First Chicago Bank

First Chicago Bank (officially the First National Bank of Chicago) was a prominent American banking institution with a history stretching back to the Civil War. For much of the 20th century, it stood as a titan of Midwest finance, a powerhouse of commercial and retail banking. However, for investors, its name is etched in history for a very different reason: it serves as a spectacular cautionary tale about the dangers of chasing popular growth stocks at any price. In the early 1970s, First Chicago’s trust department became the poster child for the “Nifty Fifty” phenomenon, a group of beloved, large-cap growth stocks believed to be so dominant that you could buy them at any valuation and hold them forever. The subsequent collapse of these stocks during the 1973-1974 market crash nearly crippled the bank's investment division and provided an unforgettable lesson on the timeless importance of a margin of safety. The bank's legacy eventually merged into what is today JPMorgan Chase.

Wall Street's graveyard is littered with the ghosts of “sure things.” In the early 1970s, the surest things of all were the Nifty Fifty. These were companies like Polaroid, Avon Products, and Xerox—blue-chip growth machines that seemed unstoppable. The prevailing wisdom, championed by institutional investors like First Chicago Bank, was that their quality and growth prospects were so superb that the price you paid was irrelevant. This was the ultimate “one-decision” stock strategy: buy it and forget it.

First Chicago’s trust department went all-in on this philosophy, loading up its clients' portfolios with these high-flying stocks, many of which traded at dizzying price-to-earnings ratios of 50, 80, or even 100. They weren't buying businesses; they were buying stories, and they paid a massive premium for the privilege. When the brutal bear market of 1973–74 hit, the illusion shattered. These “invincible” companies saw their stock prices plummet by 70%, 80%, or even more. The portfolios managed by First Chicago were devastated. Investors who had bought into the Nifty Fifty hype learned a painful lesson taught decades earlier by Benjamin Graham: No company, no matter how wonderful, is a good investment at an infinite price. This episode became a foundational story for modern value investing, frequently cited by figures like Warren Buffett as a perfect example of what not to do.

While the bank survived the Nifty Fifty fallout, the experience left a scar. The banking industry in the late 20th century was marked by intense competition and consolidation, and First Chicago was no exception. The key milestones in its later history include:

• 1995: Merged with Detroit-based NBD Bancorp to create First Chicago NBD, which was, at the time, the largest banking company in the Midwest.
• 1998: In an even larger deal, First Chicago NBD merged with Ohio's Banc One Corporation to form Bank One. The First Chicago name, a fixture for over a century, was retired.
• 2004: The story came to a final close when JPMorgan Chase acquired Bank One, absorbing the legacy of First Chicago into one of the world's largest financial institutions.

The story of First Chicago Bank is more than a history lesson; it's a masterclass in core investment principles that are as relevant today as they were in 1974.

• Price Is What You Pay, Value Is What You Get: The Nifty Fifty were, for the most part, excellent companies. The problem was not the quality of the business but the price investors were willing to pay for it. A great company bought at a terrible price is a terrible investment.
• Beware of “This Time It's Different”: The belief that the Nifty Fifty had permanently changed the rules of valuation was a classic case of speculative fever. Every generation of investors faces a new “Nifty Fifty” in some form, whether it's dot-com stocks in the 90s or other hot themes. The principles of sound valuation are timeless.
• Emotion is the Enemy of a Good Investment: The Nifty Fifty craze was driven by greed and the fear of missing out (FOMO). First Chicago and its clients got swept up in the euphoria. A successful investor must remain disciplined and rational, especially when the market is at its most emotional.