JPMorgan Chase Executive Admits that Bailout Will Be Used Not To Make New Loans But to Buy Other Companies

For those who opposed the massive bailout, a report in the New York Times may be little surprise.  A reporter was able to get into a telephone conference call with JPMorgan Chase to hear executives discuss the $25 billion it received from Congress.  Just four days after the bailout, JPMorgan Chase’s chief executive, Jamie Dimon held the conference call during which an executive admitted that Chase has no intention to use the money to make new loans but instead will use it to try to take over other companies.


The critical moment on the Oct. 17th call came when someone asked “Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”

Here is the response:

“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase. What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”

I feel much better.

For the full story, click here.

57 thoughts on “JPMorgan Chase Executive Admits that Bailout Will Be Used Not To Make New Loans But to Buy Other Companies

  1. So when you excuse and reward bad behavior, and enforce no negative consequences, it just encourages more bad behavior? Somebody should write books about this. Think of all the topics you could cover. I mean I can see applications in pet ownership, child raising, sports team management, … the list just goes on and on.

  2. Playing Devil’s Advocate here, from what I understand there was an agreement that all the large banks should take bailout money even if they didn’t need it, to avoid placing a scarlet letter on the ones who did and seeing a WaMu style bank run take place.

    If JP Morgan in fact is one of those firms that didn’t need the money (they and BofA have been the most conspicuous buyers in this merger mania), maybe we want them acquiring less stable institutions with the money they didn’t ask for.

    Then again, maybe we want to start stocking up on canned goods and bullets for the oncoming post-apocalyptic landscape we’re sure to face.

  3. This is one of the consequences of the Authorization to Use Financial Force that opponents of the bailout bill were most concerned about. It was foreseeable. This money should be returned to the tax payers immediately. Consolidation of the banks in the hands of GS and friends is a disaster for consumers. Failure to force the banks to renegotiate the loans will only worsen the economy. Not that they care, but we should.

  4. 1L,

    What you’re saying might be the rationalization, but here’s my take (this analogy isn’t perfect):

    Say I get money from local charities so that my family has enough to eat. The truth is that my family has enough money for food, but not for a big T.V. If I use that money to buy a T.V., isn’t that a scam?

  5. The Fed may be able to force banks to take taxpayer money, but they can’t force them to lend it back to the taxpayer. Instead, banks are hoarding the cash, or using it to fund mergers and takeovers of other banks. And now GM wants in on the action (though they are not a bank). They are asking the Treasury for a big chunk of change to fund GM’s merger with Chrysler. That’s nice.

    That used to be a private endeavor. Now these mergers are being socialized. We are paying (and will continue to for a long, long time) for these acquisitions. And when the bill comes due and our leadership has to make the choice between letting our infrastructure crumble or raising taxes to pay for the repairs (because over a trillion will have been handed over to banks and companies like GM) we’ll be on the hook for that, too. Once we’re struggling from higher prices, a weaker dollar, debt and higher taxes, we can always go down to the bank that we helped rescue and beg for a loan. Maybe by then they’ll be in a ‘lending mood’ again (for a nominal interest rate, of course).

    Lending the taxpayers money that was boosted from the taxpayers. Now that’s original.

  6. Another thing that’s interesting about the tape is how open these people are that we’re in recession heading for a depression. Kevin Phillips has pointed out many times how most of the economists we hear are paid hacks who speak the “happy talk” even when they knno it’s a lie.

    This behavior is so incredibly shameful and stupid. We are in a true economic crisis here. Wealthy people need to pull together with the rest of the population for everyone’s sake. This is not the time to misuse funds, status and power for bad ends. I do not understand how wealthy people think it’s fine to watch the suffering of others while they sip their wine. That is morally grotesque. If ever there was a time to pull together for the common good, this would be it.

  7. Gyges,

    Absolutely a fair point. The only thing that worries me some is the idea that imprudent lending at least in part got us into this mess, and shortsightedness of having one of the more stable institutions be forced to lend when it could potentially use the money to stabilize other institutions so the government won’t have to.

    After seeing all the people who I mistakenly thought had any idea what was going on fall from grace (Greenspan, Paulson, etc.) I’m convinced anyone who says they know the way out of this is wrong or lying. I’m heading to Atlantic City and putting all my student loans on black. Wish me luck.

  8. 1L,

    It was’n really imprudent lending, it was fradulent. The banks knew exactly what they were doing and they made a whole lot of money doing it. Failure to lend while aquiring other banks who also won’t lend will not stabilize the financial situation. This is another scam, nothing more.

    I do wish you luck at AC!!!

  9. 1L,

    While in AC, remember to tip your servers and never play cards with someone named after a gem stone and/or a state in any combination.

  10. ‘… maybe we want them acquiring less stable institutions with the money they didn’t ask for.’
    You get it, 1L. If I were Jamie Dimon, I’d probably do the same thing given the way it was presented – ie take the money now or if you get into trouble later, expect no help from the feds ie they would be ‘allowed to fail’. Sounds like a threat to me. I’d be looking to cover some serious ass – my business, my shareholders, my depositors, and my employees while keeping and eye on and a finger in as many investment pies as I could swing.

    Anybody else ever wonder what happened to Eliot Spitzer?

    Predatory Lenders’ Partner in Crime
    How the Bush Administration Stopped the States From Stepping In to Help Consumers

    By Eliot Spitzer
    Thursday, February 14, 2008; Page A25

    Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers’ ability to repay, making loans with deceptive “teaser” rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

    Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

    Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York’s, enacted laws aimed at curbing such practices.

    What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

    Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

    Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

    In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

    But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

    Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

    When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

    The writer is governor of New York.

  11. This likely use of the bailout funds has also been endorsed by Stephen Schwarzman of the Blackstone Group. (Schwarzman made headlines a year or two ago when he threw a multi-million dollar birthday party for himself.)

  12. “When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners …”

    There’s a few problems with that phrase. If you bought a house and agreed to pay back the loan, it does not matter whether the home is worth more this year or less. You bought the home and agreed to pay the mortgage. If you could not afford the loan you agreed to pay, it does not matter how much the home is ‘worth’. You thought it was worth a certain amount and agreed to pay that amount, based on the loan terms you agreed to. You decided to take that loan and pay according to it’s terms.

    Unless you were betting on the home rocketing up in value, and now you simply don’t want to pay the mortgage because it isn’t worth what you thought it would be. Were many of these people planning on ‘flipping’ the house? It’s not a stock that you can purchase in the morning and sell in the afternoon. Weren’t they planning on living there for a decade or actually paying it off? Didn’t they consider whether or not they could actually afford the terms of the loan?

    When I hear politicians claim that people “can’t afford to repay their loans because the house is worth less than what they paid for it” it makes me laugh. Of course they can’t afford it, but it’s not because the home is worth less; it’s because they couldn’t afford it to begin with, they never took that into consideration, they don’t feel like continuing to pay on a poor investment choice, and they were wrong when they thought it would be worth more the following year. They took a huge risk that didn’t pay off.

    Nobody held a gun to their head and forced them to take a risky loan.

    There is a sh**load of blame to go around, but these ‘poor, hapless homeowners’ knew what they were trying to do; invest in a house and turn a big profit.

    Simply excusing the poor decisions of the home-buyers and calling them victims is absurd.

  13. Mojo,

    There absolutely were scammers who bought homes to flip. Those are not the majority of home owners in trouble at this time. You’re not taking into account the many, many people who really were victims in the market. There is a large body of evidence that appraisers gave inflated “market” values to homes with the encouragement (often threats) of lenders. Mortagage lenders are on tape saying they lied to buyers about the loans, and ways they would make the loans affordable to them. Some of these lenders are even now starting to be proscecuted. When your lender “explains” how this home is afforable to you and you think the appraisal is an independent indicator of your home’s worth, even when it’s not, I call that fraud. Fraud is a crime. People who had excellent credit were deliberately put in more risky loans because this resulted in greater profit to the lender, both on the origination fee, and then when the loan was immediately bundled and sold, again and again at a profit each time. No one in the finacial industry was a victim when buying these bundled loans, but I don’t see how fraud perpetrated on homeowners (which is even now being prosecuted) can be understood another way than being a victim of illegal activity.

  14. Jill –

    I absolutely agree with you on almost everything you’ve stated. Appraisers were threatened with being black-listed and not working if they didn’t come back with higher values to please the lenders. And yet they complied with the scam so they could get work.

    It’s such a mess. Realtors who work for the NAR, which is largely unregulated (they pay lobbyists to ensure that) make a higher commission if the home sells for a higher price, so there is hardly such a thing as a “buyer’s agent”. The lender, the seller, the appraiser and the agent are standing to gain if the home sells for much more than it’s actually worth. But buyers ‘bought’ what they were being sold. They didn’t do their research. Many saw dollar signs and went with it.

    If you’re sitting at the poker table and you can’t tell who the mark is, then it’s you, the buyer. Yes, it’s really that nasty out there under a Republican administration.

    It’s called a ‘housing market’ because markets fluctuate. They go up and they go down. If it only went up it would be called the ‘housing miracle’ …

    I agree there was rampant fraud. But I think the majority of buyers took their purchases too lightly. They didn’t read the paperwork. It’s only the biggest financial decision most people will ever have to make in their lifetimes. I’m just saying that nobody is really innocent here, except those who did not participate but still have to pay, through their taxes, for the damage.

    If you make a bad investment, whether it’s a stock, a vintage car or a baseball card, and the value plummets, you can’t turn around and say, “Well, now I can no longer afford to make the payments.”

    They just don’t want to.

    But I absolutely enjoy your remarks, Jill.

  15. Sorry.

    Jill doesn’t know what she is talking about!

    Obviously, neither one of you is in the real estate markets
    OR the stock markets…

  16. ‘If you’re sitting at the poker table and you can’t tell who the mark is, then it’s you, the buyer…

    Yeah, OK – at least admit this is not your thought, originally.

    Don’t be like Jill ie mindless- and keep regurgitating whatever you hear.

    She makes me sick!

    If that’s who you are then, both of you – just ‘get off the stage’…

  17. Why does Jill threaten you so? I don’t think anyone wants to challenge your alpha female position. After all, who could? You were already at Plymouth Rock to greet the Pilgrims, and you’re the mother of all the daughters of the American Revolution. You’re the best, the most, the oldest, the first.

    You often have clever ideas, Patty, and you have a dry wit that can be really fun. But your insults are escalating, and it’s increasingly unbecoming.

  18. “If you make a bad investment, whether it’s a stock, a vintage car or a baseball card, and the value plummets, you can’t turn around and say, “Well, now I can no longer afford to make the payments.”

    They just don’t want to.


    I always enjoy reading what you have to say as well. I think that the firms being bailed out made bad investments, which they knew at the time were a ponzi scheme and are doing exactly what you said: turning around and saying they won’t make the payments, they’ll take the taxpayers’ funds. they’ll keep the bonuses, their lavish lifestyles, and remain completely unaccountable for any of it.

    In Toledo, we have a really high foreclosure rate. Many people have been and continue to be laid off. We have a very high unemployment rate and 1 of 10 of our citizens is on foodstamps. Many people took out mortgages that they could afford at the time. Some of these mortgages were taken on due to the lender assuring them they could just refinance the home in a couple years–no problem. I own my home so I’ve read through my mortgage papers and I can’t say they’re all that intelligable without a law degree. Many people simply don’t realize that you really do need a knowledable atty. to tell you what the hell the papers mean. I realize this sounds naive, but it’s true. People rely on loan officers to tell them the facts. In fact, they have some reason for this reliance, as technically, these loan sharks have fiduciary duties to the buyers, mostly honored in the breech. They simply don’t realize that the whole process of buying a home is fundamentally adviserial at every point. It’s lambs to the slaughter.

    Secondly, many people here were able to afford their home, but have lost their job, or gotten ill. It’s not a matter of not wanting to pay the mortgage, it’s a matter of they can’t.

    To me, it makes no sense not to work with people to renegoitate these mortgages. House lie empty, bringing down surrounding property values. Houses get stripped bare for parts. Worse to me, is the horrible disruption that being expelled from one’s home and scrambling to find some place to live (and more homeless around here are families). This itself causes people to have difficulties keeping a job, it’s a hugh stress on families, especially displaced children. I see no reason for this misery. Banks will lose money on a foreclosure at any rate. Why not work with people to keep them in their home for the same loss they’d take on a foreclosure anyway?

    I don’t know if you’ve read any books by Elizabeth Warren from Harvard but she goes into great detail, and has a lot of research behind her explanation of how so many of us come into overwhelming debt.

  19. my apologies, LL – posted to wrong thread

    Patty C 1, October 31, 2008 at 12:10 pm

    Lindy Lou, I’m not even going to dignify that with a response except to provide this little gem – which I came across last night.

    Remember (Saint) Bartleby (at your service) a/k/a Cro’Magnon’man who did nothing more than try to start ridiculous arguments with anybody and everybody? On the first day, he attacked me and my dead ancestors
    for no reason, and when I stood up for them and myself by telling him to get lost, Jill decided it was the perfect opportunity to encourage
    someone like him to stick around and become her new BFF.

    It’s not I who is feeling ‘threatened. Jill likes to manipulate people – the more fragile the better.

    This is what I think about Jill:

    She is not married, has no children, is disabled and trapped on Social Security, and lives with an elderly parent. She owns no real property except for an old jalopy – maybe. She has no real social life – just this blog.

    She has delusions of hooking up with a hot-shot lawyer who will appreciate her ‘for who she is’ and rescue her…

    Garcon, barf bag… s’il vous plait?

    …as in, will never happen!

    FYI, just because my great grandparents were wealthy, at one time, doesn’t mean that what I have been able to achieve was handed to me.
    Quite the opposite.

    My WASP grandfather married a French Catholic.
    Quite the family scandal in those days…

  20. ‘ Secondly, many people here were able to afford their home, but have lost their job, or gotten ill. It’s not a matter of not wanting to pay the mortgage, it’s a matter of they can’t.’


    I am not unsympathetic.

    However, if these homeowners who became ill did not have long-term disability insurance as part of a comprehensive life insurance package, theirs was never a good realistic overall plan. Too bad.

    As for the rest who lost their jobs, there is a window while on ‘Unemployment’. Finding a way to retool and use one’s skills in a slightly different way and possibly start a business, or retrain and switch careers altogether are all possibilities.

    Going back to school is available for many also.



  22. Thank you very much for your post. Absolutely excellent information and very useful for me. Great done and keep posted. Looking forward to reading more from you.

  23. Bailout for banks aren’t helping me out. I called Chase today to try to get my interest rate lowered since all my other credit cards are doing it. But they refused saying my account was closed and if I hadn’t closed it when I did it would have went to 17.99% from the 8.99 that it is today..And that I couldn’t reopen it because it had been closed past the 90 days. And even if I did it would go to 17.99 even though I have paid my bills on time and rates are going down.

    I asked if they recieved a bailout from Congress and were told that they didn’t. Then I looked it up and found out that they recieved the 25 billion. Called back because I was upset that they lied to me. But still no lower intereste rate for me… Guess I have to not pay my bills to get a break..

    Can’t believe they would lie about the bailout. Could believe they wouldn’t help me. I wasn’t asking for a bailout just a lower interest rate.

  24. This goes way beyond failure to mitigate the losses on loans that have already gone south (for whatever reason). Chase is looking for any excuse to withdraw from commitments previously made to good credit risks, people who have used credit responsibly for years without problems, with sterling credit ratings, substantial incomes and all kinds of insurance, who they cannot hit up for late fees and penalty interest rates.

    If you read the entire article Mr. Dimon is quoted as saying “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” Does that perhaps mean the Fed has driven interest rates so low for non-defaulting borrowers that he simply can’t make as big a profit from lending safely as he can from eliminating the competition? That’s the way to turn recession into depression.

  25. New Yorker,

    That is an interesting point. Banks have been making most of their credit card profits on fees and penalties for years now. Notice that Congress closed off some of this ability recently with legislation, but it will not take effect until 2010, allowing banks to get that last widdow’s mite as more and more borrowers default. Banks certainly are using the bailout money to buy out competitors, just as you said.

    If you have time to write further anaylsis I’d like to hear it.

  26. For a bank that didn’t need the money, they sure are pushy wanting my payment. Now that they took 25 billion, Billion with a B, why don’t they use that money to help me. Where is my bailout. I’m the one that lost my job, another case of corporate out of touch with america.


  28. Well JP Morgan Chase just charged me a $39 dollar late fee for paying late on my card (as they had moved the regular monthly payment date ahead one week) on top of a 14.95 payment by phone charge in addition to the usual 26.49% interest. How much in interest is JP Morgan Chase paying the US taxpayers? Politicians are certainly out of touch with the crap the regular guy has to put up with from these banks. I was sent recently a pre-screened unsecured personal loan offer from Brookwood Loans for 1 – $3,000 at APR 96% interest. Why don’t we make the US loans available to Chase for the same amount. That seems about fair. The opportunity has finally arrived for the government to stand up, and deal with these banks the way they’ve dealt with the taxpayers for decades. If the banks don’t like it – and don’t have real assets / currency to cover every penny of leveraged dollars, Obama could federally guarantee the banks depositors their money so as not to have a run on the bank – and then seize the bank, leaving all employees in their place. Then start creating legislation capping all the crappy things banks do. Don’t just give these thieves a ton of money.

  29. I think everyone has forgotten that the majority of G.W. Bushs’ presidency was with a democratic Congress. The same Congress that has consistently looked the other way while innocent taxpayers get beat up by big business. Even today, with a Democratic President, Congress is still looking away. Even worse, they are kicking us while we are down. I am not blaming Democrats, not at all. I am blaming the corrupted politicians that keep getting elected and keep beating us up. It is time that the entire Congress be swapped out for representatives that are for the people, not for themselves. Although I do not have the faith to say that they exist, something needs to be done. The large companies that took billions of money from US and then used it to make money instead of what it was originally designed for are commiting crimes that the average American would be jailed for. Again, who is supposed to be guarding the cookie jar? Everyone has their hands in the jar and there are not even crumbs left for the rest of us. I believe the people need a bailout now and that companies like Chase should be left holding the bag. i don’t cry to the government when my investments suffer; I chalk it up to leason learned and drive on. When did we start throwing money at billion dollar companies that can’t mange their money?

  30. And whose fault is this? Don’t blame chanse. It’s like giving your house keys to a meth addict then being surprised when all your electronics are stolen.

    What we need is to get some politicians who can remember that our gov is for the people by the people not to give away the people hard earned $$$.

  31. I agree with Hooch, it’s time to vote out the incumbents who are tight with businesses that are sticking it to us.

  32. Milo, we can’t just seize them because that’s commie %$$ and this is free enterprise (even though in free enterprise business that fail, well… FAIL!)

    I suppose we could let them fail. This is a very entrepreneurial country with lots of smart businessmen. New banks would spring up and have better, more responsible behavior so as to not make the mistakes of their predecessors. This whole bailout thing is just rewarding bad behavior and as expected, their behavior has worsened.

    This whole thing about using taxpayer’s $25B for mergers and acquisitions and having it as a reserve makes me sick!! Specially since they are dealing a HEAVY HAND at the very same taxpayers who could use a little help right now.

  33. JP Chase received a bailout from the taxpayers and did not give me a modification on an SBA loan, as well as their customer service was rude and abusive. Therefore, I have added them to protest blog named, which also has Bank of Abusing America on it. Therefore, I am looking for a JP Morgan Chase customer who would like to be in charge of the Chase protest. If you are interested, please do not hesitate to contact me at
    I always think of Bank of Abusing America and JP Morgan Chase when I hear this song:

    Have you seen the little piggies
    Crawling in the dirt
    And for all the little piggies
    Life is getting worse
    Always having dirt to play around in.

    Have you seen the bigger piggies
    In their starched white shirts
    You will find the bigger piggies
    Stirring up the dirt
    Always have clean shirts to play around in.

    In their ties with all their backing
    They don’t care what goes on around
    In their eyes there’s something lacking
    What they need’s a damn good whacking.

    Everywhere there’s lots of piggies
    Living piggy lives
    You can see them out for dinner
    With their piggy wives
    Clutching forks and knives to eat their bacon.

    Divided we might have fallen America, BUT UNITED WE MUST STAND!
    My name is John Wright AND I AM FIGHTING BACK!

  34. As for the bailouts, they should have never received it. Also, the modifications that they giving out so to speak; THAT IS ONLY A BANDAID, TEMPORARILY. THEY LOWERED MY APR. BUT STILL BACK WHERE WE WERE 4 YEARS AGO. LIKE I SAID, ITS ONLY A BANDAID…

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