Chase Alumni Association

Donald H. Layton spent most of his career at JPMorgan Chase and its predecessors, rising through the ranks from a trainee to eventually becoming vice chairman responsible for managing about half of the company. His responsibilities spanned capital markets and investment banking, consumer banking and operating services. From 2002 to 2004, he was responsible for Chase Financial Services, the consumer and middle-market business. He was co-chief executive officer of J.P. Morgan, the investment bank of the company, from 2000 to 2002 and oversaw its entire range of global activities. Prior to the merger of Chase Manhattan and J.P. Morgan in 2000, Layton was responsible for Chase's worldwide capital markets and trading activities, including foreign exchange, risk management products, emerging markets, fixed income and the bank’s investment portfolio and funding department. He was also responsible for Treasury & Securities Services, the operating services unit of the company, from 1999 until his retirement from JPMorgan Chase in 2004. Layton served as chair and then CEO of E*TRADE Financial from 2007 to 2009 and served as CEO of Freddie Mac from 2012 until his retirement in 2019, a position he took as a public service.

When Manufacturers Hanover and Chemical merged at the end of 1990, they advertised it as a merger of equals, known as an MOE (pronounced em-oh-ee), as the market value of the two companies were within 1% of each other on the day of announcement. As both companies then had depressed earnings and weak credit ratings due to losses on LDC [Less Developed Countries] debt, the merger was designed to enable significant cost cutting, thus likely returning earnings to a more reasonable level. Specifically, the two banks were mostly competing in the same lines of business, which would therefore enable heavy cost cutting by eliminating overlapping line-of-business expenses, as well as corporate overhead ones. In addition, the prospect of being able to improve earnings was the justification for doing an extremely large common equity issue (the second largest ever done at that time) immediately after the merger was completed, which of course would also help to quickly improve those weak credit ratings. 

With this background, the MOE was pursued by having the older CEO – from ManHan – remain as CEO for two years, with the younger one – from Chemical – succeeding him as head of the company. It also meant that the MOE was implemented culturally by trying to get better as well as bigger, aiming to have the “best of both” – people, computer systems, products and even administrative processes (such as internal financial reporting) – form the post-merger bank. Interestingly, this was heavily criticized in the industry at the time; the standard pattern then was for one bank to take over the other and inflict all the pain –  and cost reduction – on the taken-over institution. NCNB –  North Carolina National Bank, later NationsBank – was probably best known for this as it did its “regional rollup” of banks to go from becoming small to very large.

This best-of-both approach, requiring a very high level of personal maturity by senior managers not to fight to keep everyone and everything from “my side”, turned up even in how the social issues of the merger were decided, including the name of the new company and its choice of headquarters.

While both headquarter buildings were first-class office space, ManHan owned 270 Park, while Chemical Bank rented its building just across the street at 277 Park, and so 270 Park was chosen (and of course is still the headquarters of the company). When it came to the name, there were three choices: keep one or the other, combine them or start a new one. The latter was easily rejected, as it would be very costly to establish a brand from scratch with a new name, directly at odds with cost cutting as the primary objective of the merger. Both CEOs – John McGillicuddy from ManHan and Walter Shipley from Chemical – also realized that combining the two would be ridiculously long, with ManHan’s full name (Manufacturers Hanover Trust Company) already being considered rather long just by itself. So, putting aside the emotional distress that the ManHan people would have about it, Chemical Bank was chosen as the new name in the interest of having a cost-cutting, best-of-both merger, as it was shorter and also balanced out the selection of ManHan’s building as headquarters. 

Four years later, in the summer of 1995, the merger of Chemical Bank and Chase was announced. Unlike the earlier transaction, it was not officially an MOE, as Chase was the one with stock market weakness requiring a “fix”. But the two banks were increasingly moving their large corporate banking activities towards expanding into Wall Street activities, such as trading and bond underwriting, where the competition consisted of leading securities firms. In these businesses, there was an important saying: The assets go home every night. If a merger were  pursued with a takeover mentality, those “people assets” from the Chase side were likely to leave heavily and go work for others, negating a lot of the value of the transaction. And so, while not technically an MOE, culturally the combination of the two firms was substantively implemented with the same best-of-both approach as the original ManHan/Chemical merger. 

This showed up in the name selection. Walter Shipley, then the CEO, and all the other Chemical top management knew that the Chase name, while recently fallen on hard times, was the grander, the more well-established, the more recognized than Chemical, both in the United States and globally. So, putting aside his emotion and keeping to the spirit of best-of-both (and doing what was right for the shareholders and the franchise, rather than his ego), Walter agreed in the negotiations to use the Chase name. (A combination name, by the way – like “Chemical Chase” – would have been far more expensive to implement, and cost cutting was still a primary objective of the corporate combination.)

I do recall one poignant incident about the name selection. The then-CFO, Peter Tobin, heritage ManHan, announced the selection of Chase as the new name via speakerphone to a room of executives (a mix of heritage ManHan and Chemical people) working on the still-secret transaction. The reaction was of course emotional for the heritage Chemical folks, to which Peter drily added, “You’ll get used to it” – just as he, I and all the other ManHan folks had.

Fast forward to 2000 and the new Chase, doing well as a bank, was working on the acquisition of JPMorgan, which at that time was no longer among the largest banks in the country. This was to be a straight-up acquisition, with a large stock market premium paid to Morgan shareholders. Nevertheless, because the merger was mainly a combination of Chase’s wholesale activities with all of Morgan, which of course was not broadly in the consumer business, the assets go home every night challenge was front and center. So, culturally, again, the merger was implemented heavily in the best-of-both style, which went from being criticized back in 1990/91 to, almost a decade later, being regarded as a smart thing to do. 

As usual, the issue of the name of the new company presented itself. As a straight acquisition transaction, it was fully decided by the acquirer’s – i.e. Chase’s – management. There were four of us in the room to discuss it: Bill Harrison, the CEO (heritage Chemical) and the three vice chairman working on the transaction – Marc Shapiro (heritage Texas Commerce Bank through Chemical), Geoff Boisi (a recent outside hire) and me (heritage ManHan). This merger was not primarily about cost cutting, although there was to be some; instead, it was principally about building a full-scale investment bank to compete with the leading wholesale securities firms (like Goldman Sachs or Morgan Stanley), something that no commercial bank had ever succeeding at doing. By putting together the wholesale side of Chase with JPMorgan’s business, it was hoped the scale and breadth of the combined operations would enable us to do just that – and subsequent history has proven that true.

Building upon the track record of the previous name decisions being made for the best of the franchise and the shareholders, we chewed over the alternatives. One major issue we faced was that there was no example of a brand – i.e., a single name – that was simultaneously a success in both broad consumer banking and in a high-end and global wholesale/investment banking business. And in the wholesale space, the JPMorgan brand was clearly the better-established one, even though it was also the legal name of the company being acquired. So, we decided to go with a two-brand strategy: wholesale banking activities would be JPMorgan-branded, consumer activities would be Chase-branded and the holding company, to our shareholders, would be known as JPMorgan Chase. (We had chosen this name order, rather than Chase Morgan, as the wholesale business would be far larger than the consumer one post-merger, and so it seemed right for the Morgan name to go first.) Given that no one in the room came from heritage Morgan or even from heritage Chase, it was easy to be unemotional about it all and do what we thought right. 

It took only about an hour, as I recall. No consultants, no lengthy studies, just quick decision-making by executives who knew what “best of both” meant.  

And that’s how Manufacturers Hanover and Chemical became JPMorgan Chase.