When Is $13 Billion not $13 Billion

There is a lot of news about the JPMorgan settlement for $13 billion and how tough the government is (finally) being.  Well, I’m not sure how much the settlement really is but I know it is much less because:

  • Some of it is not new. They’d already agreed to $4 billion of it
  • Most of it is restitution. That is, compensating people for harm they did. They owed that money and they are not paying all they should. If I took $100 from you and then the police made me give $50 back, would you think they were doing their job?
  • They are deducting most of it from their taxes. So, the government is essentially giving them a discount on it and treating it as a normal business practice.

There is one piece of potentially good news. JPMorgan asked the government to absolve them from criminal charges. The government refused. JPM actually agreed to help the government make a case against some past employees. This could conceivably be good if the government actually follows through and if they prosecute senior executives. I’m not holding my breath.

P.S. The Too-Big-to-Fail subsidy is worth tens of billions of dollars every year to the megabanks. (I think the $83 billion Bloomberg estimate is too high but it’s the right order of magnitude).  JPM — the biggest of the megabanks — surely gets a decent chunk of that. EVERY YEAR. That puts the $13 billion fine (that really is costing them much less) in proper perspective.

P.P.S. According to the New York Times, the JPM board thinks that Jamie Dimon is a hero for arriving at this settlement. You can understand why.

“The bank’s board remains steadfastly behind Mr. Dimon, who holds the dual roles of chairman and chief executive. That support traces to a widespread belief among board members that the deals represent a victory for the bank as it tries to move past its woes.”