Run The Fortress Balance Sheet
Dimon has been talking about the fortress balance sheet since the 1990s, and his definition is more specific than the phrase suggests. It is not simply holding more capital. It is conservative accounting, genuine liquidity, real margins from real clients, and a refusal to use leverage to inflate short-term returns. He said he does not upfront profits when he can spread them over time, and he treats bad loans as bad revenues, not good revenues that happen to sour later. The tradeoff is explicit and he owns it. JP Morgan was less profitable than its competitors in the good years. Other banks were running 30 times leverage going into 2008. JP Morgan ran at roughly a third of that. When the system broke, those banks were gone and JP Morgan was not. He raises equity not when he needs it but before he needs it. After buying Washington Mutual in the worst week of the financial crisis, he went to market the next day and raised 11 billion dollars of additional equity he described as not really needing, because the situation could get even worse and he did not want to be short capital or liquidity. The accounting discipline is equally deliberate. He is explicit that accounting rules allow you to drive a truck through them, that things called revenues can be losses in disguise, and that things called expenses can be investments in the future. His version of the fortress balance sheet is a system that does not confuse accounting results with economic reality.