By Alexander Saeedy

On a tour of a Huntsville, Ala., missile factory last fall, JPMorgan Chase Chief Executive Jamie Dimon nodded along as L3Harris executives explained why they need help building more of the expensive rocket motors for badly needed Tomahawk and Terminal High Altitude Area Defense, or Thaad, missiles.

L3Harris relies on procurement from the federal government, which can be stop-and-go, explained Ken Bedingfield, the company's chief financial officer. Without enough capital, L3Harris can't just build the motors at scale and have them on hand to sell later. The frustration comes as the U.S. faces a shortfall in weapon stocks, made even more dire since the war with Iran.

The discussion helped crystallize a broader idea Dimon had been pondering about JPMorgan's role in national defense — and about his own legacy — people familiar with the matter said.

JPMorgan, the biggest bank in America, has long lent money to and advised the defense industry. Now Dimon would start investing the bank's own money — usually used for commercial and consumer lending or invested in Treasury bonds — into buying stock in the firms. It's an inherently riskier strategy but also potentially more profitable.

Soon after the factory visit, Dimon said the bank would use $10 billion of its capital to invest directly into companies the bank has defined as critical to national security and economic self-sufficiency.

JPMorgan also said it would increase its traditional lending and financing to national security, defense and other industries, targeting $1.5 trillion in deals between now and 2035 and working closely with the government — its work with L3Harris fit into this category. Bankers involved in the "Security and Resiliency Initiative" said they meet with officials at the Pentagon, Energy and Commerce departments weekly.

The bank hired Berkshire Hathaway's star investment manager, Todd Combs, to run the $10 billion fund. JPMorgan decided to not put its own money into L3Harris, but it has so far invested in a gold mine in Idaho and a San Diego-based manufacturer of fighter drones powered by artificial intelligence. Dimon has said he wants to eventually allocate $20 billion or more to the fund.

The new program harks back to a former tradition on Wall Street of "merchant banking," when Gilded Age banks and their successors in the 1980s invested their capital directly into the stock of companies such as Consolidated Edison, U.S. Steel and RJR Nabisco, making bankers powerful sculptors of America's industrial might.

The practice fell out of favor as regulators and lawmakers blamed the banking industry's risky bets for financial crises, including both the Great Depression and the 2008 crisis, and made it harder for the biggest firms to use their own capital on stock investments. In recent years, banks have taken advantage of a more permissive regulatory climate to make riskier investments and compete with private equity and private credit firms.

It also puts JPMorgan in line with the Trump administration's aims to reinvigorate America's defense industry. Last week, the president summoned senior Pentagon officials and top military contractors to the White House to discuss ramping up munitions production.

The government under President Trump has itself taken stakes in nationally important firms, including Intel and U.S. Steel. The strategy is a break from past administrations, which have typically become shareholders in American companies in moments of crisis.

JPMorgan has also held talks about investing in a new American manufacturing initiative by Amazon founder Jeff Bezos, a friend of Dimon who also sits on a JPMorgan advisory council for the national-security initiative. Bezos aims to raise $100 billion to buy manufacturing companies and use AI technology to help them automate.

For the 70-year-old Dimon, the national-security initiative is part of a long-running strategy at the core of his legacy as his generation's leading banker and one of the country's most influential executives. By putting the bank's own money to work on national security, he is doubling down on earlier attempts to catalyze societal changes, from fighting global warming to empowering Black citizens.

Dimon, a history buff who is fascinated by World War II, is so excited by the project that he is considering staying involved even after he retires as CEO, which is expected in the next few years, people familiar with the matter said.

The broad plans — being marketed as patriotic efforts — for the most part advance goals to strategically expand JPMorgan's current businesses. Bank executives said the national-security initiative has already resulted in new revenues for the bank.

They also reflect the role that big business is increasingly playing to help the government achieve its aims. "Federal, state and local governments are examining...[how they] leverage the private sector to meet the goals that are traditionally achieved by the government," said Peter Scher, the bank's former head of government relations and philanthropy, in an interview.

"The overwhelmingly positive response we've received to the initiative has reinforced our conviction that there is a real need for this work — and that we have an important role to play," said JPMorgan's Doug Petno, who has been closely involved with the national-security initiative. The executive was promoted last week to co-president, marking him as one of two top contenders to succeed Dimon when he retires.

Pushing for closer ties

Dimon, who has run JPMorgan for more than two decades, has been pushing for most of that time for closer ties between the government and Wall Street, trying to ensure that Americans see big banks as contributors to society.

He marshaled resources to help Detroit rebound from bankruptcy in 2013 and has helped organize business-civic organizations that counsel pro-business officials across the country, including the mayor of San Francisco, Daniel Lurie.

JPMorgan says its new Park Avenue headquarters created over 8,000 union-affiliated jobs and financed hundreds of millions of dollars of public transportation-related renovations at nearby transit hubs. The skyscraper is a tribute to Dimon's patriotic sensibilities, which he talks about often. It is filled with Americana and features what he calls the "Patriot's Bar," a sky-high watering hole adorned with flags from the Revolutionary and Civil war eras. The CEO salutes the American flag on the building's ground floor every morning.

The bank's latest annual financial report is stamped with the America250 logo — JPMorgan is a sponsor of the group — and titled "Life, Liberty and the Pursuit of Happiness."

Dimon had the bank put $30 billion toward a "racial equity commitment" months after the George Floyd protests in 2020 brought race relations to the forefront of national politics, and he committed $2.5 trillion to finance climate change-related investments in 2021.

Some inside the bank have said those initiatives felt mostly like marketing, since the bank would have likely done the work anyway. Other people inside the bank said it takes the commitments seriously and tracks their progress. A spokesman for JPMorgan said it has completed its $30 billion racial equity program and is on its way to meeting the $2.5 trillion climate change commitment.

The CEO has reasons to win over Trump, who has slammed Dimon, JPMorgan and other big banks for becoming too "woke" and accused them of closing conservatives' bank accounts. He has sued JPMorgan and Dimon for closing his own family's accounts after the Capitol riots on Jan. 6, 2021. The bank said no one's account should be closed because of political or religious beliefs and said it supported the government's effort to address regulatory issues that have contributed to account closures.

As the administration has become more active in taking stakes in companies, the bank wants to be part of those deals. And JPMorgan is among the banks fighting for a role to lead what could be a giant stock offering for the federal mortgage giants Fannie Mae and Freddie Mac.

Dimon has said the national-security initiative isn't done to win favors with the president, though he has also said he hopes administration officials "appreciate this."

A target's stock doubles

JPMorgan was advising MP Materials, the largest rare earths manufacturer in the country, when the Pentagon acquired a 15% stake in the company last year. MP Materials is meant to undercut China's dominance in rare earths and help ensure that U.S. manufacturers can access critical components for advanced electronics.

MP's stock more than doubled after the announcement, and Dimon wished that his bank had invested alongside the U.S. government, people familiar with the matter said. That, combined with his trip to Huntsville, helped bring the $1.5 trillion initiative to life.

Dimon told JPMorgan bankers late last summer to canvass clients who might be receptive to taking money from the government in "public-private partnerships" like the MP Materials deal.

They cast a broad net in defining the national-security initiative, including not only defense and mining companies but also artificial intelligence and tech firms and pharmaceutical manufacturers.

Dimon's bankers estimated that they would have loaned and advised on approximately $1 trillion worth of transactions for those clients over the next 10 years just by using the bank's current strategies. So they set a goal of $1.5 trillion for the initiative to show the increased focus. Since it was announced late last year, JPMorgan so far has financed $150 billion in deals through the initiative.

Being part of the program has helped JPMorgan get internal approvals on loans or deals that carried greater risk or were a type of complex transaction the bank might have avoided, bankers said. The bank agreed to finance an equity deal for an Italian defense company that partners with Lockheed Martin. It also expedited loans for a South Korean-backed zinc smelter in Tennessee.

Korea Zinc is building a mineral smelter in the state to produce 13 kinds of critical minerals in partnership with the U.S. Defense Department and Commerce Department. JPMorgan both arranged the transaction and has agreed to lend billions of its own capital to finance the deal.

The bank advised L3Harris, the defense contractor, when the Pentagon took a $1 billion equity stake in its missile business in April, months after Dimon's visit to the Huntsville factory. JPMorgan is co-managing the missile unit's initial public offering later this year.

The bank is also advising a planned national-defense bank headquartered in Canada, meant to help member countries purchase weapons by pooling their collective resources. The Defence, Security and Resilience Bank has been slow to grow because officials in Germany and Britain signaled they weren't interested in participating and the U.S. hasn't been involved, people familiar with the matter said. NATO members will discuss the defense bank at the alliance's coming summit in Ankara, one of the people said.

Some of the projects now publicly highlighted as part of the initiative would have taken place without the new program, such as a $125 billion merger between NextEra Energy and Dominion Energy. JPMorgan advised Dominion Energy, a client for some two decades, and didn't put up any of its own cash. The bank also counted a $5 billion IPO of a Czech defense company manufacturing drones for the war in Ukraine toward the initiative's total that it likely would have done anyway.

JPMorgan has brought names of companies looking for investors to the government, and it has been especially active advising defense contractors on how to raise low-cost financing through the Pentagon's Office of Strategic Capital, people familiar with the matter said. The office provides extra-low-cost capital to defense-related startups.

Dimon tapped leaders from across the bank and assigned them to the national-security initiative — including some of JPMorgan's most seasoned bankers. Its chief is Jay Horine, a longtime dealmaker who previously advised on major oil and gas and mining transactions.

The CEO also put together a committee of corporate executives and government officials, including Bezos, former Secretary of State Condoleezza Rice and the ex-cybersecurity head of the NSA, to help the bank strategize and source investment ideas.

Mines to data storage

From the $10 billion national-security fund of the bank's own capital, JPMorgan said it has invested $2 billion into companies.

It put $75 million into the stock of Perpetua Resources, a mining company that is extracting gold and antimony from an abandoned quarry in Idaho. Antimony is a critical finishing material for bullets and other types of weaponry. Perpetua has also received a $3 billion loan from the U.S. Export-Import Bank, controlled by the Department of Commerce.

The fund also invested undisclosed amounts into Databricks, a data storage company that has also been a longtime client of JPMorgan's investment bank to raise stock and borrow debt.

Dimon announced a separate initiative in March, the "American Dream Initiative," pledging to "expand opportunity to millions of Americans and future generations through targeted investments in local communities." The bank said it would increase investments in areas including housing, employment and healthcare.

It said the fund would start with launching a firmwide effort to support 10 million small businesses — up from seven million served currently — over the next several years, and expand its one-on-one coaching and technical assistance for owners. The bank didn't include financial specifics.

Combs, 55, the new manager of the $10 billion fund, had served on JPMorgan's board of directors, where Dimon is chairman, since 2016 before taking the fund job.

At Berkshire Hathaway he had been a possible successor to Warren Buffett, but the job ultimately went to Greg Abel. While at Berkshire, Combs helped launch Haven, a shuttered initiative started by Dimon, Bezos and Buffett as an effort to lower healthcare costs by collectively bargaining with insurers.

Haven shut down after a few years because its leaders felt that its transformative ambitions proved too difficult to achieve across the three companies, the Journal previously reported, though Dimon has kept some of those goals alive through Morgan Health, a follow-up healthcare venture.

When he was hired, Combs was named a strategic adviser to Dimon. He had advised Dimon directly on succession while he was on the board, and he had even had his name tossed around by some current and former executives as a possible candidate. People close to him say he doesn't want to become the bank's CEO.

Dimon has kept investors anxious about succession planning for years. The bank announced two new co-presidents last week, Petno and Troy Rohrbaugh, putting them in the lead as candidates to succeed Dimon.

The executives were also named CEOs of the bank's two biggest businesses and received $30 million retention bonuses to stay around. Petno's work on the national-security initiative includes giving updates to the bank's board of directors and liaising with government officials.

Write to Alexander Saeedy at alexander.saeedy@wsj.com