
U.S. Secretly Halted JPMorgan’s Growth for Years - marklyon
https://www.bloomberg.com/news/articles/2018-10-26/jpmorgan-s-secret-punishment-u-s-halted-its-growth-for-years?srnd=premium
======
micv
The Great Depression II was on the cards in 2007/2008 before governments took
on gargantuan debts to brush it under the carpet. We're all paying for that
with governments straining under comically heavy debt loads and interest rates
held stupidly low long-term to avoid bankrupting the banks. The last thing we
should be doing is allowing the same corrupt institutions which created the
crisis loose to do it all over again. It will all just happen again with no
room for manoeuvre left.

~~~
hendzen
1) The 700B in assets distributed via the Troubled Asset Relief Program (TARP)
have all been sold by the government, earning 15.3B in profit in the process
[0].

2) The federal funds overnight rate has been raised 4 times in the last year
with more raises planned [1].

3) While the federal debt load is high, the actual annual interest paid by the
government in servicing the debt is in-line with historic norms [2].

[0]
[https://projects.propublica.org/bailout/](https://projects.propublica.org/bailout/)

[1]
[https://fred.stlouisfed.org/series/EFFR](https://fred.stlouisfed.org/series/EFFR)

[2]
[https://fred.stlouisfed.org/series/FYOIGDA188S](https://fred.stlouisfed.org/series/FYOIGDA188S)

~~~
dageshi
I wonder how many of those TARP assets were bought either directly or
indirectly via the FED via QE?

You would also wonder, why not apply this government intervention to all other
industries and businesses that are in trouble? Why does Banking get bailed out
and others don't?

~~~
pcr0
Over 90% of the monetary supply consists of credit as opposed to money. If
companies and people can't borrow money, the world economy freezes and banks
control credit unfortunately.

~~~
dageshi
Certainly, you would think they ought to be regulated or constructed in such a
fashion where taking down the entire world economy through their own greed
should be impossible?

As it stands, they reap the profit in the good times, they get bailed out in
the bad (and still make a profit I expect).

Essentially the taxpayer subsidises and protects one of the richest industries
in the world from their own mistakes and greed.

~~~
pcr0
That's the spirit of the current system, and it mostly works. The 2008 crisis
was crazy because nobody anticipated the magnitude of moral hazard between
insurers <=> (banks <=> rating agencies <=> pension funds) <=> mortgage
lenders <=> homebuyers. Homebuyers thought they were in great financial shape
because lenders kept pushing them easier loans, lenders were writing mortgages
with their eyes closed because the banks buying the mortgages were making so
much money packaging them into MBSes and selling them to pension funds, the
pension funds were enjoying great returns on these products rated AAA by
rating agencies asleep at the wheel, and meanwhile the banks offloaded their
MBS risk by purchasing CDSes from insurers who were blindly making lots of
money selling them. The whole thing was a self-reinforcing feedback loop that
burst violently.

I definitely blame the banks for being overly creative in coming up with
perverse, complicated multi-party incentive structures that are hard to
regulate while lobbying for deregulation. But at the same time, the mortgage
lenders, insurers and rating agencies deserve some blame for being negligent
at their jobs.

------
BooneJS
JP Morgan _still_ hasn't provided clean drinking water[0] to New Yorkers yet,
so it's simply karma.

[0]:
[https://en.wikipedia.org/wiki/The_Manhattan_Company](https://en.wikipedia.org/wiki/The_Manhattan_Company)

------
im_down_w_otp
The tone of this article is really weird.

It openly admits that various banks we're being constrained due to their
notorious bad behavior, but casts those constraints in a passively negative
light, and then tacitly celebrates that these bad actors are now less
constrained to act badly.

~~~
ackidacki
It's pretty bad if you ask me. A governments job is to follow the law too and
not use its discretion in 'unwritten law' that is secretive.

No problem if they publicly said they would do this, but this way is precisely
the problem of developing countries. You wouldn't think it would happen in
America.

~~~
intended
This is a financial paper championing it’s core audience.

For example it makes no mention of the harm caused 10 years ago in 2008, and
the causal link between bank behavior and the final disaster.

Instead it is painted as an unrighteous limit to the banks natural path, using
hidden tools to curb their growth.

Wsj, Bloomberg etc would assume that profitable growth at any cost is good
(except of course at the cost of bad PR).

Regulations and limitations are bad and simply evil barriers to firms manifest
destiny.

Don’t put much stock in it.

~~~
hueving
No, it does not excuse the behavior of the banks. The point is that the
regulatory behavior was bad, not that it wasn't punishing a real crime.

It would have been significantly better if they announced publicly that JPM
was going to have it's growth restricted because of reason X. This would have
acted as a deterrent to other banks, sent a message to the public that the
banks were indeed being punished, and avoided the image of a secret governance
process.

Everyone who reads these publications is well aware of the financial disaster
so it doesn't need to be reiterated on every article because the knowledge is
assumed.

~~~
intended
Disclosure is what happens all the time. I havent really heard of a recent or
distant event where it was the norm to not disclose SEC actions. (barring some
privacy clause or agreement reached via settlement)

Most likely, and I say this as an opinion, several of the banks they bought in
2008 were restricted from expanding until their house was in order.

These moves were, with 100% certainty, would have been announced and published
at inception.

And no, the meaning of "financial disaster" is VERY different depending on
which side of Fin services you stand on.

To many banks and bankers, the debacle is a failure of market participants -
the cost of living in such exalted times. More regulation would only hamper
future efficiency and delicious growth to shareholders.

For main street, this was a watershed moment where they saw that banks were a
force unto themselves.

Their market niche so critical, that letting them continue more necessary than
justice - overturning a basic tenet of American expectations (bad firms fail,
merit rises).

"too big to fail", is the shadow of "too big to care".

Main street does not read Bloomberg or WSJ, so they tailor their articles to
their audience's bias.

~~~
intended
Curious why this has been downvoted, I’d prefer understanding than assuming
what the error was.

------
sonnyblarney
Why are there only spoken deals, and why is a major thing like this not
public.

That has to change. Investors have a right, Americans have a right.

~~~
jayd16
I assume it was private because it would hurt JP Morgan's stock price if it
was made public. You could say investors have a right to know but my guess is
JPMorgan wanted to keep it private.

------
tehwebguy
Wish it had been public but I’m still okay with this.

------
jmnicolas
A French economist, I think it's Charles Gave, said something like "bankruptcy
is to finance what hell is to Catholics : if there was no hell they wouldn't
behave well".

------
mrhappyunhappy
“Severe punishment “ constitutes expansion ban and fees. Great! Break the law,
no jail for those people. It’s clear that as long as you are a banker you can
do whatever the hell you want.

~~~
kevmo
Exactly. Until bad behavior actually destroys profitability or sends people to
jail, the banks are free to continue their abuse of the American citizenry.

~~~
pas
Petition Congress for more proactive financial regulation agencies, otherwise
they won't be able to jail bankers much.

Everything that matters was by the book. (The risk offloading.) The DoJ
managed to get DPAs worth billions for stuff that wouldn't have landed anyone
in jail anyway.

------
hypershit
Good advertisement for the banking industry

------
gcb0
"regulators under President Donald Trump, the people said, it’s planning to
open 400 branches"

really? "the people said"? who write like this?

~~~
grzm
It's part of Bloomberg style guide.

~~~
DiabloD3
Please quote exactly where in Bloomberg's style guide it says to write like
that. Parent isn't wrong, that's a absolutely horrendous way to write.

------
travisgriggs
I scanned the article title. I thought “huh”.

I saw the source (Bloomberg). I thought “oh”.

Post “the big hack” effect. Is that bad?

~~~
mohammedbin
It is bad because you are willing to believe one side (composed of multiple
companies) when it's in their interest to say what they are saying and
completely discount no just their article but their publication.

------
vxNsr
> _JPMorgan has racked up more than $30 billion in penalties, legal costs and
> related obligations since the 2008 financial crisis, some of which stemmed
> from its acquisitions of Bear Stearns Cos. and Washington Mutual Inc._

So they were being punished for agreeing to purchase companies that were
failing and that Obama had pushed them to buy... and then he turned around and
fined them for the crimes these previous companies committed.

I don't think JPM is innocent in the 2008 debacle as is outlined later on in
the article, but it just rubs me wrong that they were punished for BSC and
WMI.

~~~
AnthonyMouse
> I don't think JPM is innocent in the 2008 debacle as is outlined later on in
> the article, but it just rubs me wrong that they were punished for BSC and
> WMI.

Once their crimes are public knowledge, the expected cost of the future
penalties should be priced into the purchase price. Unless the penalties were
larger than expected (and if anything they were smaller), they got what they
paid for.

~~~
chibg10
I'm not familiar with the specifics of how the negotiations actually went
down, but I can't imagine negotiations work like this when regulators are
telling you "You _must_ buy Company X" and you weren't interested in acquiring
Company X to begin with.

Purchase prices only reflect a acquirer's view of the value of Company X under
market conditions, which seems to have clearly not have been the case when the
acquisition occurred.

~~~
AnthonyMouse
They paid $2/share for Bear Stearns, in stock rather than cash. The closing
price that Friday had been $30/share (and was $150/share the year before).

[https://www.marketwatch.com/story/jp-morgan-to-buy-bear-
stea...](https://www.marketwatch.com/story/jp-morgan-to-buy-bear-stearns-
for-2-a-share)

