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Sept. 20, 2004
Shapiro: Days of "Staying Small" Long Gone in Banking
by Erica Grieder
According to Marc Shapiro, the
former vice chairman for finance and
risk management at JPMorganChase, the
banking industry in which he began his
career was dramatically different from
the industry today. For one thing, “in
1970, nobody was doing it for the
money.” Instead, said Shapiro, speaking
to MBAs Sept. 14 as the kickoff guest
for this fall’s Executive Speaker
Series, bankers in the 1970s tended to
be interested in community development.
Of course, Shapiro continued, bankers
in those days lived in a much different
regulatory environment than their
contemporary counterparts. “The rules
that governed the banking industry in
1970 had been put in place by 1932,”
not a time of historically high
confidence in bankers, he noted. These
rules aimed to keep banks small and
confined to one or two of the various
banking functions.
“Stay small, and stay out of trouble,”
said Shapiro. “That was the message.”
Under such conditions, a lack of
interest in profits made a little more
stoic sense.
When Shapiro started his career with
Texas Commerce Bank in 1972, he chafed
under those restrictions. “We [were]
forced, really, by the law, into a
cardinal sin of banking—not
diversifying,” he recalls. The bank did
well throughout that decade, but they
found themselves in tough times in the
mid-1980s. Oil prices were falling from
their 1984 peak, and the value of their
real estate assets plummeted.
Texas Commerce Bank concluded that
their best option was to merge with a
larger bank. Unfortunately, that was
illegal at the time. Fortunately, a
special session of the state
legislature in 1986 made it legal, and
Texas Commerce Bank merged with the
Chemical Banking Corporation in New
York later that year.
Shapiro’s career at the bank lasted for
thirty years and saw two more mergers.
In 1996, Chemical Banking merged with
Chase Manhattan, and in 2000 Chase
merged with fellow behemoth J.P. Morgan
& Co. to form JPMorganChase. The merger
with J.P. Morgan was, Shapiro said,
especially difficult. That bank had not
gone through a merger since 1952 and
was quite set in its ways.
“My guess would be that even though
you’ve seen very large mergers,
there’ll be many, many more to come,”
said Shapiro, looking to the future of
the industry. At the same time, he
anticipates that there will be room for
small banks in the industry, provided
such banks can differentiate
themselves.
“I think you only have two strategies,”
said Shapiro. “One is to be very large,
very global, and very diversified, and
the other is to find a niche and to do
it extremely well.”
On communication:
“The thing that’s most important in
business is to be able to
communicate…You can’t overvalue
communication.”
“People won’t remember unless you say
something so often you’re sick of
hearing it. The value of a simple,
clear, uncomplicated, repetitive
message in anything you present is
something I’ve learned over the course
of my career.”
On confidence:
“Insecurity is a huge driver, and I
would go so far as to say that many
people who are successful in business
are so because they’re insecure…but in
my opinion, that success comes at a
great cost. Self-confidence is what
preserves you and let you ride through
the storm.”
On internal politics:
“I hate internal politics. One of the
things that I have always believed is
that if you work for someone, you owe
it to them to tell them what you think.
You don’t get ahead by telling people
what they want to hear…that’s always
been my litmus test. If you don’t have
the freedom to express your own views,
your own opinions, politely, you’re in
the wrong place.”
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