After the flurry of role changes at JPMorgan Chase & Co. this week, it is easy to dwell on the relative power of executives and their career trajectories.

Don't stop there.

The real lesson may be that even the retail operations of JPMorgan Chase — presumably one of the better-run banks overall — has grown too cumbersome to manage and now has to be carved up. It is one that should be heeded by anyone interested in the future of big banks and the economic recovery.

"Managing through the next four or five years of deleveraging is going to be a lot more difficult than I think the consensus believes now," said Keith Davis, an analyst for Farr Miller & Washington. "Jamie Dimon has been pretty prophetic about what's going on in the economy," he said of Chase's CEO. "That he thinks these things need to be split up is a good indication that we're not out of the woods."

Whether voluntary or not, former retail banking chief Charles Scharf's move to the One Equity Partners unit and his departure from the parent company's operating committee marked a step down from the company's top ranks. That his duties will be divvied among several others suggests awareness that running JPMorgan Chase's mortgage, consumer and branch operations in the current environment is the sort of assignment liable to chew up an executive's career.

Under the new system, commercial banking head Todd Maclin will also administer the bank's branch network, small-business and consumer banking and private client services. Responsibility for retail branding, along with the auto and student loan portfolios, will fall to cards chief Gordon Smith. And Frank Bisignano, a troubleshooting chief administrative officer who was brought in four months ago to fix the mortgage division, is officially no longer parachuting in: He permanently replaces David Lowman, who is leaving after a tenure that began just as the housing market began to collapse in 2006.

The only announced change that did not involve taking on retail duties was that of investment banking head Jes Staley, who picked up Heidi Miller's oversight of overseas operations, which are expected to account for half of the company's profits within a few years. (Miller plans to retire early next year.)

Though Staley's task is complex, Chase appears to be comfortable that investment and international banking can be handled by one person whereas several executives are needed to oversee what used to be called "basic banking."

Richard Bove, an analyst for Rochdale Securities, said the move likely would have happened sooner if it were not for Dimon's great faith and confidence in Scharf, a lieutenant of his for decades. "You've got to have someone who really knows mortgages doing mortgages and nothing but. Same thing with credit cards and so forth," he said. "The idea of melding them all under one person doesn't make sense to me. This is emerging at a number of different institutions."

By Bove's thinking, then, the current round of moves amounts to a temporary fix because it leaves crucial retail responsibilities in the hands of executives who are still focusing on unrelated parts of the business. "The solution that has emerged at JPMorgan at present doesn't seem to me to be the final step," he said. "It should be a totally different group of execs who focus on the product development and attempt to adapt their products to the distribution system as it evolves. … If this is the way things wind up, it's not the right solution."

Indications that the prior model was not working for retail are not hard to come by.

Dimon has called returns on capital in the division over the past year "unacceptable," and the uproar over the bank's failure to observe laws protecting active-duty military borrowers was the worst mistake the company has ever made, the CEO has said. Chase has drawn the lion's share of attention for the industry's military foreclosures, and it has also been caught up in the more universal squabble over robo-signing and general foreclosure documentation.

Assigning blame for such things to one executive would be grossly unfair, as all of Chase's competitors have struggled with them as well. But Davis said its strategy to divide up the troubles could well spawn imitators."If JPMorgan has success in splitting up the structures, maybe it will be duplicated elsewhere. It's going to require more diligence in getting through this credit cycle than anyone now thinks. That means more management and more manpower."


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