Today's LIBOR Rates
1 M |
0.31563 |
 |
3 M |
0.47500 |
|
6 M |
0.68794 |
|
1 YR |
1.06438 |
|
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The Banks Behind LIBOR
JPMorgan Chase
July 20, 2009
“Contributor banks” selected by the British Bankers’ Association (BBA) report their daily interbank lending rates for different maturities and currencies, and from these data the BBA computes the LIBOR indices. This is an overview of one of those contributor banks.
JPMorgan Chase is a contributor for nine of LIBOR’s 10 monitored currencies, including the US Dollar, the Pound Sterling, the Euro, and the Yen. It is one of America’s “Big Four Banks,” along with Citigroup, Bank of America, and Wells Fargo, boasting the country’s largest market capitalization and deposit base and second largest hedge fund. JPMorgan Chase describes its corporate history as “intertwined with innovations in finance and the globalization of the world economy.” The colossus today is an aggregation of mergers, beginning with noted institutions formed between 1799 and 1905 that coalesced in the mid-twentieth century. This pattern has continued to present day, with JPMorgan Chase absorbing Bear Stearns and Washington Mutual, two noted collapses of the current economic downturn.
JPMorgan Chase’s oldest predecessor is the Bank of Manhattan Company, formed by former American Vice President Aaron Burr in 1799 through a political maneuver that allowed a water carrier to “to consider the most proper means of employing the capital of the Company.” Chase National Bank, founded in 1877, combined with the Bank of Manhattan Company to create Chase Manhattan Bank in 1955. Chase became the world’s largest bank in 1930 when it acquired the Equitable Trust Company.
In another major tributary of today’s JPMorgan Chase, Manufacturers Trust Company, established 1905, and Hanover Bank, established 1873, became Manufacturers Hanover in 1961. Chemical Bank acquired Manufacturers Hanover in 1991 and Chase Manhattan in 1995, retaining the more familiar Chase Manhattan name for the enterprise.
The JPMorgan half of the brand originates with J(ohn) P(ierpont) Morgan, a dominant figure of late-nineteenth and early-twentieth century American finance who was instrumental in the formation of General Electric and US Steel. His namesake J.P. Morgan & Co. merged with Guaranty Trust Company of New York in 1959, using the name Morgan Guaranty Trust until the 1980s when the J.P. Morgan name reasserted itself. The company focused on commercial banking, moving into investment banking and securities underwriting as restrictions on such an institution’s ability to conduct this business eased in the 1990s.
In 2000, Chase Manhattan Bank merged with JP Morgan & Co. to create JPMorgan Chase. In 2004, the company merged with Bank One Corporation, itself a 1998 conglomeration of Banc One of Ohio and First Chicago NBD (a joining of First Chicago Bank and National Bank of Detroit).
JPMorgan Chase’s pattern of mergers took on more historic significance during the economic crisis which peaked in 2008. In March of that year, it acquired Bear Stearns, at one time America’s fifth largest investment bank, after a disastrous plunge in equity market value. In September, the U.S. Office of Thrift Supervision seized Washington Mutual in what would be America’s largest bank failure. JPMorgan Chase bought most of WaMu’s banking operations and rebranded its branches “Chase.”
JPMorgan Chase’s major functions are:
- Investment Bank
- Market Making and Trading
- Retail Financial Services
- Card Services
- Commercial Banking
- Treasury and Securities Services
- Asset Management
- Corporate, which includes private equity functions
On Thursday, July 16, 2009, JPMorgan Chase posted quarterly profits of $2.7 billion. The New York Times reports that the company stood with Goldman Sachs as a new giant in American finance, benefiting from government support and the continued weakness or outright elimination of rivals. Wanting to rid itself of the “scarlet letter” of government emergency funds, JPMorgan repaid the $25 billion it received in December 2008. As the company works to improve its image and competitive posture, The New York Times points out that proposed regulation to limit banks’ ability to trade their own capital could crimp future profits for JPMorgan.
The accuracy and relevance of LIBOR rests on its contributor banks. With JPMorgan Chase, LIBOR has a constituent that is a timeline of American finance in itself. The company comprises the combined efforts and achievements of numerous distinguished institutions dating to the era of Burr, Jefferson and Hamilton. It continues to play a key role in what has been called the worst downturn since the Great Depression, positioned to emerge even stronger in what will be a radically reconfigured financial industry.