Taxpayer Bailout For JPMorgan?


Will Jamie Dimon Keep His Cool?

JPMorgan lawyers and public relations staff could have lifetime employment. Seven US regulatory agencies and one European Commission are in hot pursuit to investigate and fine JP Morgan for poor compliance, conspiracies to mislead regulators and misstatement of earnings.

Topping the list is this week’s $6 billion penalty from the Federal Housing Finance Agency for how JPMorgan lied about the true worth of $33bn of home mortgages in 2007. Early betting is that JPMorgan will try to settle for a bit less, like $5bn. That alone would be a record-breaking fine.

Meanwhile Jaime Dimon has gone from Jaime the Flamboyant to Jamie the Cool. Since he beat a stockholder attempt to dump him, he avoids making remarks like the famous one at a Senate hearing about how $2bn billion in losses in one scandal was a “tempest in a teapot” to JPMorgan. His cool was shaky this week when he pouted that a $6bn fine was “unfair” because JP Morgan didn’t do it, banks JPM bought did it. He can pout but JPMorgan will pay.

Could this mean a taxpayer bailout for JPMorgan? Not this time.  JPMorgan can absorb a $6bn fine, like a big sponge absorbing a messy spill. JPMorgan profits currently are between $21bn to $29bn. Breaking laws, sidestepping regulations, hiring the best lobbyists, buying competitors and supporting the right senators is highly profitable.

A $5 or $6bn fine will not come directly out of your pocket. However it could come indirectly out of your pocket if any of the penalties are deductible by JPMorgan as a cost of doing business– like legal fees or part of the fine that would lower JPMorgan’s corporate income taxes.

For more details on the JPMorgan’s pursuers, see The Financial Times of August 28: JPMorgan’s woes deepen as US demands $6bn penalty (page 1) and Regulator battles threaten to swamp JPMorgan (page 13.)

 

 

 

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