Tag Archives: jp morgan chase

Is it Right to Divert Settlement Money Intended for Citizens?

diverting moneyNew Orleans   Every once in a while we stumble on some real “ah-ha” moments, where the obvious finally is so unavoidable we almost trip over it.

            For me this has been happening recently while reading about the JP Morgan Chase $13 billion dollar settlements as the money is distributed to the states and the states put the money towards foreclosure remediation.  The money starts as too little too late for millions of foreclosure families victimized by the banks’ fast, loose, and, frankly, fraudulent practices.  The state Attorney Generals got in the game and righteously sued Chase and the rest of the banks along with federal government in order to provide relief for homeowners.

            Then after the story moves off the front pages, and then later off of the business pages as well, to the nitty-gritty where it can finally do some good, what happens?  I had never fully grasped how little, if any, might actually get to the victims themselves.  The story of the dispute between New York State Attorney General Eric Schneiderman and Governor Andrew Cuomo brings all of this to the forefront.  New York gets more than $600 million of the settlement with about $165 million in the first year.  It seems the Attorney General wanted to use the money to actually go to housing programs and foreclosure remediation.  It seems that the Governor wanted the whole sum initially to go into the general fund of the State of New York, ostensibly to pay for pre-K education.  Hey, universal pre-K is a great thing, but why would Chase foreclosure money not actually be used to fund foreclosure abatement and remediation for the thousands of victims in New York State?  That’s why New York’s share was $613 million after all.    So, they made a deal for the 1st year only that gave half or $80 something million for housing programs and the other half to the general fund. 

This doesn’t seem quite right does it?  Yet, it may be the normal “bait-and-switch” being performed in state after state.

Take the giant tobacco settlement money that those companies are still paying to the states as another big fat example.  As the years have gone by, it is shocking to see how underfunded tobacco prevention programs are by the state.  It’s hard to compare one to one with the foreclosure money because too many of the reports mix apples and oranges between a state’s share of the settlement billions and their even greater share of tobacco taxes they collect, but regardless the Center for Disease Control reports that prevention programs are only being funded at about 19% of what is needed. 

Said more pointedly, 15 years after the huge tobacco victory in 1998, of the more than $25 billion the states receive in settlement money and tax revenue annually, less than a half-a-billion is spent protecting citizens from the smoking companies.  The CDC honor roll of states even spending half of what is needed is short:  Delaware, North Dakota, Wyoming, Oklahoma, and Alaska.  On the other hand those spending less than 10% of what’s needed number 23 states throughout every region of the country. 

Exactly how are state governors and legislatures able in good faith to resolve the fact that they are collecting money as stewards of their citizens for their housing and health and then diverting the money to whatever and wherever, rather than actually using it to address the abuse or save lives?

And, why in the world are we letting them get away with this? 


JP Morgan Chase Gaming on Big Settlement

Chase_Bank_Athens_OH_USALittle Rock  Ok, you remember that we were skeptical when news of the $13 billion record breaking settlement between JP Morgan Chase and the Justice Department was announced until the details became clearer.  I just wasn’t sure the leopard could change its spots by buying a new paint job no matter what the price.  Now, the settlement seems to be in danger of unraveling as the details become clearer and the chicanery of the Chase lawyers and accountants in trying to weasel out of really paying the penalty as opposed to having their public relations department put out press releases about direct negotiations between CEO Jamie Dimon and Attorney General Eric Holder.

            First, Chase jumped the gun on Justice and cut a separate deal with the Federal Housing Finance Agency (FHFA) for $5.1 billion which got Justice hopping because they are insisting that only $4 billion of their $13 billion resolves those claims.   It gets sketchy when it becomes clear that Chase was trying to fudge $1.1 billion of an earlier settlement where it agreed to repurchase bad loans it had bundled and sold to Fannie Mae and Freddie Mac back when they and others were getting away with everything before the housing bubble burst.  Essentially they wanted two dollars of credit on this deal for a dollar really paid.

Holder to his credit is reportedly balking at anything that would allow Chase to try to shift the cost of the settlement unto the FDIC, the federal deposit insurer, not wanting one federal settlement to be paid by another federal agency.  Meanwhile according to insiders talking to the Wall Street Journal, Chase would take all $5.1 billion of the FHFA settlement as a tax deduction, reducing the bite, and at its effective tax rate, clawing back a savings of $1.5 billion in taxes, essentially transferring part of the penalty to the US taxpayers for its own giddy, avarice and community destruction.   Oh, and of course, Chase thinks that there may be some other big chunks they can take as tax deductions as well and they are looking hard for them.  Now, these kinds of maneuvers sound more like the Chase we all know and rarely love.

Justice since the first news of a deal surfaced was quick to say that none of the settlement had to do with Chase’s purchase of Washington Mutual and other assets after the meltdown, partly as a response to an intemperate, whack editorial in the Journal that tired to argue that Dimon was actually Joan of Arc and was being punished now for having done the government a favor back when.  Justice the day after the editorial released some more information about the deal saying nada had to do with Chase’s acquisition of failing institutions.

I suspect that is all part of why this deal has now unraveled a bit.  It turns out that Chase is also trying to “cost out” another part of this settlement by disagreeing with the FDIC about responsibilities for some of Washington Mutual’s bad loans and bonds and seeing if they can tap an FDIC $4 billion reserve fund for what Chase is saying is $5 billion or more in liabilities they don’t want to own up to.   Talk about doing a hustle!

My bet is that they have gone too far and pushed Dimon out on the limb publicly as having reached out to Washington and virtually singlehandedly worked out a deal with Holder for them to be able to let this whole house of cards collapse, so a deal of some sort will come back together.  They may have just found that bargaining in bad faith doesn’t work with Holder.  He seems to know his cards well and be unwilling to fold them or kiss the Wall Street rings. 

Regardless when it comes to these bums, if he’s not our hero, he’s definitely about our only hope.