JPMorgan star Dimon rises to a risky rescue

That was six years ago when he was chairman of Bank One, a once-troubled Midwestern financial institution that was taken over by JPMorgan four years ago.

Today Dimon, now chairman and chief executive officer of JPMorgan Chase and the man who hired Tony Blair as a senior adviser, is not just the King of Wall Street but probably America's top banker.

By taking over Bear Stearns, he is running a big risk - no one really knows what skeletons lurk in the closet. But equally he is paying next to nothing to acquire one of the world's top prime brokerages - and, incidentally, ends up with a very valuable extra slice of prime Wall Street property, Bear Stearns' headquarters.

It is also certain that JPMorgan was exposed to the tune of several billion dollars as a counterparty to Bear Stearns trades. This takeover avoids what could have been a massive trading writedown on top of the pain JPMorgan is feeling on its mortgage and credit-card books.

Thus far JPMorgan has escaped relatively unscathed from the subprime crisis with a 2007 writedown of just $1.3 billion (£645 million) - less than a tenth of the sum lost by rivals Citigroup and Merrill Lynch.

Dimon, a six-foot New Yorker, educated at Tufts University in Massachusetts and then Harvard, has always been seen as the whiz-kid of banking who made the merger numbers work.

His stature is symbolised by the fact that he is one of only three bankers on the board of the New York Federal Reserve, the most senior of the state banks reporting to the Washington Fed.

Dimon will have his work cut out absorbing Bear Stearns but few doubt he will succeed. He was celebrating his 52nd birthday at a family dinner in a Greek restaurant in New York last Thursday when the call came from Bear Stearns' advisers. Dimon himself oversaw 200 JPMorgan staff, who spent the next three days poring over Bear Stearns' books.

He decided he liked most of what he saw and said: "This will provide good long-term value for JPMorgan Chase shareholders. We are taking reasonable risk, we have built in an appropriate margin for error, it strengthens our business and we have a clear ability to execute."

Dimon knows he has to get it right, not just for JPMorgan and not just for Wall Street but for the world's banking system.

The scale of the pain inflicted by the subprime crisis will be underlined again this week as a series of banks reveal their first-quarter results. Tomorrow, Goldman Sachs is set to show writedowns of $3 billion and Lehman Brothers another $1 billion.