If you were Jamie Dimon, or a sleazy banker of the same stripe, and you got the following deal, would you take it: make billions of dollars for your bank, which, in turn, rewards you personally making you a very, very wealthy man BUT, in the process, because of a combination of incompetence, criminality and greed, you help destroy an entire economy and put millions of people out of work, for which your bank pays billions of dollars in fines BUT you get to keep your job and, despite all the crimes, you don’t spend a single night in jail nor do you take out a single dime from your own pocket because the system will protect you and instead hand the bill to essentially the very people you hurt, and you are dealing with a government with no spine or inclination to punish the responsible people at the top so don’t worry for a second…well, would you take that deal?
Of course you would.
And that, in a nutshell, is the upshot of the $13 billion sham fine Jamie Dimon cut with the Obama Administration.
The news about Dimon’s stay-out-of-jail-card-keep-getting-rich deal via The Wall Street Journal (paywall):
J.P. Morgan Chase and the Justice Department Monday agreed to a landmark $13 billion settlement that resolves a number of legal headaches for the largest U.S. bank, clearing the way for a public announcement as soon as Tuesday, according to people familiar with the talks.They added that the final piece holding up the deal—terms of $4 billion worth of aid to distressed homeowners—was completed Monday.
The historic settlement ends several investigations and lawsuits targeting soured mortgage bonds issued before the financial crisis and amounts to the biggest combination of fines and damages extracted by the U.S. government in a civil settlement with any single company.
J.P. Morgan agreed to pay at least $1.5 billion, and as much as $1.7 billion, to write down the principal amounts of J.P. Morgan-held loans in which the borrower owes more than the property is worth.In addition, at least $300 million and as much as $500 million would go toward what the mortgage industry calls forbearance—restructuring some mortgages to reduce the monthly payments, the people said.
The other $2 billion in consumer relief will be directed toward a number of different measures, including new mortgage originations for low- and moderate-income borrowers, or absorbing the remaining principal owed on properties that have been vacated but not yet foreclosed upon, the people said.
Part of the problem with this moment is that for just about every normal human being $13 billion is a lot of money. And it is.
But, not when measured with a crisis that has cost so much misery and at least $13 trillion in economic damage to the country, not to manage the cost to the rest of the world.
It’s not even pennies on the dollar compared to the damage.
The observation that “JP Morgan Chase Is A One Bank Crime Spree” comes from an organization called Better Markets, which gave JPMorgan the useful moniker as part of a campaign to pressure the Administration to be transparent in a deal. I’ll come back to the campaign in a minute.
But, first, it’s worth remembering that Jamie Dimon and JP Morgan were not innocent bystanders in the financial crisis. Dimon was a central power player in the financial system. He sat on the board of the New York Federal Reserve Board — the most powerful of the Fed’s regional banks. As Bernie Sanders said, “The conflicts of interest are so apparent that they’re laughable. Here you have the Fed, which is supposed to regulate Wall Street. Then you have the CEO of the largest Wall Street company on the board which [it] is supposed to be regulating. This is the fox guarding the henhouse.”
“One Bank Crime Spree”? Apt description if you look at the other settlements already agreed to and investigations still under way:
• In July, the bank agreed to pay $410 million for manipulating energy markets in California and the Midwest.
• In September, it paid $920 million to U.S. and British regulators to settle investigationsinto the bank’s $6.2 billion in derivative losses involving the so-called “London Whale” trader — and, then, another $100 million to cut a deal with the Commodities Futures Trading Commission (CFTC) on the same issue. The real danger: it actually had to admit guilt, meaning it could face billions of dollars in additional lawsuits.
• Also, in September, the Consumer Financial Protection Bureau ordered the bank to refund about $309 million to more than 2.1 million customers for illegal credit card practices.
• It’s one of 12 banks being sued for allegedly manipulating benchmark Libor interest rates.
• There is a bribery investigation involving the bank’s hiring conduct in Hong Kong.
• The bank is still being investigated for turning a blind eye to Bernie Madoff’s Ponzi scheme because, well, Madoff made them a lot of money so why should Dimon have cared?
What was the damage caused by Dimon and his band of financial bandits? It was at least $13 trillion — likely a whole lot more once the counting is all done. Better Markets summed this up quite well in a 2012 report entitled, “The Cost Of The Wall Street-Caused Financial Collapse and Ongoing Economic Crisis is More Than $12.8 Trillion”. It’s quite worth the time to read the 72 pages of the report and the numbers are still solid today.
The consequences of those events touch every corner of our country, including
many of our neighbors who will sit at their dinner table tonight, look their children in
the eye, and worry about their future, for good reason:
• 23.1 million Americans today cannot find full time work.
• 9.3 million Americans have lost their health insurance.
• 11 million homeowners—almost 1 in 4—are saddled with mortgages higher than the value of their homes.
• Home values have fallen to 2002 levels, destroying $7 trillion in homeowner equity.
• 3.7 to 5 million foreclosures have already forced millions of American families to move out of their homes and millions more foreclosures are in process.
• The American family’s net worth plummeted almost 40% in just three years, from 2007-2010, wiping out almost two decades of hard work and prosperity.
• Zero interest rates have prevented families from rebuilding their net worth, either by savings or investments, because yields are historically low or even negative.
• Trillions of dollars that were spent, lent, pledged, guaranteed, or otherwise used by the government to bail out the financial system and respond to the resulting economic crisis
o dramatically increased the annual deficit ($1 trillion plus) and the national debt ($8 trillion),
o and, thereby,depleted the government’s ability to maintain the social safety net and respond to the greatly increased needs arising from the Great Recession.All of that—and much more—adds up to more than $12.8 trillion.
In fact, even $12.8 trillion dramatically understates the true costs of the crises, not only because that number does not include every cost, but also because so much is simply unquantifiable. For example, the ultimate immeasurable cost is not included: preventing the complete collapse of the financial system and a second Great Depression or worse, which undoubtedly would have cost many tens of trillions of dollars more.
There are also the many incalculable costs of unprecedented government actions that
enabled that outcome: the federal guarantee of the $3.7 trillion money market industry,
which stopped a run on those funds and the liquidity crisis in short term funding that
it caused; the extraordinary overnight conversion of the two largest investment banks
into bank holding companies giving immediate access to all the highly favorable federal bank programs, which prevented their bankruptcy; and, most important, the literally priceless full federal guarantee of the entire financial system in February 2009, which almost certainly—in combination with all the other emergency measures—prevented the full collapse of the financial system and another Great Depression.
Then there are the enormous unquantifiable costs from the economic wreckage Wall Street caused from one end of our country to the other. For example, unemployment, bankruptcies, foreclosures, and underwater homes have destroyed many neighborhoods and communities across the country, while decimating the tax base of cities, towns, counties, and states. Added to that are the demoralizing and gnawing invisible costs of anguish, anger, depression, and often humiliation from losing a job and failing to provide for a family; being forced to move out of a home, often to move in with relatives or friends, but sometimes to move into a car or homeless shelter; watching your children get sick with no ability to go to a doctor or pay for a prescription; signing up for food stamps and having your children get free school lunches that you can no longer afford; having to break it to your children, who have worked so hard in school, that college is no longer affordable and they have to get a job, any job, as soon as possible; or your spouse finding out that you aren’t retired but working at a low paying, often minimum wage, job because you need the money. This list sadly goes on and on, including spouse, child, alcohol, and, too often, drug abuse.[emphasis added]
As this deal was being negotiated, Better Markets sent a letter to Attorney General Eric Holder, demanding that all the details of the negotiations with JP Morgan be made public so, in the words of Dennis Kelleher, President and CEO of Better Markets, the people “…can decide for themselves if the settlement is just another sweetheart deal for Wall Street or in fact an appropriate punishment for unprecedented and massive illegal and criminal conduct.”In the letter, Kelleher lists a whole series of documents and disclosures that Holder should release as part of any settlement.
Holder never replied, as far as we know (and Better Markets has not published a reply). None of the documents requested will be made public — at least without a fight.
Now, here we come to the question: who actually pays these fines?
The answer: You. And the bank’s shareholders. The bank has set aside $23 billion to pay off penalties and fines.
That money will effectively come out of the pockets of shareholders AND every customer of the bank who will see higher fees imposed on every transaction regular people have to make — in a quiet way, and obviously not declared as a way to claw back the costs to settle the litigation and investigations.
Jamie Dimon does not lose a dime in this deal.
He keeps his job with its multi-million dollar pay, pension and other benefits package.
Not one dime from his pocket.
It is, indeed, astonishing that this deal does not require Dimon to step down from his position at JPMorgan despite this long track record of running a “one bank crime spree”– and the bank’s board of directors is stacked with his cronies so he will not lose his job no matter how much he costs the bank.
At the end of the day, the putrid deal lets Dimon off the hook and sends a pretty clear message: nothing has changed.