Guess How Much More Wall St. Spends on Bonuses Than on Penalties for Torpedoing the Economy?
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Are you enraged about JPM Chase’s puny $156.3 million fine? The fine was part of an SEC settlement in which the firm "neither admits nor denies" any wrong-doing. Translation: Stuffing assets with carefully selected crap is not wrong. Creating the crap loans to begin with: Also, not wrong.
Of course you’re pissed off. I know I am.
There aren’t enough synonyms for the word "tiny" to adequately describe the size and impact of this settlement. It's a fleabite on the hand of the nation's second largest bank in punitive pain terms, and meaningless in stopping the creation of toxic assets, or reducing the criminal complexity of our banking system.
This JPM Chase settlement isn’t the first wrist slap for a financial firm’s role in killing our economy and making off with the money and the bailouts, while our political leaders scratch their heads and wonder where all the debt came from. This hush money is part of the SEC’s two-year program to address, in its own words, the " misconduct that led to or arose from the financial crisis."
So far, the SEC has charged four firms with CDO (one of the many types of toxic assets) related fraud, including Wachovia, Goldman Sachs and JPM Chase, which settled for $11 million, $550 million (plus a civil court fine of $10 million earlier this month), and $156 million respectively. Its case against ICP Asset management remains open.
The commission also charged five firms with making misleading disclosures to investors about mortgage risks, including American Home Mortgage, whose former CEO settled for a paltry $2.45 million fine and was barred from taking a director position on any board for five years; Citigroup, which settled for a $75 million penalty; and Bank of America’s Countrywide, whose former CEO, Angelo Mozilo agreed to a $22.5 million penalty and was permanently barred from being a paid director of a public company (it was a fraction of his pre-crisis $470 million take). Additionally, New Century executives were fined $1.5 million and barred from sitting on corporate boards for five years. There is an ongoing case against IndyMac Bancorp.
In addition, the SEC charged six firms with concealing the extent of risky mortgage assets dumped into mutual funds. Charles Schwab settled for a $118 million fine – it is running an expensive TV ad campaign that doesn’t mention this. Evergreen, TD Ameritrade and State Street settled for $40 million, $10 million and $300 million fines respectively.
Separately, Bank of America agreed to a $150 million settlement for misleading its investors (read: the people who own stock in Bank of America) about bonuses paid to Merrill Lynch executives, and for not disclosing Merrill Lynch's mounting losses, before taking the firm over in September 2008. This didn't stop the Federal Reserve and Treasury Department from ardently pushing the Bank of America/Merrill Lynch merger. Neither entity has said word one about the irony of making a big bank (notably one that required the SEC investigation to begin with) bigger.
The trivial JPM Chase settlement appears even smaller when compared to the financial goodies the bank received in the wake of its financial crisis. Despite CEO Jamie Dimon's disingenuous, though fervently delivered, remarks to the contrary (he didn't need a bailout, he took it for the "team" so no bank would be singled out, with a scarlet B of bailout shame), JPM Chase, at the height of the federal bank subsidization program, got nearly $100 BILLION dollars worth of -- help.
That figure included: $25 billion from the TARP fund, which has since been repaid, $40.5 billion of backing from the FDIC's Temporary Liquidity Guarantee Program (TLGP), which has since been retired, about $6 billion through the TARP HAMP program which aided a fraction of underwater borrowers, and $28.8 billion of Fed-backed, Treasury-pushed money to cushion any potential losses that could result from its takeover of Bear Stearns. Not to mention, JPM Chase got lots of government support when it took over Washington Mutual.