When it comes to negotiations involving the so-called federal regulators (U.S. Justice Department) and the big-money-center-too-big-to-fail-national-institutions better known as banks, it seems that it really isn’t rocket science. I should probably be more specific and memorialize history’s most beloved culprit, namely JPMorgan Chase & Co.
Whether it was the tragic sinking of the Titanic, a White Star Line cruise ship owned by J.P. Morgan & Co., or the sinking of the RMS Lusitania, a Cunard Line gun-running ocean liner that led to our entry into WWI, it seems that the House of Morgan is always at the center of the imbroglio. In addition, the proclaimed multi-billion dollar “London Whale” losses seem to be just another daily event in the life of Wall Street’s most infamous investment bank, as were the LIBOR manipulations. Moreover, it appears that legal actions, reactions, fines, and the announcement of “no admission or denial of guilt” always seems to be the order of the day for Morgan.
That’s why the most recent deal between JPMorgan Chase CEO Jamie Dimon and the U.S. government — settling for a paltry $5.1 billion on the allegations that JPMorgan sold faulty home loans and mortgage-backed securities to Fannie Mae and Freddie Mac — was definitely a no brainer.
The $5.1 billion is only part of the potential overall settlement that’s rumored to be $13 billion. Now before you start shedding tears for the Morgan gang and wish to conduct a telethon for their benefit, please do the math. The Federal Housing Finance Agency (FHFA) sued JPMorgan and several others in an attempt to recover some of the losses that taxpayers suffered when the federal government took control of Fannie and Freddie in 2008, and it was estimated that Morgan took in $33 billion from all those shenanigans. As Fannie and Freddie continued to sink deeper into red, it was only a matter of time before the “banksters” would be asked to pay up. Of course, to repay $33 billion would be completely out of the question, economically unfeasible, and certainly not politically correct. Therefore, with $33 billion “in” and $13 billion “out” in potential total penalties, it would result in $20 billion remaining in the Morgan coffers.
The taxpayers will have recovered something; the TBTF will continue on its merry way (albeit $20 billion richer), and the government regulators will join their bank counterparts for cocktails as they raise their glasses and drink in honor of a job well done.
No, it really isn’t rocket science — it’s just another day at the office for JPMorgan.