Why Is JPMorgan So Quick to Agree to a $13B Fine?

Your next video will start in

Recommended Videos

  • Info

  • Comments


Oct. 21 (Bloomberg) -- Gordon Kerr, consultant at Cobden Partners, talks with Guy Johnson about the potential $13 billion settlement by JPMorgan to end civil claims over its sales of mortgage bonds. He speaks on Bloomberg Television’s “The Pulse.”

There is a number of issues here that don't seem to make a great deal of sense.

If jpmorgan exposes itself to these fines by virtue of its takeover of washington mutual, there are other things it did to help the american taxpayer back in 2008. why would it be paying such enormous sums of money and incurring such legal costs?

One wonders whether the truth behind this is that there is a far lever -- far greater level of wrongdoing at the bank.

I suspect that is the case.

That is by no means proven.

This is a $13 billion fine and you would have to assume that unless both the department of justice and other government agencies are running significant risk further down the road that that is not the case.

I think assumptions are the mother of mistakes.

It is openly reported by both sides that the negotiations with the general's office by jpmorgan have been to try to limit the scope of the criminal investigation.

No promises have been made.

One would assume according to your trap that some kind of not concessions have been made.

If in fact i am wrong on that and there is going to be an unlimited attempt to probe wrongdoing here, then one wonders why on earth the bank would agree to pay a $13 billion sediment.

Why make a deal?

If in fact all you have done is try to help the taxpayers, just sit there and say, take this one in front of a judge.

If i was running the bank -- my job is to run a bank, not to get a front of a judge.

Every major bank has stacks of litigation.

And jpmorgan has an awful lot at the moment.

Many are either in court or facing criminal charges.

I think the essence of this is that banking has become so bad, the laundry list we can go through here in europe has become so bad that bankers simply don't -- they didn't really realize what they were doing was wrong anymore.

If we have in europe -- they're talking about fixing the foreign exchange.

We are in a situation where it seems to me pretty clear evidence that the bailouts have been intended to try to reform banking behavior, it hasn't worked.

Back to the jpmorgan story we are talking about.

Mortgage losses were sustained by two huge american organizations.

Fannie mae and freddie mac.

Mortgage losses were substantially incurred by these subsidiaries that were acquired as a attempt to prop up the banking system.

Jpmorgan itself may not have had done anything wrong.

Nevertheless, it acquired two businesses.

There is a charge that could be leveled that they didn't do significant due diligence on two businesses that had significant liability further down the road.

Obviously, that is the case.

At the same time as the settlement is taking place, there is talk about the settlement for the trading losses.

When you look at the congressional investigation and see how jpmorgan were allowed to spin the line that the origin of the whale trade was somehow to hedge its own -- we are a big bank, there we -- therefore we have shorted the credit.

Not even a child of five would buy that argument.

The investigators would have asked them, name another 10 huge banks that have been going around shorting huge profits.

How much is this the inability of regulators in the past to convey the letter of the law to institutions that were massive?

I think the basic approach of regulators has always been to expect thanks to the run by honorable managers who obey the letter of the law.

The response to the obvious failure has been to draft more voluminous laws like dodd frank which appear to many commentators -- saying that the frank is just propping up systemically important institutions and doing nothing to reform the nefarious conduct which we are talking about today.

And i am sure we will be talking about it again in the

This text has been automatically generated. It may not be 100% accurate.


BTV Channel Finder


ZIP is required for U.S. locations

Bloomberg Television in   change