JP Morgan agreed to pay $211 million last week to settle allegations that it cheated local governments in 31 states by rigging the bidding process for dozens of muni bond deals.
With all the coverage on the grim jobs numbers and the stirring launch of Atlantis, you might have missed the news about JP Morgan's settlement. Or maybe you thought it was groundhog day.
Friday's settlement was just the latest in a series for the banking giant.
- In June, JPMorgan paid the SEC $154 million to settle charges it failed to disclose that hedge fund Magnetar not only helped choose the assets in a CDO transaction called "Squared," but also bet against much of the deal.
- In April, JPMorgan Chase paid $75 million in fines and forfeited $647 million in fees to settle federal charges that it made unlawful payments to win municipal bond business in Jefferson County, Ala.
- In March 2010, JPM settled for $6 billion with the estate of Washington Mutual, which JPM bought from the FDIC in late 2008 for $1.9 billion. The estate claimed JPMorgan conspired to lower WaMu's sale price by leaking false information about WaMu's finances to federal regulators and potential rival bidders.
Meanwhile, Chris Whalen of Institutional Risk Analytics estimates JPMorgan may face up to $50 billion in additional claims stemming from lawsuits related to its crisis-era purchases of Bear Stearns and Washington Mutual. The firm is also exposed to separate settlements with state and federal regulators over illegal foreclosure and servicing practices.
"It has been our view, for some time, that banks are similar to tobacco and asbestos companies in that they are being sued by plaintiffs for a wide variety of problems," writes Rochdale Securities analyst Dick Bove. "This means that each year for the next five to seven, there will be agreements, some wins and some losses, that will cost these companies billions of dollars. JPMorgan Chase, the nation's second largest bank, is likely to pay a large amount of this money."
The BP of Banking
Clearly, JPMorgan is not alone in paying big fines. UBS and Bank of America both paid fines related to muni bond rigging while Goldman Sachs got tagged with a $550 million fine for the "Abacus″ transaction that was very similar to JPMorgan's Magentar deal.
Every Wall Street firm has paid significant fines during the past decade but JPMorgan is starting to look the BP of banking. BP, you'll recall, was cited for safety violation with far greater frequency than its competitors in the years leading up to its 2010 disaster in the gulf.
I'm not saying JPMorgan is heading for the financial version of the Deepwater Horizon fiasco, but I'd like to take Jamie Dimon to task for creating a culture where bad behavior seems to be epidemic across the bank. Other than some low-level muni bond traders, no one at JPMorgan has been held accountable for these violations, which would suggest Dimon condones the bad behavior.
Any why not? The fines JPMorgan has paid to date are a drop in the bucket of the tens of billions of dollars of government bailouts and subsidies the firm has received -- and continues to enjoy -- going back to the take-under of Bear Stearns in March 2008. Plus, they're a tax write-off!
(Editor's note: The Daily Ticker has extended an invitation to Mr. Dimon to come on the program and respond to this story.)
The World's Best Grifter
Dimon has taken advantage of Uncle Sam's generosity — and competitors' missteps — to turn JPMorgan into the nation's most powerful bank; if the price of that growth is having to pay some fines that don't even come with a playful slap on the wrist, he'd be a fool not to pursue this business model.
Dimon is often described as the world's best banker but these days that's like being the world's best grifter — only the law is working for you rather than trying to stop you.
Which brings me to the watchdogs. I'd also like to take to task the SEC, Federal Reserve, Justice Department and other federal regulators to task for failing to seek criminal charges and for what The NY Times calls a "softer approach" in pursuing cases against white-collar criminals.