Is it Time to Break Up JP Morgan?


Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger

I am sure that you have heard the phrases, “Too Big to Fail” and “Too Big to Jail”, when it comes to the so-called Big Banks.  Indeed, the topic has been written about and discussed on many occasions here on Professor Turley’s blog.  Fellow Guest Blogger Elaine Magliaro wrote about it here, and I wrote about Big Banks plotting, along with the FDIC and the Bank of England to “steal” depositors money in order to bail out gambling banks, to name a couple of recent articles.

The stories about Big Banks being investigated and fined could fill a very large hard drive.  Even with all of those stories and countless others, I was still shocked to read recently about a meeting that JP Morgan CEO Jamie Dimon had with the United States Attorney General, Eric Holder.  It was reported that the purpose of the meeting was to discuss yet another financial settlement for alleged JP Morgan irregularities. The numbers they allegedly were discussing were staggering!

According to reports, Dimon and AG Holder were discussing settlements in the neighborhood of $3 Billion to $11 Billion.  That is one hell of neighborhood!

“JPMorgan (JPM) CEO Jamie Dimon met with Attorney General Eric Holder on Thursday morning as rumors swirled about a possible $11 billion settlement to end criminal and civil charges against the bank. The Justice Department has a minimum of seven different probes into JPM and they’re reportedly trying to settle as many as possible in rapid fashion.

According to several reports JPM made a $3 billion settlement offer connected to alleged abuses in residential mortgage backed securities. Mr. Holder is said to have rejected the offer. Last week JPM paid $920 million and “admitted to some wrongdoing” to settle regulatory charges connected to the “London Whale” losses.” Yahoo

I just can’t imagine how any corporation could continue to do business when they are paying fines in the range that JP Morgan is paying or negotiating.  However, when you are raking in the Billions as JP Morgan is, these large fines may just be like a mosquito bite. The Yahoo article linked above, goes on to give a more complete picture of the costs that JP Morgan has incurred in fines.

“Regarding JPMorgan’s settlements and charges and degrees to which the bank is willing to concede guilt, two things are clear. One, JPM has a ton of money. Earnings estimates are pegged around $22 billion for 2013 and the company has a market cap of about $200 billion. The other is that it will always be politically expedient for young prosecutors on the make to attack Wall Street banks. JPM is going to be in a constant state of legal defense for the foreseeable future.

Ritholtz Wealth Managment CIO and Big Picture editor Barry Ritholtz says JPMorgan has shelled out about $11 billion in fines and spent around $16 billion in legal fees in the last few years. “This is just the cost of doing business for these mega banks.”

I guess when you are “earning” $22 Billion in 2013 alone, the settlement amounts could be considered a pin prick to JP Morgan.  However, at what point will JP Morgan’s shareholders revolt against the business practices that are causing these huge fines?  I could go a step further and ask when will Americans insist that when any corporation has committed fraud, someone should pay a criminal price along with the financial price?

When I read that JP Morgan is shelling out Billions in fines and legal costs, I wonder why the business model hasn’t changed to prevent or reduce these allegedly illegal practices?  The answer is in the aforementioned earnings numbers from JP Morgan.  The fines and legal costs are just another cost of doing business.  The problem is that they are not gambling their own money.  They are gambling and paying out depositor’s monies and shareholder’s money.

It seems obvious to me that unless someone goes to jail and/or big financial institutions like JP Morgan are broken up, this improper activity will continue unabated.  This is not a political issue.  This is an issue of protecting shareholders and depositor’s funds from the continued shell game that is being played by the large financial institutions.

It is far past the time when cabals like JP Morgan are prosecuted for financial crimes and put out of business.  I submit that putting some high executives in jail when they break the law, may have a deterrent effect on the rest of the industry.  I not talking about making a few examples.

I am talking about dealing with alleged law breaking financial executives the same way that the government and law enforcement authorities deal with common criminals.   If there is evidence that indicates illegal activity, no matter who and what organization is involved, investigate and indict and prosecute them.

Wasn’t it Mitt Romney who once said, and I am paraphrasing here, that corporations are people too?  Then it is time that “people” like JP Morgan go to jail for their allegedly illegal activities.  Do you agree?  What action do you think the Justice Department should take in dealing with financial criminals?  If we break up the big banks and/or put law breaking executives in jail, will that stop or reduce the financial crimes that rob shareholders and depositors?  What do you think?

Additional resources:  Nation of Change;

73 thoughts on “Is it Time to Break Up JP Morgan?”

  1. JPMorgan Chase Reports $380 Million Loss As Legal Costs Jump
    Reuters | Posted: 10/11/2013

    JPMorgan Chase & Co , the biggest U.S. bank by assets, reported a rare quarterly loss after incurring $9.2 billion in legal expenses, including money set aside for future settlements.

    The bank posted a loss of $380 million, or 17 cents per share, in the third quarter, compared with net income of $5.71 billion, or $1.40 per share, a year earlier.

    Excluding litigation expense and reserve release, the company posted a profit of $5.82 billion, or $1.42 per share.

    Analysts on average had expected earnings of $1.20 per share, according to Thomson Reuters I/B/E/S. It was not immediately clear if the results were comparable.

    JPMorgan’s shares were up 1.9 percent at $53.50 in premarket trading.

    The prospect of additional legal expenses have been weighing on JPMorgan and CEO Jamie Dimon for more than a year as the company has come under intense scrutiny from regulators following the disclosure of derivatives loss in May 2012.

    “While we expect our litigation costs should abate and normalize over time, they may continue to be volatile over the next several quarters,” Dimon said in a statement.

  2. RWL,

    Both Democrats and Republicans were responsible. Think of what happened to Brooksley Born when she warned the powers that be about the problems that derivatives would cause. She was done in by Larry Summers, Alan Greenspan, and Robert Rubin…during a Democratic administration.

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