Courtesy of Pam Martens.
Jamie Dimon, Chairman and CEO of JPMorgan Chase
Is JPMorgan actually a cartel of lawyers in drag as a bank? You’d think so reading the fine print buried in the firm’s 2011 annual report and the legal disclosures in its hair-raising third quarter report filed with the Securities and Exchange Commission (SEC) on November 5. According to its own figures, JPMorgan has paid the following sums for litigation expense: $3.8 billion for the nine months of 2012 ending September 30; $4.9 billion in 2011; and $7.4 billion in 2010 for the whopping total of $16.1 billion in 33 months. There are more than a dozen small countries that have less than that in annual GDP.
How many times have we heard the now enshrined gospel that JPMorgan escaped the 2008 crisis unscathed. Reading the mountain of lawsuits now filed against the firm, it’s clear why: JPMorgan’s role in the housing collapse has been significantly shielded from public view – until recently.
The SEC, continuing a long standing practice of dumping news of toothless settlements against Wall Street firms on Friday afternoons when, hopefully, no one is paying close attention, announced the settlement of charges against JPMorgan Chase & Co. and Credit Suisse Group AG this past Friday. The settlement related to charges that the firms misled investors in the sale of securitized residential home loans. JPMorgan agreed to pay $296.9 million, while Credit Suisse will pony up $120 million. (Included in the JPMorgan payment were separate claims against a Bear Stearns unit, which JPMorgan acquired during the financial crisis of 2008.)
Because of the muddled press release from the SEC and the late Friday afternoon announcement, it is easy for the public to dismiss this as an isolated incident relating to one JPMorgan securitization or to confuse it as a misdeed by Bear Stearns, without any underlying intent to defraud on the part of JPMorgan. Both assumptions would be wrong.
For those few taking the time to read the full SEC complaint, it is clear that the SEC is alleging that JPMorgan, itself, filed a registration for a $1.8 billion offering of securities, knowing it was intentionally misleading investors about the number of delinquent mortgages in the offering. The SEC complaint produces an email showing an investment banker at the firm was aware of the misreporting in advance of the filing of the registration, as were the lawyers writing the prospectus. Neither the investment banker’s name nor the name of the law firm were disclosed by the SEC in their complaint.
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