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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Topic: JPMorgan Chase

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October 28, 2013 at 10:53 AM

The costly story of JPWaMu

“Time wounds all heels,” or so the saying goes. The big news lately has been JPMorgan Chase’s $13 billion settlement with the government, and in the case of the London Whale trading disaster, the Too Big To Fail institution was forced to admit wrongdoing.

In the story during and immediately after the Panic of 2008, the House of Morgan under Jamie Dimon was the one big bank that did things right. No wonder it could acquire Washington Mutual after it failed. But the whale episode, which occurred in 2012 and cost $6 billion, showed that all was not actually well inside the bank.

Now it turns out that even the neat tale of how Dimon was smart enough to avoid the trap of subprime mortgages was untrue.

According to the Wall Street Journal, before the crash JPMorgan “dealt with some of the biggest subprime lenders of the time, including Countrywide Financial Corp., Fremont Investment & Loan and WMC Mortgage, a former unit of General Electric.”

It was bundling subprime loans and selling them as securities, including to Freddie Mac, the government-backed agency that had to be saved with $100 billion in taxpayer money.

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Comments | More in Banking | Topics: JPMorgan Chase, Washington Mutual

September 20, 2013 at 10:28 AM

Vote: Was justice done with JPMorgan?

So the federal government has imposed a $920 million fine on JPMorgan Chase in connection with the fraud known as the “London Whale,” which led to $6 billion in losses to this institution which is ultimately backed by American taxpayers. The event is noteworthy for several reasons. First, the settlement required the bank to admit wrongdoing, a significant departure from the usual “neither admitting nor denying” guilt. Unfortunately, the Securities and Exchange Commission failed to name a single senior individual as being responsible. As a result, as Michael Santoro wrote in the New Yorker, “the S.E.C. will be supporting the bank’s own narrative about the Whale missteps.” As for the size of the fine, it represents about 13 days of profits.

The London Whale episode is remarkable, too, because it happened in 2012, not in 2007. It’s disheartening enough to know that every executive that built the house of cards that brought on the Great Recession — and personally profited handsomely doing so — got away with it. None went to prison or even on trial. None was forced to return even some of the compensation they received for engaging in risk hustles and derivative grifting. It was left to American taxpayers, most of whom are making less than they did in 1989, to pay the bill. The poor kid who gets caught knocking over a convenience store should be so lucky. No, the Whale came in 2012, a reminder that not only did the Too Big to Fail banks get bigger in the crisis, but their dangerous gambling continues. And remember, Jamie Dimon was considered the statesman of finance (still is) and the House of Morgan (buyer of Washington Mutual) the most prudent institution.

What do you think about the settlement?

Read on for some of the best business and economic stories of the week, and the haiku:

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Comments | More in Banking | Topics: banking, JPMorgan Chase