JP Morgan’s Greatest (Settlement) Hits

Jacob Harper  |

On Feb 5 investment banking pariah JPMorgan Chase & Co. (JPM) paid the Federal Housing Financing Agency $614 million to settle fraud claims. The same day, JPMorgan settled with trustees of Ponzi scheme proprietor Bernie Madoff for $543 million over the bank’s negligence in its handling of the notorious investor's clients. That brings the two year total amount of settlements paid out by the bank to bilked investors and regulatory bodies to over $27 billion – roughly the annual GDP of the country of Bolivia.

While this latest payout is more fallout from the 2008 global financial crisis, not all of JPMorgan’s legal fees stem from misdeeds six years past. The bank continues to rack up costly malfeasances in an broad spectrum of arenas all the while, it should be noted, still remaining highly profitable.

Profitable or not, JPMorgan has indeed been impressive in both the scope and degree of their ethical impropriety. While the bank remains under investigation for allegedly bribing both Chinese regulators and Libyan officials in separate incidents, incidents that could end in more costly settlements – the last six months have already seen JPMorgan pay out these massive restitutions:

Energy Price Fixing

Settlement: $410 million

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JPMorgan pays $285 million to the US government, $124 million to California energy grid operators, and $1 million to a Midwest energy company after the investment bank is found to have manipulated energy prices to bilk utility customers.

“London Whale” Trading Debacle and Cover-Up

Settlement: $920 million

While JPMorgan was lauded during the 2008 financial crisis for not losing money and avoiding the risky bets that sunk the other big banks, they lost their comparatively sterling reputation in 2012 on a large, leveraged, monumentally bad gamble.

In March and April of that year rogue traders in the bank’s London branch lost $6.2 billion. Following the loss, JPMorgan was found by investigators to have tried to hide the losses from their investors to keep the balance sheet looking healthier than it actually was. JPMorgan ended up shelling out nearly a billion to several US and UK regulatory bodies in the aftermath of what came to be known in the press as the “London Whale.”

Mortgage-Backed Securities Fraud

Settlement: $13 billion

In October 2013 JPMorgan agreed to pay the Department of Justice a whopping $13 billion after being found to have greatly overstated the quality of the mortgage-backed securities it was selling to investors. The payout constituted the largest settlement amount recorded in US history.

JPMorgan had long seen the writing on wall, and in fact had already set aside more than enough to pay off the DOJ. While they did try to negotiate, first offering $11 billion before being turned down, the settlement had already been absorbed by the market. Not to mention that JPMorgan could afford it – the bank had produced $16 billion in profits since 2008 from the acquisition of failed banks Bear Stearns and Washington Mutual alone. 

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