The toughest guy on Wall Street

Editor’s note: This article as originally published in the April 3, 2006 issue of Fortune.

Just about everyone who works on Wall Street has heard the stories about Jamie Dimon. The one about his shutting down the gyms and pulling the fresh flowers at J.P. Morgan Chase. (That story is true.) And the one about his grilling limo drivers parked in front of headquarters to find out who’d ordered the Lincolns, then screaming at the culprits for wasting money. (That one’s apocryphal, but Dimon doesn’t mind people repeating it, because fear helps him control costs.)

Here’s one you haven’t heard. Dimon became president of J.P. Morgan Chase in mid-2004 when it acquired Bank One, where he had been CEO. Soon after, he convened an emergency meeting and ripped into his new colleagues for “letting pay get totally out of hand.” Among the examples that set him off: Regional bank managers at J.P. Morgan earned around $2 million–five times the $400,000 that comparable Bank One people made. Morgan’s human resources chief was pocketing better than $5 million. Outraged, Dimon announced he was slashing comp for hundreds of staff positions by 20% to 50% over two years. “I’d tell people they were way overpaid,” Dimon recalls, “and guess what? They already knew it.” The kicker: Most of the managers stayed on despite the cuts.

A few months later, at a retirement party for J.P. Morgan CFO Dina Dublon, 52–whom Dimon was replacing with an ally from Bank One–Dimon stepped to the podium and praised her service to the company. Then he unleashed a biting one-liner: “But if you paid one dollar for Texas Commerce bank”–which J.P. Morgan acquired in 1987 for $1.2 billion–“you paid a dollar too much!” The room, studded with Texas Commerce alumni and executives who had championed the deal, went dead silent.

As these stories suggest, Jamie Dimon is not known for subtlety. He has shouted down a U.S. Congresswoman who was pushing Bank One to keep more jobs in Chicago, and told a roomful of J.P. Morgan internal auditors that a colleague “knows as much about accounting in her baby finger as all of you combined.” He will lash out in meetings with trusted confidants–“That’s the dumbest thing I’ve ever heard”–and expect them to come right back at him. (“If not, he won’t respect you,” says J.P. Morgan asset-management and private-bank chief Jes Staley.)

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Yet far from hindering his career, this brash, iconoclastic manner has made Dimon the most watched, most discussed, most loved, and most feared banker in the world today. From Wall Street to the City of London, just mention “Jamie,” and everyone knows you’re talking about the rampaging rebel who’s as loud as he is tight. He’s much more than a cost cutter with a colorful personality, and his compulsive candor is just one of his highly effective management tools. Working alongside boss and mentor Sandy Weill, Dimon helped engineer 12 years of audacious mergers that turned an obscure Baltimore loan company called Commercial Credit into Citigroup, the world’s largest financial services company. After being unexpectedly shoved aside by Weill, he re-emerged at a dysfunctional Bank One, turned it around, and sold it in the deal that made him, as of January, CEO of J.P. Morgan Chase, the third-largest financial corporation in the U.S. (2005 revenues: $55 billion), behind Citi and Bank of America.

Now he wants to perfect the model he and Weill created at Citigroup–and defeat the house he helped build. “It’s all about having the best systems, the best people, the best products, the best risk controls,” he says. “It’s all about being the best, the best, the best.” That’s why investors, industry watchers, and fellow CEOs trade all those Jamie stories. They see him as the one figure with the skills and opportunity to prove once and for all whether the model of a one-stop-shop financial firm can live up to its promise. And they know that Jamie is just itching to expand his empire with at least one breathtaking deal.

It would be hard to find a company more in need of the Dimon treatment than J.P. Morgan. A hodgepodge of businesses from multiple mergers that were never fully integrated, the giant bank is burdened with a lazy culture and an underperforming stock ripe for reinvigoration. While J.P. Morgan ranks at or near the top in many key categories–second in retail deposits, credit card balances, and investment-banking fees; first in U.S. private-banking assets and cash-management revenues–growth has been tepid and profitability mediocre. J.P. Morgan’s return on equity, a crucial yardstick for financial firms, is just 10%, well below that of its top rivals. No wonder the stock has barely moved in five years.

J.P. Morgan, of course, isn’t the only financial conglomerate with an identity crisis these days. At Citi, the original incarnation of the do-it-all firm, CEO Charles Prince is struggling to overcome scandals and management turnover. “Financial conglomerates like J.P. Morgan are feeding grounds for smaller, more nimble and focused players,” says Tom Brown, chief of hedge fund Second Curve Capital. “Shareholders of all the supermarkets would be better served if they were broken up.” Some analysts are already getting impatient with Dimon. “He told us to expect big progress in 2005,” says Meredith Whitney of CIBC. “Now we won’t see major improvements until 2007.” But many are betting that Dimon’s rare combination of an analytical, Cartesian mind with a passionate, damn-the-social-graces style will end up rewriting the rules of the game. As Larry Bossidy, former Honeywell chairman and a J.P. Morgan director, puts it, “I don’t use superlatives lightly, but he’s the best guy I’ve ever seen in financial services.”

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“It’s offensive to me to be called a cost cutter,” says Dimon during one of a series of in-depth, exclusive interviews with FORTUNE. Striding about his eighth-floor Manhattan office, the stocky CEO, who took boxing lessons after being ousted from Citigroup, karate-chops the air and punches out sentences in staccato bursts that bear traces of his Queens upbringing. He grabs a pen and begins scribbling on an easel to illustrate how the bank’s revamped computer systems work. He pulls out a dog-eared piece of paper that he........

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