JP Morgan Making a Fortune Off of American Poverty
Earnings and bonus reports are rolling in and the big, bailed-out banks are back in the black. In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion -- up almost six percent from 2009 according to the Wall Street Journal. JPMorgan Chase CEO Jamie Dimon may take home the biggest bonus check, an eye-popping $17 million.
While the Wall Street economy is booming, the real economy is in a dead stall. Only 36,000 jobs were created in January 2011. A roundup of recent headlines shines a light on how big banks like JPMorgan Chase make their big bucks.
No Saving Private Ryan
U.S. foreclosure filings are projected to reach 9 million in 2011. An increasing number of the foreclosed are U.S. service members even though they have access to special protections and programs. USA Today reports that foreclosure filings near military bases jumped 32 percent since 2008. More than 20,000 veterans, reservists and active-duty troops lost the homes to foreclosure in 2010, the highest number since 2003. This report comes hard on the heels of an NBC expose showing that JPMorgan Chase illegally overcharged 4,000 active service members for their mortgages improperly foreclosing on a number of them.
Diane Thompson from the National Consumer Law Center points out that big banks and mortgage service firms have perverse financial incentives that spur them to foreclose. “The servicer’s expenses, other than the financing costs associated with advances, will be paid first out of the proceeds of a foreclosure. . . Whether and when costs are recovered in a modification is more uncertain.”
In other words, big banks and mortgage firms are rushing to kick American families to the curb to pocket more fees. Thanks for the service boys!
Profiting on Poverty
In these hard times, some 43 million American families rely on food stamps. To the surprise of many, JPMorgan Chase is the largest processor of food stamp benefits in the United States. The bank is contracted to provide food stamp debit cards in 26 U.S. states and the District of Columbia.
The firm is paid per customer. This means that when the number of food stamp recipients goes up, so do JPMorgan profits. Talk about perverse incentives. JPMorgan is taking its responsibility to keep the U.S. unemployment rate high by offshoring the servicing of many of these contracts to India, according to ABC News.
Michael Snyder of the Seeking Alpha blog put it best: “There are just some things that are a little too creepy to be outsourced to private corporations.“
Aiding and Abetting Bernie Madoff
According to documents in a lawsuit made public Thursday, senior executives at JPMorgan Chase expressed doubts about Bernie Madoff’s miraculous investment returns more than 18 months before Madoff's Ponzi scheme collapsed, but continued to serve as his primary bank and failed to report him to federal authorities.
The lawsuit was filed against JPMorgan and other firms by the bankruptcy trustee gathering assets for Madoff’s victims. The suit alleges that JPMorgan allowed Madoff to move billions of dollars of investors’ cash in and out of his bank accounts right until the day of his arrest even though there were an abundance of red flags.
The bank “had only to glance at the bizarre activity” in the Madoff accounts “to realize that Madoff was not operating a legitimate business,” the trustee asserts. The unusual activity should have tripped the banks anti-money laundering software. The suit also alleges J.P. Morgan was creating products to leverage off of this relationship with Madoff. JP Morgan denies any wrongdoing.
Covering Up Fraud at Bear Sterns
Another lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was recently unsealed. A trove of documents reviewed by Atlantic Monthly suggest that Bear Stern executives cheated clients out of billions by double dipping on securities sales they knew to be flawed. In a stack of damning emails, Bear Sterns top executives crow over selling investors a "sack of shit.
The lawsuit also alleges a cover up by JPMorgan Chase (which bought Bear in 2008). Ambac recently won a court order to add misrepresentation claims against JPMorgan to its suit, which can double or triple lawsuit award. JPMorgan, of course, denies any wrongdoing.
"Not Fair," says Dimon
At last week's World Economic Forum in Davos, Switzerland, Jamie Dimon lambasted the media and politicians for portraying all bankers as greedy evil-doers. “I just think this constant refrain [of] ‘bankers, bankers, bankers,’ -- it’s just a really unproductive and unfair way of treating people. It’s not fair to lump all banks together,” he steamed. Don't worry Jamie, you are on a level all of your own.
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Learn more about JPMorgan Chase and its role in the financial crisis at Sourcewatch.org.