The giant financial institutions in America have a way with settling and not admitting culpability in the financial havoc they wreak. On Jun. 29, JPMorgan & Chase Co. (JPM) settled with investors and the government for $410 million after overwhelming evidence suggested they had engaged in a price-fixing scheme to manipulate power prices. After paying out the settlement, a spokesman for the company said, ““We’re pleased to have this matter behind us,” without admitting or denying wrongdoing.
On Aug. 1, Citigroup Inc. (C) settled with disgruntled investors to the tune of $590 million after evidence surfaced the company knew the mortgage-backed securities they held prior to the Great Recession were toxic, yet hid this information from investors. Following the settlement, a spokesperson for Citigroup said, “Citi is pleased to put the matter behind us.” without admitting or denying wrongdoing.
On Aug. 2, the SEC found infamous Goldman Sachs Group (GS) trader Fabrice Tourre guilty of fraud stemming rom his knowledge about the impending financial collapse he withheld from investors. Goldman had previously paid out a record $550 million settlement to the SEC over their role in the subprime mortgage crisis, with $250 million returned to harmed investors through a Fair Fund distribution, and $300 million would be paid to the U.S. Treasury. The firm narrowly avoided being prosecuted by the Department of Justice. On the matter, a spokesperson for Goldman Sachs said, “We are pleased to put the matter behind us.”
Goldman neither admitted nor denied wrongdoing.
On Aug. 9, the SEC pushed back on JPMorgan over the “London Whale” debacle, wherein the London branch of JPMorgan lost $6 billion on badly understood, excessively large trades. A settlement with investors is expected in the matter.
The difference this time? The SEC is demanding a financial giant not settle and walk away, but instead admit they are guilty of wrongdoing.
This isn’t a matter of mere pride on the part of the SEC. If JPMorgan is forced to admit fault, an SEC settlement won't be the end of the story. According to the New York Times, admitting culpability in a financial disaster like the London Whale debacle could encourage shareholder lawsuits against the bank.
If shareholders are allowed to sue, they will have excellent grounds to do so, as by the bank's own admission they bilked investors. And the precedent that set will make it exceedingly difficult for the financial giants that rip off stockholders to ever say again they're “putting the matter behind” them.
JPMorgan is down .52 percent to hit $54.54 a share.