v a lof accolades most gratifyingly, from client-ba v .

How we intend to grow

i 2010, ll

a al v ba k : a vpa a v , a ap al,

ak a k a x l l . i ll, a lp

l l b l bal v a ll.

w al a a v l a a all a pa b . F

xa pl , P s v b acquired from Bear Stearns which provides

l la v , a

Key earnings metrics(in millions, except or ratio and per share data)

What we do in Sales and Trading

t a p ap l a a a v ba k a v . w av

6,500 p al app x a l 120a k 25 a a

l ; p al l a 800 a a al a

investors on nearly 4,000 companies andprovide insight on 40 developed and emergingmarkets. The job of our sales and tradingp al p v 16,000 v

l l ball a xp , a va x apab l lp b a ll a a al -

. t v a a apal p pla p a a

v . w av xp p al- a p pa b ll la

a k a b , - l a v

a a l q need it something we never stopped v a

a al . A all , lp a -zations manage and hedge their risk throughp v a a va v p .

Al al a a b - pp l , a k b .

w x app x a l 2 ll aa b a ll l $2.5 ll a

a a a . o a av a a , we own, for our account, approximately $440

2005 2006 2007 2008 2009

Investment Bank $ 3,673 $ 3,674 $ 3,139 $ (1,175 ) $ 6,899

Retail Financial Services 3,427 3,213 2,925 880 97

Card Services 1,907 3,206 2,919 780 (2,225 )

Commercial Banking 951 1,010 1,134 1,439 1,271

Treasury & Securities Services 863 1,090 1,397 1,767 1,226

Asset Management 1,216 1,409 1,966 1,357 1,430

Corporate* (3,554 ) 842 1,885 557 3,030

Total net income $ 8,483 $ 14,444 $ 15,365 $ 5,605 $ 11,728

Return on tangible equity 15 % 24 % 22 % 6 % 10 %

Earnings per share diluted $ 2.35 $ 4.00 $ 4.33 $ 1.35 $ 2.26

* Includes extraordinarygains and merger costs.For more details on theCorporate sector, seepage 82.


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and trade execution largely was concentrated u s a . w a

b e p a A a. A b -, ll v a

l , p $1 b ll a

p a a va . w al axpa v a k a k ,

including China, India and Brazil essentially b a v ba k a ap al a p v

p pp ( . ., a) v p a a v

l a k . F xa pl , lav a i a, av v

36 pa 180 pa . w ll pl .

Cazenove

A 2009, a a U.K. joint venture with Cazenove GroupLimited would become a wholly owned part of J.P. Morgan. Our initial investment in Cazenovein 2005 was extremely successful among

, a u.K. vba k a k a * 5% 13%. w

welcome all of these employees to J.P. Morgan Cazenoves long tradition of integrity and client

v a a a all .

Commodities

w b l ca . P a

l k l, a a l a a pa- l . w lp p -

a l a a k b a a a a apa . s

2006, c b a a bl v v l .

i F b a 2010, a a -ment to purchase a portion of RBS Sempras

b $1.7 b ll . ta q ll v ab l e p

a l, a a l a x -v l a a ; ll a all

p u.s. apab l ; a ll a aapab l a al l . i

al ll a l bl b p -a l v c ,

a 2,000.

Retail Financial Services reported net incomeof $97 million with an ROE of 0%

Overall results

r a l F a al s v (rFs)

be a tale of two cities. Retail Banking, whichincludes Consumer and Business Banking,

a $3.9 b ll , p a l b v ba k b a 23 a .

Consumer Lending lost $3.8 billion because a -

l b .

i a v v , p a1,800 wa m al b a amore than 40 million accounts to Chases

, p a b a . A a l v , a avfull access to 5,154 Chase branches across

( n y k a Fl a cal a). F wam av

v a a b ap , a a a l

(app x a l $2 b ll). w av

a a v a , pp .

What we do in Retail Banking

Last year, our 61,000 people in 5,154 Chaseb a 23 a v a 30

ll u.s. a all b b p v k a av a a

v , a ll a , b , aa l a . F rFs p al ,2009 a a a a pl :

Retail operations teams processed 700

ll ll a a , 3.5 b ll ba p a , 100 ll Atm p ,l 6 b ll k a a

1.3 b ll a .

Investment advisors oversaw $120 billion ina a a lp

a al .

We added 4.2 million mobile banking a a 5.2 ll

l ba k .* Market share as measured

in total ees.


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We also added 2,400 branch sales sta last year personal and business bankers, mort -

a a v p a v to better serve our customers.

i a , a va p v ap l la q ,

ak l a a pl , a v l. c a

a v a v b a , a ll av a al-

ab l bala v a . t a a a

pl x. w p pl al p a ax

a a . w l l ( a

a ll a - ax b app x a l $500 ll a all ), b l v v ll l -

la p .

What we do in Small Business Banking

i 2009, a l 2,000 b ba kp v app x a l $2.3 b ll l a ( al a l a a $17b ll ) a v lp 2 llb a a a

businesses. Loan origination in 2009 was 58%, a a a

a l a a -a b a pl . w xp a

b a al a 2010, a , a , al a a a a

q al .

w a a k pla , l a 375

all b ba k k-

. i la 2009, blending to small businesses by $4 billion

2010 ( a al $10 b ll ) a a k ap al, l a

xpa , al a , l a b a .

What we do in Consumer Lending

Our Consumer Lending business includes a a l a . i

v all l , a a l afor Consumer Lending, with losses of $3.8

b ll , v b a a - aa l a l v l p l . A la a , l l pa

a al (a ll- ) a a , a pl all p a

p . w l a b p v l q a

p a k , b l v a a p v ll p la l a

p v .

As expected, charge-o s in Home Lending 2009, a a

$5.2 b ll v p l . wa pa a p l ll l x a ( x l

v a ) a k aba kl p bl l a . t l

l a - b a a l q a l

( abl b a 12,700 2008

to 7,400 in 2009).

m p v l , k a l a p l lp A a

l a k a aWe added 6,000 people just to help home -

a p a a a p v l . w al

opened 34 Chase Homeownership Centers all l b alk

l a l a a a av bp 17 a l 2010. t av all b a -a p a l 600,000

(app x a l - a -a v h

A abl m a P a , hAmP).

t a b all a pl

a a a : 80% l a - -val a

a v a . i 2009, -a a $150 b ll


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l a , a a all l pa b

ak a va a all l a . m l a a a a

l Fa ma , F ma g

Mae. We still underwrite jumbo loans (those l a a la a p

v p a ), b av b v a . t l b llone day return to being a good business it

a l al p p Americas nancial markets and we intend tob a l a .

i 2009, al b a la u.s. al , a a 1.1 ll a

l a , p 25% 2008. oauto loans outstanding totaled $46 billion at

2009.


t p v b v ll , pla add 2,700 p al

bankers and more than 400 investment salesp a v 2010. t llp a a b a la p x b

k a a ba v . ia , xp p a l a 120 b a 2010 a a p p pa openings in 2011 and 2012 especially in Cali -

a a Fl a, a -u.s. a k ,

wam a q .

Card Services reported a net loss of $2.2 billion

Overall results

By all measures, 2009 was a terrible year

a b . t v v a - a all-

. ca s v l $2.2 b ll( pa la a p $780

ll ). w l i a a v v all l , p -

v . w abl a k a a a p ;

and our credit loss performance 8.5% onChase cards while poor, was better than our

p p a .

What we do in Card Services

o 23,000 ca s v pl a l p v a al x b l av , 2009,

c a a a $328b ll p . w than 145 million cards in circulation held by app x a l 50 ll $163.4 billion in loan outstandings, Chase isa la u.s. a , a

va al p p a v al a all b .

w al a a b paorganizations, such as the American Associa -

r P (AArP), c alA l , ma , s A l , uA l a wal d .

How we dealt with new regulation

i 2009, a bl v -, u.s. a b a

a l a a a b a a la a b c ma . t la ab l a aa p b a p a a

- l . t aal a xp a - ax

b app x a l $500 ll $750 million but this could possibly changea b a p a

b av .


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w b l v a a , b all, a a pl l app p a .

i a , a v l a l l a aof the targeted practices like double-cycleb ll , l a

a v lv a bala (2007); a v al a l

p , l a

(2008). h v , b a la ak a a a av

b a k a b a all pa a -

a bala (v . l - a bala ), a p av a ak

a l a a b :

We have substantially reduced very low p al bala

a . t a al a bala b $20 b ll .

In the future, we no longer will be o ering a app x a l 15%

l .t l b a

k l la

our ability to make adjustments over time as l k p l a .

We reduced limits on credit lines, and wea l a a b v ax p .

i a , a a l lfrom a peak of $4.7 trillion to $3.3 trillion.w l b l v a p p a p b a a ,

a a l q p pl . ul a l ,

v , a a ak a b - a abl a b b .


A v p va a v l p a b

ev l , v pp v p

a v . i2009, c a la p a

a a . n p av l c a -b a a

p a , a a pla , a a a lp b a a p a

b . h a l :

The Chase Sapphire sm a a v l p p a

af , p a

a x p al v .

Inksm c a a ba x bl pa p a

all b .

Our new Ultimate Rewards sm p a l p p a

l b : . l a a . .

Blueprint sm a - a p v a c a a a

p a b , l lp ak a a

pa bala a a a p .

t p * a p a lbe considered major innovations at any time;b a a la

- v u.s. v especially noteworthy. By delivering conven-ience, customization and great service, we willb l la p . ev

a a b a a l pa a

b l v p ll lp b l . i a p a

ll ak , b l vl p a ak a a

, ca s v ll b a b a a p abl pa .

* I you would like to review anyo our new products, go toour website: www.chase.com.


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We helped nance the construction of a$22.3 million healthcare center in the Bronx,n y k, v a a al 18,000pa p a .

As part of more than $384 million in newa gnPh a

a al o , p vK s a u v a .

We assisted Childrens Memorial Hospital c a a a $915 ll b l a

$196 ll a l .


hav ll pl v -

al l a a q wa m al, c al

Banking is well-positioned to grow. The busi - al a ak a va a c a

a l b a k xpa into ve new states California, Washington,o , g a a Fl a. w ll v

a k b pp a ll a l , l a k pa

la p a . w a a v b hiring exceptional commercial bankers morethan 50 employees by the end of 2010 alone

v a al a k . s v al a , xpa l a l

pl , xp ll a ll lla a al p

a all .

o a , JPm a c a aBank One merged, we set a target of more than$1 b ll v v ba kproducts sold to Commercial Banking clients( p $552 ll ). t a , x

al a a p b .

Commercial Banking reported net income of $1.3 billion with an ROE of 16%

Overall results

In 2009, Commercial Banking overcame many

all l v x p al a alp a . ev a b a all

a v l a q a l l , b x a al pla

b l l , a k b a v l , a a k

a xp , a x ll l v .h l l a 20% b v $5.7 b ll ; a 25% p v p a

a $3.5 b ll ; bl - a b av a l ab l bala , p 10%, a

av a l a bala , p 30%; a a 20%jump in gross investment banking revenueto $1.2 billion a full 25% above plan. These

fabulous l a v .

What we do in Commercial Banking

More than 1,400 bankers help ful ll thea a l 25,000 l a

v 30,000 al a v a .The average length of a Commercial Banking

l la p a 18 a .i 2009, a v 1,700 c alBanking clients and expanded more than 7,600

la p . w a a ba k , a a l v p al a l al

a k a a a a l ,Commercial Banking delivers nancial services

while steadfastly supporting communities. Last year, Commercial Banking extended more than$73 b ll a , l

a l $8 b ll v , - -p a al a (gnPh) a a

. F xa pl :


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Treasury & Securities Services reported net income of $1.2 billion with an ROE of 25%

Overall results

t a & s s v (tss) l v

l b l l , p 2009 p $1.2 b ll v . $1.8 b ll p a .

t b l v v $7.3b ll , 10% p v a . wdescribe TSS as our Warren Bu ett-styleb b a la a ; l v x ll aa ap al; a a

l -b p pl a b a l bal al , l - l la p

a pl x l .

o 2009 p a la l a vb ak a k a l

a . s l a x a v l a p a , pa -la , a a l . tss al a

p l v l a a x p al p la 2008 a a l 2009,

a b a a k q al . d p a 2009,

l b v a

: i a al l a v l 13%, a

a 13% a b l ala 19%.

What we do in Treasury & Securities Services

m a 6,000 tss ba k v a40,000 clients from all of our other lines of b 60 l a a l .tss p v l al p a

v , l l bal a

90 l bal a k , l a l $15 ll a ; p a a a a , v

a a $10 ll a a a a -a a l l ; p a

a v , p v 27 ll a a 5,000 p a l a v - a ; a a v , a a -

a al pa l , a a l la l bal

pa . F ll a p xa -pl tss pp a a l :

We delivered unemployment and otherb a 12 ll v al

2009, a a al l a bl ba k v l -

l l b

a a b a -val a .

We were selected by the Federal Reserve v a a p a

p a p $1.25 ll a -ba k p v pp

a a a k .

We are the leading cash managementp v u.s. P al s v ,p v a a k p

v a l - u.s.P al s v 80 .


tss all b ll la l , a p

b a a a l p vp . i 2009, tss p b a

c a, d a k, F la , n a as ; la v t k ,South Korea, Brazil and Mexico; and expanded

apab l A al a, i a, e p , m l ea a A a. w ll

xpa abl .

i a , a a a , tssand the Investment Bank formed a joint

venture to create our Global Corporate Bank.w a a a 100 p abankers, the Global Corporate Bank serves

l a al l b v a tss p a v a a

IB products, including derivatives, foreignx a a b . w xpa

Global Corporate Bank aggressively over thex v al a b p 20-30 l a

a a 150 p a ba k , all v app x a l 1,000 l

(3,100 al, p 2,100).


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Asset Management reported net income of $1.4 billion with an ROE of 20%

Overall results

A ma a , a p v -

$1.7 ll , a a a b 5% a a a b a a v

a a a a k all .ov all, a l v al

, l v p -mance, continued growth in Private Banking,

x ll v p a h -b cap al ma a a a b ak

a u.s. a l al b .All a p v

all pa a .

What we do in Asset Management

o A ma a a p a b . t i v -

ma a , 6,500 pllp a a l v l

a a a ; p v q , x a al a v v a ; aadminister 401(k) services for large and mid-sizeu.s. pl . ov all, a a a$1.2 ll a l .

o p a b P vaBanking. Our 1,900 private bankers help the

l al v al a a l, a a a a al

v , p l , ap al a v -, p la p a ba k v .

t 2009, A ma ap al a v

p pla b

pl ; a v a 1.6 ll401(k) participants on achieving a secure; x p v a -

al pla a l p a b; b a $100 ll

a b al a l ; ab a k a p-pp a al a v

ll v al v l .

w A ma a , F xi p l p a #1 p v l bal l q ( a a$590 b ll ), a u.s. eq pla

a 82% a a a

p q a l p p v - p a v v a . o u.s.

a l b a a x p al a pl b a l ba k av , b

a a a k net new long-term ows in the industry duep pall al -p

x p .

Private Banking experienced record revenue l a l v ,

l a ba k a v , a ll a a a l 100 l a v a v

P va w al ma a (m a , P la lp a, sa F a , s a la wa , d.c.).

i -2009, J.P. m a a 100%p h b cap al ma a ,

la al a v a a a u s a , $21 b ll l

assets. We acquired Highbridge in 2004 to

a al a v v - l . h b l v bv p a 2009,

and just ve years into our partnership, itsa av l .

i p a l , k a aabl A ma a p v val -

abl pp l a av a a v v l p a a

a al a a a a

l b v .How we intend to grow

o i v ma a b v l p l bal a , l

a v ,, b a c a. w

al pla a i v ma a - l bal b a

a 200 pl a ab a k a l a .


14/36

15

In 2010, we plan to expand Private Bankingl ball b a a 500 ba k ,

v a l v pl . i a -, v

b k a b a q

from Bear Stearns. We anticipate a slowly p v b v la l v v -

ment in 2010 yet, nonetheless, we expectA ma a v b

lp ll v al , a l a a v a al al .

The Corporate sector reported net incomeof $3.7 billion

o c p a , x l -

la , p $3.7b ll pa $768 ll p a . t c p a p

: P va eq , all ap a xp a p a v -

p l . o P va eq p a l $78 ll v . a l $690 ll 2008. r b , v , 2007, a a a a

pretax Private Equity gains of more than $4b ll . w k a P va eq ,b a , a l p , b xp av a 20% v a .

o p a v p l , a a x a ,

lla al a a xp , a l $91 b ll ma 2008

to an average of $324 billion in 2009. Ourv p l p x p al

p a , l b a a a xp a b

a x l a v - a a a la

fair value (e.g., mortgage ABS, Triple-A creditcard ABS and Triple-A CLOs). The pretaxunrealized gain of this portfolio went from aloss of $3.4 billion at the beginning of 2009 to

a a $3.3 b ll a a - . i p -a a pa a a

a xp x l a ll ab l v a ak xp a-

all ak . A

investor can take on interest rate exposure a a b . w borrow cheap from the Federal Reserve ora ; b a a k a ,l k v l .

We may realize some of these Corporatev a 2010, b xp

x p al l . ov a , c p a q a l ( x l P va eq ,

la a a a ) xp l app x a

$300 ll .


15/36

16

n v al l - JPm a c a a ab l a a

a a al a a pl .o a pl a b . ma a q pl x , x v q a -

a v k ll a k pl . t pcan be enormous and wide-ranging from a

a al la p a all pl lp a

a a l a a l a abl .Being smart is not enough; it also takes a highl v l al ll a k ll a lall p a all k

all a .

s a q a pla l a p ll a

a l a a val b l : p al , ,

a k, v a a a .

e av b p pl , a al a p q a a

, a a -nizing, rewarding and developing leaders.t a abl a a , a a

v l p b p pl .

Recruiting and training talent

t b a , pl x a va k p pl a p v b a

a b a ll- . w av220,000 pl a l . w lsome of us have high-pro le jobs and receivegreat attention not always for the betterthese days many others are not in the public

. t v al a al l bal p a a l :

Nineteen thousand programmers, applica - v l p a a l

pl l l k p 80 a a, 55,000 v , 225,000 k p

and global network up and running and who were a major part of completing theBear Stearns and WaMu conversions in

.

Eighty thousand employees ful lling opera - l ball a a

v ll a . i 2009,they responded to more than 245 millionphone calls to help customers stay in their

, a a papla a av a al p bl

l .

Thirteen thousand people in Legal & Compli -a , r k, A , h a r aF a 60 l analyze facts and gures, thoughtfully

v p l av a a a . F xa pl , l p

k a a va xp , l $2 b ll l a ak av a v a .

Thousands more of our colleagues workingb k p p a aa , l a l a a ,

a a , x v a a ,p , p l a

a a a l l .

To ll these jobs, we hire thousands of pl a a , all ba p , v a p -

dures in order to do their jobs well. Annually, 1,800 p pl a va (including M.B.A.s and Ph.D.s). Thousands of

p pl av a va a , a p . w l a

people work in the Investment Bank, others k A ma a , c a r kAnalysis, Consumer Lending and Treasury &s s v , a ll a a a a .

e pl JPm a c a v a a v l p a

ll- q pp a a pl x ,k a a pl a l la-

p a a al a .A all , a a p pa a

a a al a l a p l v .Our company has 94 management develop -

I I . HOW WE MANAGE OUR PEOPLE JPMORGAN CHASES MOST VALUABLE ASSET


16/36

17

p a a a 20,000 ap a ( l l ) a

abl p pl a xpa k ll a ap l a b .

Ongoing assessment and developmentA JPm a c a , a a a a

l - la al . w pl , a a l a

a v p pl a b k. t a , b l v

a a aka la l v a -

ba k. A all , k a a p v

p , v l p x p-al l a . t a a l a aa a ab a b

val a a . t q al b all a

a al a p .t p b a pa

p a . w al a v l p a almanagement program for M.B.A. students to

lp a b a b l ala a al a ba .

Encouraging mobility and multiple careers

Talent mobility and optimization are key to ourl - . w av l a l l

a p pl v xl v l a JPm a c a . w a k

a a a a , m b l b l look at positions in other divisions. People

av xpl a

pp a ll a . w l al a v al p b l

manage his or her own career, its our job tolp a l a a . w v b p a v

a l a a .

Intense ocus on succession

w b a l abp al , pa la l jobs. We have redoubled our e orts to

a av p pl p p l a apabl a l v l

p b l , v v v a a a ( b

truck emergency scenario). This is true formy job as well.

P ceo a a apa . ceo a a a

l k a p l al a a a s ak p a a a a a

a a p l b . i b av a a.

i a a , a l , a your Board believes that we have within theorganization some outstanding people whocould do my job today; and we will continue to

a p pl a b a a ll v l p

take my job in the future. The Board of Direc - l b l v a a p

a p a . A rest assured that your Board members are on

a . t p all k all op -a c b pa (amany others), and the Board members peri -odically review with and without me your

pa k pla .

Getting compensation right

c p a pl xissues we confront it is important to our

pl , pa , a la , a l , p bl a la . A p l

v p a a a va -a a pa b a a p pl

a a . A JPm a c a ,

p a a al a p a pla a a a

a va p pl a a b av . o , p a a , al a xp p pl A ba l p a pla v a x ba b av .

ma p pl a a a abp a p a a a -

cial services industry and many of these a q l a . s l a

a pa a a a al


17/36

18

l pa a l a , p , lp b

our country. This angers me, too. But not allcompanies were reckless and not all compa -

a ba p a p a .

i , i b v all 2009 p a la

, p v all p pla a xpla appl

p pl p a p pl .

Comparing JPMorgan Chase with other industries

i 2009, JPm a c a al xp $52 b ll . t al p a ( alaa b a v ) pa pa a $27 b ll .

JPMorgan Chase compensation 2009

Average perTotal employee

(in billions) (in thousands)

Salaries $ 12.5 $ 56

Benefts* 3.9 18

Incentivecompensation** 10.6 46

Total compensationand benefts*** $ 27.0 $ 120

A ab v , pa ala a bof approximately $74,000 per person andincentive compensation on average of $46,000p p a al $120,000 p p .t ala a b b a -

ally in line with other major companies a al a - a al.

t v a a va ( a , , k, p ,

.). App x a l 32% vp a 2009 a k

a p a v v a b a .A JPm a c a , k pis very restricted we only use stock optionsfor approximately 500 people a year and

represents just 1%-2% of the companys totalp a xp .

ma a , a a p aa a a abl a pa

p a pa , av l k a alp a a a p a v . o

ba , JPm a c a al p a-

( ala , b a b ) a 27% 2009; b av a 33% v p v v al a . F i v -

ment Bank alone the part of the company receiving the most scrutiny compensation

a 33% v , a av aof 44% over the last ve years.

t a x pa pa a p a a x b -

. F av a u.s. b , al

p a a a p a v app x a l 16%. i al, a b

a a p pl - v a ap al- ll al p p - v , a p -al v pa , a p a

pa v pa employees. Law rms, for example (whicha l ll abl ), pa

a 80% v pl . i l ap al- v pa-

, l k l a aa a pa , pa a a

abl l .

s a al av l k a alp a a a p p . h a la l a l .

e all , a al a a - va b a v ,

a l k a a al a ll pdivergent conclusions they alone do not

v al v .i al p a p a a a

pa , a a a vp a all pa a l

v all pa ll. ma pa pa a v alba p p a ( al a

v pl ) a a l p a pa .

JPm a c a pl a b

l p a v al , p babl more than in many other industries but not

* This includes what JPMorganChase contributes to variousbenefts programs (i.e., 401(k)match, pension, health andwel are, etc.) and employment-related taxes.

** Represents 2009 expense basedon U.S. GAAP.

*** While we have 220,000employees, our health plancovers 400,000 people,which includes covered

amily members.


18/36

all. We are unable to nd real comparisons.Much of the anger about highly compensatedindividuals at banks relates to the argumentthat all of these companies would have failed,

which we do not believe is true (more detailon this in the next section). Finally, the morehighly paid the individual is at JPMorganChase, the higher the percentage of compensa-

tion awarded in restricted stock and options.

Before we speak specically about how wecompensate individuals at JPMorgan Chase,its appropriate to outline our principles.

Some key compensation principles at JPMorgan Chase

We believe the compensation principles weuse are best practices and compare favorably

with those outlined by outside authorities,such as the G-20, the Financial ServicesAuthority, the Financial Stability Board, theFederal Reserve and the U.S. Treasury. Ourprinciples are as follows:

Pay a signicant percentage of our incentivecompensation in stock: at least 67% for theOperating Committee members and approxi-mately 50% for the remainder of our seniormanagement team.

Structure the stock we grant restricted stockunits or options to vest over multiple years.

Require Operating Committee members toretain and hold approximately 75% of thestock they receive from the company afterthe stock vests.

Generally do not provide multi-year guar-

antees to new hires and almost never tocurrent employees.

Institute meaningful recoupment policies,some of which we enhanced in 2008 and2009 and are progressively more strin-gent at higher levels of management. Forall employees, if anyone causes materialnancial or reputational harm to the rmor its business activities, we can recoup theemployees incentives, including stock.

For approximately 500 senior individuals,unvested stock also can be recouped forfailure to properly identify, raise or assess, ina timely manner and as reasonably expected,material risks to the rm.

For the Operating Committee and for me,unvested stock or options can be recoupednot only for the reasons mentioned above butalso if reasonable progress toward personaland company goals is not met. This is at thediscretion of the Board of Directors.

1 Compensation/revenue based on

U.S. data only; JPMorgan Chase

data based on worldwide totals.

2 Net income margin based on

20042008 average for S&P 500

companies and adjusted for

exceptional losses/gains.

3 Compensation/sales based on

U.S. Census Bureau data.

4 Revenue based on 2009 gross

revenue before interest expense.

5 Includes investment banks,

asset management rms, capital

markets rms and other non-

lending nancial institutions.

6 Includes regional banks, credit

card companies and other credit/

lending institutions.

NA Not applicable.

10% 20% 30% 40%

Healthcare providers and services

Professional, scientic and technical services

Newspapers

J.P. Morgan Investment Bank (gross revenue)

Transportation and warehousing

Securities and other nance

Fast food

JPMorgan Chase (gross revenue)

Construction

Nationwide average

Telecommunications

Traditional nance

Manufacturing

Retail

5.9%

4.7%

0.2%

NA

2.3%

2.2%

0.6%

NA

6.2%

NA

1.7%

4.6%

18.5%

13.6%

10.5 X

4.6 X

2.8 X

1.4 X

3.6 X

2.4 X

2.3 X

2.3 X

3.6 X

NA

2.0 X

1.0 X

1.3 X

2.4 X

4

5

4

6

Industry Compensation/revenue 1 % ofU.S. sales 3

Compensation/net income 2

JPMorgan Chase 2009reported compensation/revenue ratio is 27%, whichreects revenue net of interestexpense, unlike other industries.

Compensation ratios by industry

The industry compensation ratios in the table above reect 2007 information contained in U.S. Census Bureau data, Capital IQ Compustat

records and company lings and are based on revenue before deducting interest expense, whereas JPMorgan Chase and other nancial

services rms report their compensation ratios based on revenue net of interest expense.

19


19/36

20

Pay our people for performing well overl pl a a lp b l

p a .

Ensure that nancial results a key metric(b l ) pa people always include pro ts adjusted

k; a , ap al a b, a a a

a ap al.

Recognize revenue for complex and long-a a p v l pl a

p p l k. t b ava v a p bl a a

aiming not to recognize pro ts at all when k app p a .

s p a p pl b a la av a k b , b l v , a q all p a . F xa pl :

We do not have change-of-control agree -, p al x v pla

l pa a , p al v a pa k-a x v .

We do not pay bonuses for completinga , a a pa job. When the merger has proved to be

l, p a p.

We feel strongly that nancial outcomesal p a p vpicture of performance. Broader contribu -tions such as continually honing leadership

k ll ; a a a pl a ; a a a v , a

k ; b l b ; afostering innovation, to name just someimportant qualities matter a great deal. In

a , b , ba p al l a al q a a v a ,

a q al a v a , a ba . g p a a pa la

a a l a a individual did a good job.

We are mindful that a rising tide lifts allb a ak a a

a k , a pp a v v al p, b

l .

We must be highly competitive on compen -a , ab l l al b

a a pa . w l a b apa a pa pl ll,

l b b a av b a ll-p pa .

We want our employees to be shareholders.All p l b ab v avb v a : o plown 488 million shares and options, asigni cant portion of which is unvested

. ., val v al l av pa a p -

. o p a a a pl ll a l k , b

a l p v .

How we pay individuals

o a p p a-tion is, as it should be, risk-adjusted nancialp a . w k p a p -a -l a (b b a , b a k, .).w l a a v p a-

p l a a a la l v l, av p l ; a a a

v pl app a la p a- a l l a p bl p a .

h v , p . w akadjustments based on our own judgmentsab pa ( ab la p v ) a v pb , a a a

la , v a a p . i a , pa -a a ll b l bl . i

a , x a av asigni cant e ect on the size of an incentive

p a p l. i l p l a a a , pa .


20/36

21

s v al a pa v p -a ba v p ; xa pl , p pl all , a l

b a a p a . t a b a a b

pa p a . t al aa p pl a pa p

. F xa pl , ba k a a l av p a-

tion tightly tied to the kind of job they did for l . i k l a a

pl l app p a .

m p pl anot pa b formula we use multiple metrics to assessp a a appl a a al

judgment. In general, the more senior thex v , p a l

la pa p a v all.t p all l a p a

a b .

w a v al, l k a p a , l a

v all p a pa . s all k v al ll,

val a p a v a l - a

period. It is important that we recognize ourbest people many of those in senior posi - av all p v lv v

a , a a .

w al a k l a a p - a k a l ak pla

a p a . wa p a a va .

Our most senior people members of ourOperating Committee have their compensa -

l pa p a ,a al a val a l a p

k ll . i 2008, pa a were down 64%, your senior managements

p a a 67% ( l ; i v a - v ).

w k a p pl who have been extraordinarily well-paid and,

a , v pa . s p plav b p a

b p al l x -

v l v a . s b x p p

al , a b . w l a la p a v , a

JPm a c a k av all b pl -

. w b l v av p -a p a , b a l pa

b l a a pa . t p apa v l p a l a .

Developing leaders

ea l , i a b p p a al a

p v p pla . A i ll b a l pi l l k a ab

al q al a l a av , pala l a la a la l a al

p a l k JPm a c a .

Leadership is an honor, a privilege and a deepbl a . w l a ak ak , a l

of people can get hurt. Being true to oneself a av l - p a a p a

a l a a av p pl l, b a a v . i b l v alintelligence and emotional quotient, oreQ, a a a . eQ a l

pa , la , pa a a a .

g p pl a k l a .Bad leaders can drive out almost anyone whos

b a a v a azation; and since many are manipulative and

p v , a all a .

A a b pa , a a l a

is what has enabled the organizations to standthe true test of greatness the test of time.

Below are some essential hallmarks of a goodl a . w l a b a a all traits I know Im not to be successful, al a .


21/36

22

Discipline

t a l la b v ,al v a a a

constantly striving for improvement fromav a k ak l a

doing real, detailed follow-up. Leadership isl k x ; a b a

a .

Fortitude

t a b l a : t av a lv a . i a

v a , b a a a p l -, a ak p a p b l .

High standards

Abraham Lincoln said, Things may come a b l l

by those who hustle. Leaders must set higha a p a all , a a

a l l v l a a al .Leaders must compare themselves with theb . h av a a

l , a al a p a a l . t l a

a a those standards are not embedded in theb b q . s

a a a a a a pl a l a b

a lv a l a b a .

Ability to ace acts

i a l -bl , a , l a p a-size the negatives at management meetingsa a a b p v ( ,

ka l b a , ). Allp b a a , a all l va

a b p , ll l a b k .

Openness

Sharing information all the time is vital l ba a al a vapp a , a . t b l a k llbureaucracy it can cripple an organization and watch for signs of politics, like sidebar

a al b a p pl l p ak a .

eq all p a , l a lla l a l . A a

l l p ak a a l .

i a b p a

of having at least one truth-teller at the table.Well, if there is just one truth-teller at thetable, youre in trouble everyone l ba - ll .

Setup or success

A v l a ak all people are in the room from Legal, Systemsa op a h a r , F aa r k. i al a p

. w - a p - a ,

all decisions become political a setup fora l , .

Morale-building

h al v l p xp bl , al l a l

, a p a . i v pa p pl l v-

alk, p av a a ak a pa v -

a v b av .

Loyalty, meritocracy and teamwork

w l i pl b l v l al , misused. Loyalty should be to the principles

a a -tion: Loyalty to an individual frequently isanother form of cronyism. Leaders demand al pl a l b l alto them but loyalty and mutual respect aretwo-way streets. Loyalty to employees does not

a a a a a a pa lajob. Loyalty to employees means building a

al , v b a pa ; ll ; a v a l k,

a a pp . i pl all, l lp .

m a a a k al a al bq l . m a a

putting the best person in the job, whichpromotes a sense of justice in the organization

a a app a a : hthey go again, taking care of their friends.F all , l a k p a a


22/36

23

code for getting along, equally important isa v al ab l av a

a al a .

Fair treatment

t b l a a all p pl p p l ap ll , l k ceo . ev lp v l a pa

b a v ll v p p vl . w l a p

p pl , p k a p aa k lv ,Would I want to work for him? Would I want my kid to report to her?

Humility

Leaders need to acknowledge those who came

b a lp ap p its not all their own doing. Theres a lot of l k v lv a , a a l l

l p a . t v all al be to help build a great company then we

a pl , a .

The grey area of leadership

t a a a p l a p

p a a p p a . t a a b pl x challenges that leaders and those who governthem face. I would like to share with you wherei a a a .

Success ul leaders are hard to fnd

t a xa pl v al avb , ll p pa , p -

l a p a a all p ll I think of President Harry Truman, among

. i l b , v , a l l k a k p p . h a ba xp l a a p

a l . w l a p bl a a pa l a p (p ap

b a ll a a al ), pa a pl b al

val a v al; xa pl , kethic, integrity, knowledge and good judgment.ma l a av k l v

a , a l p ap

a v a a p l , a . A a

p a , v v all a av k -

a b a al k ll a k l a ak a l a .

Success ul leaders are working to build something

m l a i k a k b l a b p . t

all k a , b a b b a a ;

a a b a a l a l a a , a b

a . t b l v la alv , a bl a

the team or the organization. Leaders demandl al , lv b a

a .

Nonetheless, compensation does matter

w l i a a l b p a va l a ,

al a a p a l a a l v l. P pl av p b l -

lv a a l . tal av a p p ajustice, which means they often are upset

l a a l p -

a a a p b a pa . t a a k al ,

just like products, and a company must pay aa abl p p .

Big business needs entrepreneurs, too

t p p la p p a p those who believe in free enterprise exist

l all pa a a p - all pa l b

p app a a a app -p a . F p , p p a

p app al x la p . A , a l

l . w apa va , p a ap l a

a k , a a pa all ,la pa l a x . tpeople who achieve these objectives want tobe compensated fairly, just as they would be if

a b l a l a - p.


23/36

24

Per ormance isnt always easy to judge

ma a p bl b a l val a v al al a p -

a . d v al a ? d a a p pl ?

d b l a p a will strengthen the company, not just in the

a b a ? d v l p al a a a ? i ,

a b l a abl ,l - val ? mak arequires courage and judgment.

Sometimes leaders should be supported and paideven when a unit does poorly

i a pa la , a p ap

p a , b a a , l k l a

a l , a a amight ask his best leader to take on the job.This may be the toughest job in the company,

a ll ak a k b p a b . w a a

a k a l a ak p b l , q app p a l ll a k

ll b pp of times: Will you make sure the organizationdoesnt desert me? Will you stop the politics

p pl p p aagainst me? Will you compensate me fairly?m a all q l b

. A a l a i the job well, I would want to pay her like ourb l a , p a . c v l , allk a a l all b a . w

a a , pa a l a possibly the worst thing one can do because

a p pl l .

Evaluating the CEO

t ceo l b l l a ablby the Board of Directors. The Board should

all v ceo p aand give feedback (and coaching). The Boardal l p a the CEO. At every regularly scheduled Board

a JPm a c a , alav a p va . c p -

sation committees and the Board need to beindependent thinkers and yours are. They

v l a a val a p a pa , l v p -

p a a p apractices. Our Board members do not rely on

p a l a ak for them. The Board members believe that p a ceo (a

all a a ) p -b l a a b .

i la 10 a , i v b , i a ab l l app p a . i2000, Bank One was in terrible shape we had

la app x a l 10,000 p pl , a i pl l app p a a i ak

a bonus. That year, my rst at Bank One, I hada guarantee I gave it up. The second time was in 2008, and our nancial results were just

pla a b ceo. s pa a p pl

a , al l v b p pla ceo av b

pa p pa .

i all a iv k a pa , p a (app x a l

65%) a b k. iv v l a aa a l a i job. In fact, when I joined Bank One, I boughta l k , b a i

a ap ( a , i a v val )b b a i a b l

pa a p a .


24/36

25

We need rational policies based on acts andanalysis

t a al a a a a a a

l , b al a p v a pa a . t a ba l , a v - k

a , a a . davh a , r a lav pa But if we rewrite the rules for banks out

a p p l , ll p l a p ba a

. g p l aa al b ba a a

a al a b p v , -a , a l va .

A New York Times columnist Thomas L.F a a l a , w a

ba k la a kl k- ak ,

which is the key to capitalism. In striking la bala , a l a . w

should focus on building good regulation notpl l . t la

a p l a v - laa k a -p p

- k. n a a a ba la .

w l a k l a ak ak , k p a

pl a al a . tla k la la a p blfor banks and for the entire economy. Busi -

a a (and to create jobs). Passing sensible nancial

ll p v a b . w ,

i l l k al ll a a a al

la .

The crisis had many causes

i 2008 l a l , i

a al a a b a al . i p a a l , b , b a l p ak ,

a ll :

The burst of a major housing bubble, causedb ba a , a a

la a b a v p l .

Excessive, pervasive leverage across the, l ba k , v ba k ,

, a aba k .

The dramatic growth of structural risks and a pa a a a (

a a k a psystem). Remember, we had a run on the

ap al a k .

Regulatory lapses and mistakes: Basel capitall a q l l ap al a

a l q a l a a ; s a

ex a c all u.s. v - ba k l v a ; a pla Fa ma a F ma ,

a a l a a a , lla . h v , l

a bla la a lof individual companies, ever management

l l bla .

The pro-cyclical nature of virtually allp l , a a v ( . ., l a l

v , ap al q a a k l ).

The impact of huge trade and nancingbala a , p

a p la l v l .

I I I . OUR SUPPORT OF FINANCIAL REFORM THAT WILLSTRENGTHEN THE FINANCIAL SYSTEM


25/36

26

The heart of the problem across all sectors was bad risk management. Many marketpa pa p p l val -a - k(Var) a ;

b p pa p b l a

l v ; x v l l a a ;

a ; a a q kl a k ba .

A JPm a c a , v v l l Var, a la l a ak

p pa ba v .o al a a a p abl

v q a .

w l p a ap -goat banks, businesses, the government orconsumers it is pretty obvious that no one

a l l bla a a l bpl l ab lv bla .

Yes, we made mistakes

a av a b a a l p a a a l .

o la ak ak a l v a l a a l -a a a . w l -a a abl b

a a , l a - -val a ba a ,

v , . w a p plp b l a a all ak

a a av a .

t al a a ak a ak , a : v

v l (siV ), x l v a , x v

reliance on short-term funding, collateralizedb bl a a p p a a

va v b k.

s ak a a avb . F , ,

we are sorry to both the public and oura l . h v , l b a

a a akcaused . i a , a ,

a v l k a a b l v

lp a all

crisis and contributed to the stabilization andrecovery (e.g., our purchase of Bear Stearnsa wam a ba k l ; a ,l a a ba k ak l a ).

Yes, we should thank the government or itsextraordinary actions

A la a l , k v a b l l a l al a pl x a ap l a

a . w a a , b l v l av b

. A a b a a t a a F al r v k, l a l , b a b -

a a av av a a la ba k p .

Without these actions, however, not all bankswould have ailed

t p a all ba k l av a la b v a

. t p b a a ba k a p l

a a a a pba k . w l a k l a

a a al pa l a x . A l

a v v ba k l , , av v v , all ba k l

av a l . i k i p ak a b ba k i a a a p

t bl A r l P a (tArP)ap al b a v v b

b a b l v lp a .

w l v a v al ba k ak tArP a

xa pl all ba k a ak a ak a p ap al

without being stigmatized. JPMorgan Chasea a ba k a p

lp, a a a .


26/36

27

At the worst point in the crisis, weaggressively provided credit

t a al , JPm ac a v p a q a l l . w v

a a a av p , k l l al v a a aa v l .

o bala abl b Bear Stearns in March 2008, adding $289b ll a ; a q waMutual just six months later, adding a further$264 billion of assets. Through it all, JPMorganc a ab b a l al l l a a

l q a a p abl ap al. w a q wa m al just

10 days after Lehman Brothers collapse ons p b 15, 2008, a , a a

bala , a l l$11.5 b ll k llmorning. The takeover of Bear Stearns andwam p v al a ppto the system and minimized a potentially

a p a l av l a l . i v al

after Lehmans failure, our interbank lending al a a $70

b ll , a av a l a app x -a l $100 b ll p , v

a a b p . w alp a , a p , a $250 b ll

, lp a l a -l q a k pla .

We consistently maintained extremelyhigh capital levels

A a b l , 2008 t 1 c cap al 7.0% ( al

a b F al r v ba k ), a 2009 t 1 c cap al 8.8%.

i ma 2009, u.s. v a a 19 ba k . t a a a v

environment of 10.4% unemployment and a48% peak-to-trough decline in the housing price

x a a - a pa . up pl - , l q 10 ba k

to raise common equity to maintain 4% Tier 1c cap al

a . u v , JPmChase always had common equity of $40 billionin excess of the 4% minimum (for the record,

$25 b ll tArP ap al a p ap k a , , v a pa

al la ). t b l a pa l .

2Q2008

3Q2008

4Q2008

1Q2009

2Q2009

3Q2009

4Q2009

7.3%7.7%

8.2%8.8%

5.0

6.0

7.0

8.0

4.0

3.0

2.0

1.0

9.0%

7.1%6.8% 7.0%

Quarterly capital levels

* The Tier 1 Common ratiois Tier 1 Common Capitaldivided by risk-weightedassets. Tier 1 CommonCapital is predominantlyTier 1 Capital less pre erredequity, noncontrollinginterests and trust pre erredcapital debt securities. Tier 1Common Capital is the frstelement o capital to absorblosses. See page 90 or

urther discussion.

Stress tests minimum4% Tier 1 Common Capitalrequirement

Tier 1 Common* ratio


27/36

28

A u g 0 8

J u l 0 8

S e p 0 8

O c t 0 8

N o v 0 8

D e c 0 8

J a n 0 9

F e

b 0 9

M a r 0 9

A p r 0 9

M a y 0 9

J u n 0 9

J u l 0 9

A u g 0 9

S e p 0 9

400

600

800

$1,000

900

700

500

Flightto quality

Returnto normalcy

We kept our liquidity extremely high

A l a ala k g a d p , xp -

rienced the opposite of a run on the banka p ( a - p ,$150 billion owed in we barely knew what

). A JPm a c a , pal a x l a ; p al a

av b a a ba k. t av a ba k a

l a a a all a a 110% p . F JPm a c a , l a

app x a l 75% p . i a , x p a l

a lv k l al a k .

i l - l al a k , we borrowed on average $270 billion. Only $40b ll a b -

term credit markets an extraordinarily lowamount for a company of our size. When web a k ,

a p a l av a , all, a a .

w al a a a x l q a ba k l pa . w a a

av a a q val a lv a a , v v a a abl b

a k a all.

We were prepared for things to get even worse

w l v a ba ba a a a v , l -

a l p pa a , a p bl u.s. pl a 15% . s a a v v

l av q a a : a laa , l a a k

a v , a a a l p v ap al. s p l k

l av av a $12 b ll xp a a abl a alap al. h v , al l av p

p a p a pl ,ppl a . F a l , v

a x a a pla . t ap l a v a av , a i b l v a lp p v

a pa ak p l k ab v .

Government programs were a mixed blessing

w l pl app a v actions and they clearly had bene ts for thesystem and for JPMorgan Chase they also

a x bl .

i J 2009, pa ba k tArP ap al ll. t $25 b ll b

, b a v abl l $25 b ll a a a a

Averagemonthlydeposits(in billions)

WaMu deposits


28/36

29

a 5% p pa p a . i a , av

government warrants worth almost $1 billion a a l .

w pa pa F al d pi a c p a (Fdic) a aprogram, under which we issued $40 billion of

b a Fdic a a . ma ba k a p a l av a a

ap al a k a aa p bl l av a l . F JPm aChase, it was not a question of access or need

x , a k al a were open to us but the program did save us

. A pa p a , av pa

Fdic $1.3 b ll , a , a pa Fdic, ll av a a a

v x a .

Our company was highly criticized fora p tArP ap al a

Fdic p a . A Ap l 1, 2009, v l bl

Fdic p a , pp . t a v p a (acronyms such as TALF and PPIP) that we

b l v b al ap al a k ,b a a , a av a. (w t

A Fa l (tAF), a p al v -p p a l , b a

a q F al r v lp va .)

w l k a l avapp ab all v -

p a , a a

a a a p a av a bat the expense of failing competitors but it is

a a a l av b .

w a pa a ba kla a p a tArP ap al l v k

from the public, politicians and the media b , v , i k l

av a a p tArP ap al b a

a b . i l av b p bl b al a al ba k a a a a a program so as not to create a situation where

p bl a l p a abanks were bailed out. Last, I do regret having

Fdic a a b a need it, and it just added to the argument thatall ba k a b ba l a l a a ba k .

The government runs the FDIC, but the bankspay or it

w l Fdic a v a ba k p , a l

l k a a a a l ba k a b ll b ba k ,

b axpa . w k pl lapp p a . ev Fdic p al t p -rary Liquidity Guarantee Program (TLGP)

a l , l l av ba ba k v v ba k . t -

, v v ba k a av p Fdic app x a l

200 ba k a l b 2008

o a l , la , wam (a x $260 b ll ), a Fdic . t a b a JPm a c ab wam . All ba k a av

a l a all ( x la a l

a i ma , $32 b ll ). All a l b av Fdic a -a $55 b ll .

Between deposit insurance and TLGP funding 2008 a 2009, pl a

a a v x JPm a c a al ll av v Fdic a al app x a l $6 b ll

v a l ba k .


29/36

30

Banks are lending a little less but moreresponsibly

A a al a a l a a ll ak ba k

l a a . t al a ba kv av pp l : A F b a 2010, a la a a

la p , al l a lby commercial banks stood at $6.5 trillion

a a J 2007 a than 30% higher than in 2004.

h a b a l a l l av l a ba k

l ba k la a ll l ?t a b xpla a ll :

1. t -ba k l , aa 65% ppl

u s a , p. ma -ba k l ( k a ba k

, siV , a -ba k -cial paper market and the securitization

a k ) v all llap . t of credit alone and they were funded by

a pa , p pla , acorporate and foreign investors reduced

p v b a l al a ll lla .

2. Bank lending did go up in the monthsimmediately after Lehmans collapse, but

2009, ba k la l al. w l a

100 ba k , l JPm a c a ,pp p a a q a l ba k ,

l a ll pla x a l ba k a

b p v . F xa pl , a JPm ac a , bpl a p -Arm a awam a b p v .

3. ma ba k al l a a -a , l a .

4. Additionally, customer demand for loansa a la a all b .

i a , a JPm a c a al , l a la pa pp ( $85 b ll

$50 b ll ). t a l a ak l a b a la pa ak a va a

ab l a a l a p ap al a k .

Banks have a responsibility to make soundloans. Bad loans are one of the things that

pla . A ,a l , ak l a

a l appl a l a a a a l a.

w l a bv a , a appl a a a l

a a all a b b a l b . w av a

p b l l l aa l b . u l k a b -

, p p p la p a .

Banks are not ghting regulation

w a JPm a c a a a ba k avl a k l p p

la , a i al p k ab p a a l la a l .

Looking back, one of the surprising aspectsab a

p p bl a a ( l bala bala , b bbl , x -v l v a , a k , .)

individually well-known and discussed. But , a a a i k , p all

a a p x b a would become and the crisis it would cause.

s a a lp x a-

a ? w p bl : ba k a a . t l

a a al a l, b alv al a al a

l . t a x a b a a l v l, pla al

a a , a a l v l: xa pl , a l p v Aig akx v , - p a va-

v a a l l a a -l l a a k p l a - -

val a a a abl 80%-90%.


30/36

31

ov la 50 a , av all la b a l a . t a a a l av ap . t a , A a,

ba k a l -

a , all k -ba k aka a k a p v

. s a a ba k p - l a a a

p v . t a l a a range of sizes and categories from BearStearns and Lehman Brothers to IndyMac andwam Fa ma , F ma a Aig,as well as local community banks proves that

la b a b pa b a , b l al . w

av a a pl a la , a , , ll

l b abl a l pl x al-l a a b ll b abl a a a ll b x bl -

l a ap a l .

We support a systemic regulator

g a , ll a -la a v l

p a a l v l k a a al . t k a a p

risk regulator. Such a regulator would not elim -a all p bl , b l b abl

mitigate them. If we had eliminated just some p bl , av pp

ba . c app a b well on its way to creating just such a regulator,a p .

s k la l

k p a ll :

Focusing the process on managing risk. Thisl b a p l al p . i l

l k a k a a.

Eliminating gaps and overlaps in the system.F xa pl , a lab l pl , aterrible job, causing a race to the bottoma v pa a ba

a a a k a .

Analyzing areas like the mortgage marketa l - a

a l a , a a , a , va - l a a k .

Carefully tracking new products, as they a a p bl .

Reviewing credit across the whole system

including hidden extensions of credit, sucha a a k a siV .

Aggressively monitoring nancial marketsa p al x , b bbl . i a b

a b bbl , a a b a vabl , , x a -

a p l .However, it is appropriate to try to minimize

lla al a a b bbl a a . ial l b app p a a a

b bbl , b a p l b b p a k ( .

l av b app p a a k l l a - -val a a

or to minimize speculation in the nanciala k b l v a

p a k ).

Recognizing distortions as they develop in b a ( al , a

bala , al a b

a p l b a pa p bl a a l .

Encouraging international coordination asmuch as possible not only so companies

p a l v l pla l b alb a p a a al b

These are just some of the ways a systemicla l lp x a -

la a k a a a acontinually adapts and improves itself.


31/36

32

We support an enhanced resolutionauthority and the elimination otoo big to ail

ev a v p a al -la a al p v

a l , ll av v b p l a a .

All l b all a l a b a

. t a a JPm a c a ava a a l a

a l l la a lrms in a controlled way that minimizesa a a ll v

taxpayer anything. Fixing the too big to fail

p bl al l a l a alv a a a . J v la a ,

a l , l l k l a l a a a a b a l

recognize there is no safety net. Think of thisenhanced resolution as specialized bank -ruptcy for nancial companies. The principles

a l b a ll :

A failure should be based on a companys

ab l a l . The regulator (or specialized bankruptcy

) l b abl a a a - a b a .

Shareholders should b p abank fails just like in a bankruptcy.

The regulator could operate the company both to minimize damage to the company a p l .

The regulator could liquidate assets or sellpa pa a .

Unsecured creditors should v only after everyone else is paid like in aba k p . (i a , l a

l k p a a a v pa a

l .)

In essence, secured creditors should bea l k a a a ba k p .

The resolution fund should be paid forb a al (l k Fdic

a ).

All institutions under this regime should live the exact same rules.

Regulators should make sure that compa - av q a b

p v l v . t v a xa pl ,

while Lehman had $26 billion in equity, ital a $128 b ll b . A

l la , p , l

clearly have been able to let Lehman meet bl a , a / ll

a ll av pl l v -

. ha b l , l av b b .

If a rm fails, there should be enough clarity ab a al, l al a ax

a all la , p aa a al b a ,

down in a controlled manner what somerefer to as living wills.

While there is no argument about whol pa l ( . ., ba k ),

a al ab lb . t l la

b abl pa l a b , a a pl app p a a a pl .

o abl a a a a l,rms of all sizes and shapes should be allowed

v . i a a b inherently are risky. Banks shouldnt be big for

ak b b , b al a a val a l a a

b a b p a a l v- q kl a l xp v l . t

b x b v al lb a a ba k l , pa la l

a a l bal al a a , a

a a l .


32/36

33

Many banks capabilities, size and diver - abl a

a a . t, , a p bl a

a q ak a v -

q a lp all v a p ala a .

Closing comments on regulation

w l pp al p plb a la va v ,securitizations and enhanced consumer protec -

, pp a a v pa a b . t v l a l , a al a

a all p v p a a a a l p al v all a al .

w al b l v a aa a b a

a l- a :

Repo markets could be better structured, a ll .

Loan reserving could be made far less

p - l al. Securitization markets could be xed so that

b a a b av k a .

A system could be put into place to preventa run on money market funds.

The ability to buy shareholder or creditor v a b

xp k -l l b x l li v l av ab l v

ap al a all v a v a l

pa a a a p a l p

Finally, we support strong controls onso-called naked short selling.

d pa a a la a l la , a a avbeen proposed or recommended from theV l k r l ba k ax a Basel capital. These ideas are all in varying

a v l p a a . w a l

la a l la p la a p p a av b a l p al-

izing all rms alike regardless of whether kl p .


33/36

34

A appl a a , l

. A a a ll b b a the past some much bigger than the currentone and I am optimistic about our ability to

a a .

A a a a a q a a . A a

q k v - p l a a p va a va v a ll a p bl . r p bl

businesses can be both small and large and, a l bal , b v A a

av la l a al pa a ap a a l bal a . c a a l

a all q a a a p b l .

Americas success is not a God-given right al a k a a v .

The need or a strong economy and goodgovernment

A a p p a , l v (a

strength of our exceptional military). But ita a al a v b a

. t a a all a a , a , a l a b l a b .

A u.s. , ab l

all p v a l , pon good government. Bureaucracy is lethal,a a l a , al ,creativity, drive and goodwill of our citizens

a xa pl ,a k a va

A a. t v , a :

Legal clarity and consistency.

The fair application and steadfast enforce -

l la .

Trade policies conducive to growing theA a a l bal p -

v u.s. pa . Immigration policies that allow America to

attract the worlds best and brightest anal a a a .

Sensible and e ective regulation thatp v a p bl .

A strong and e cient infrastructure (froma a b l al , .).

The proactive promotion of economic a l a u.s. ap al

a la .

Policies facilitating job growth, as opposed to a a v l ak a .

c a av al valand objectives (though I believe most coun -tries and most citizens would like to reducepoverty and su ering). But countries shouldnot confuse values and objectives with main -

a a .

h al a a l p pl . A -

a a l a al q l l a p pl a

l v l pa a . ma av p a lp p pl

b , a , av a a a p pl . ma b

al, b , v , a ll pav .

Brazil is an example of a country that seems b ll p - p l -

xpa l al a a

p a al p a . ov la 20 years, Brazil has adopted many policies that

a a all . ialso bolstered its institutions, privatized itsb , p v l la , l b lk ap al all a p va ap al

a k a v l p l - la pa .

IV. OUR RESPONSIBI LITY AN D AMERI CAS SUCCESS


34/36

35

Eight years ago, Brazil elected a left-leaningp , b p l

. h al of the wealth to start a program called BolsaFamilia that gave Brazils poorest citizens vacci -

a , a a $80 a .

t l l a : g p l a a al

progress they are the fuel for progress.

Businesses need to be responsible andhealthy and vibrant

A JPm a c a , l a p p -b l b l a pa a b

, pl , a l a p a a l . t b pa ak -

- p . c a p blp , p a a b l l

to maximize quarterly earnings but rather tov l a a v a l

p a , , a a a p .P a a , , a a

a a ba k a .

w al a av b pl being good corporate citizens and adhering to

ll p a :

Treating our customers and employees with p v .

Building safe and useful products.

Maintaining ethical and responsible businessp a .

Meeting our duciary responsibilities and

a al val a l . Developing a company for the long run

a a .

Making a meaningful di erence throughp la p av pp

.

Acknowledging our mistakes (which are aa al pa b ), x

a l a .

Supporting the economies in which we work through job creation and appropriate

ax pa . JPm a c a , av a ,pa a $12 b ll a a ax

v a l .

Building a great company allows investment in , p v pp pl

b l b p a . c pa a a al

a v b a a .

Businesses small to large are one oAmericas key strengths

A al b a al : o 130 ll

p pl k v a us a , a l 110 ll a pl b p va b . t p va ba a al a av b a p a drivers of job creation and innovation.

t b v , all a - p

a l - la l a-al p a .

i , la p b la aall b b . s that for every one job created at a larger busi -ness, ve jobs are created at smaller businesses

a p v pp a v .JPm a c a , pa la , p

a $15 b ll p a app x a l 40,000 vendors, who provide jobs to millions

pl .

We need global fagship companies

including banksIn the current political environment, size inthe business community has been demonized,b a a b qsize in order to make necessary investments,

ak x a a k a p v v alpp l ball . A a la pa

p a a l a pl ll p pl . t l pa a a

make huge investments as much as $10

billion to $20 billion a year and compete ina a a 50 100 a A


35/36

36

a l - . c b , b aall b p $1.5 ll p a ap al xp a $300 b ll

a a v l p . i a a a 70% ap al xp a

a b la pa .

t p v k a al p a ( -

a a v a va )a a l a l v a

. e pl a la paa a p v : c p a a

b pl a la pa ab a all a a all .*

i a a la p a la l a al a v u

States have accounted for the majority of U.S.p v 1995.

Companies such as Ford, Boeing, P zer, Cater -p lla , Appl , m a g l a x -pla a v a va l .c - pa l k h l -Pa ka

p v b a k all a -size suppliers and vendors. Academic research

a v ab a a all create more jobs in the United States.

Large companies such as the ones mentionedab v ba k pa la

bala a a aaround the world. And its not just multina -

al p a a l al :s a a pal al p

ap al a a l k JPm a c aa p v . t b , all ba k pla a

v al l a b aal a p v p v , ap al,b a p a p x

a l . o l la ba k av al a a k a

the globe, in places like China, India, Brazil,s A a a r a; x va la - al a a ; a a p a v , l a a k a a l al l ;

p ab a al a a; a p v a b ll .

u.s. ba k a all a l l a a l , a a al

l a b la ba k aa al a a . F xa pl ,

2007, the three largest U.S. banks held 34% of

total U.S. bank assets the second-lowest gurea o a a e c - p aand Development (OECD) nations, just aheadof Luxembourg; the average for the rest of theoecd a a a bl , a 69%.n l ba k pa -la l a , b la ba k a relatively large compared with the size of theU.S. economy. The arguments that big is badand that too consolidated is bad are refuted by

a xa pl la , l -a ba k a av p b-

l a all ( . ., ca a a).

Capping the size of Americas largest banks a b b . i a ,

ll pa ba k a a a .JPMorgan Chases capabilities, size and diver -

al a a al 2008 a a a .

Everyone needs to be responsible

A a a b l p pl v al a l - p b l . w

a p b l all participants in the economy. Bad outcomesare not always someone elses fault we need

l va a v ,l , b , b a v all

ak p b l a a l k l bla . w av p

l pp a a p -pa bla . A l ba a al a lb p , al l a all

bl p bl . wll a k l , xa pl , a a -

v al lv a l pa a a b a al l pl b l, a

l b a a l a p ll .

t pa pl a a a

a - a q , a l p bl a ba k a ba k .

* The U.S. Bureau o LaborStatistics shows thatemployees o large rms (with500 or more employees) haveaverage hourly earnings ($25/hour, including wages andsalaries) 46% higher thanemployees o small rms (with

ewer than 50 employees).Similarly, large rms provide88% o their employees access

to medical bene ts comparedwith 55% at small rms.


36/36

w l JPm a c a a l a a ak l ,

al a a a a al ba k a pa a

pla pp l a .

o 220,000 p pl k v a a great job serving clients, whose trust we haveto earn over many years. The vast majority of

p pl , , p a a a -holders are far from Wall Street they actually a pa v a l ma s ,

v all v pa . A a a v a b b

a l .

V , p bl p l a

ak p v a a ba k l k , k a p l

a a a , , a , ap a a l a ll.c a p p la p p , ma s

b ba k a p a av a . o

a l p a A a, l a , a p bl

pl . w ba vp b l a la pl a

a a , a ma s v . walls , b b v . all b bba k v . all ba k , a a l blaming the good and the bad this is simply another form of ignorance and prejudice.

By extension, when we vilify whole industries all b , a -a lv a a a

l. w al l a a bla a l p

p pl , l p l a a. w a b l a l a a p ll

a b k a ll b a b . w all l a k lv

, a , a a .

Conclusion

t u s a a a all . i , v

a pl ba k ka p a . i l ,

al a a ;v l p a al, b a v p l ;

a b l a w al la u.s. ,b ab a a b alresponsible for ourselves it is dangerous to

a l bal a k p a pl . t a all all

b , k , a x .

y pa v a , v k,

lp l v a q kl a p bl .i 2009, a av a b ,

p pl all , k a a a a l

a p l al v . t al avp a a a al v . t all,

l a all : v l a , , -

a l . o b al JPm ac a a a a a a l ,i xp p a p pl .i a p b pa .

Ja d

c a a a c ex v o

ma 26, 2010

jamie dimon's 2009 letter to jpmorgan chase shareholders

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