14 ms·

U.S. Secretly Halted JPMorgan’s Growth for Years

211 points by marklyon 8y ago

jmnicolas 8y ago
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".
deleted 8y ago
[deleted]
tehwebguy 8y ago
Wish it had been public but I’m still okay with this.
im_down_w_otp 8y ago
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.
- slededit 8y ago
  During that time period I held investments in JPM. This was material information that should have been available to investors.
- hnmonkey 8y ago
  Yeah it's a pretty odd article. It seems like things were working as they're supposed to and yet it implies that it's gonna be great now that the regulations have been lifted by the Trump admin. Unfortunately though, I'd imagine the banks will just continue with their bad behavior now that the shackles are off and it seems like there won't be anything in their way to slow down or halt their plans. Doesn't seem like a good thing really...
  - wallace_f 8y ago
    I don't find it odd. Economists are typically skeptical of government picking winners and losers. Here this is mentioned as the result of an unwritten rule, and as the title says, it was not done transparently.
    - jmlsf 8y ago
      How did you go from "punishment for multiple crimes and regulatory violations" to "picking winners and losers"? Economists typically think laws governing fraud should be enforced.
      - AnthonyMouse 8y ago
        Laws should also be transparent. If there is a crime, the punishment should be known in advance and be imposed openly. How else will it act as a deterrent?
      - wallace_f 8y ago
        But that's not what happened. The law was an "unwritten rule" which was enforced in secret. As another user here stated, regulatory law needs to be enforced openly and transparently.
    - drb91 8y ago
      You could also use this argument to imply we should have allowed banks to fail in the mortgage crisis.
      - AnthonyMouse 8y ago
        What we should have done is saved the banks only to break them up. And it's not too late to do just that.
      - wallace_f 8y ago
        In fact, at that time, mainstream economists expressed the same concern which I am expressing now: gregmankiw.blogspot.com/2008/12/
- travmatt 8y ago
  The best part is how scrupulously Michelle Davis avoided any uncomfortable mentions of the crimes that brought said punishments. Wells Fargo’s business tactic of forcing their sales staff to commit fraud and identity theft is instead described as “a pattern of lapses and abuses”.
  - rayiner 8y ago
    > Wells Fargo’s business tactic of forcing their sales staff to commit fraud and identity theft That’s just a dishonest characterization. Wells Fargo didn’t “force” their staff to do any such thing. Staff gamed an incentive structure and WF didn’t catch it. “Lapse” is the most accurate characterization.
    - dd36 8y ago
      Coercion combined with ignoring customer complaints is the most accurate characterization.
      - rayiner 8y ago
        No. Words have meaning. Forcing someone to do something means coercion + intent to achieve a specific outcome. There was no evidence that WF intended anyone to commit identity fraud. You don’t get to redefine the meaning of well understood words.
        dd36 8y ago
        There was a decade of complaints and more than enough to connect the dots. Looking the other way because you like the results goes to intent. Threatening ones job unless they sign up X many customers for a product is coercion. Sales quotas are inherently coercive. If you choose to do zero quality control and employees learn cheating is okay then it is bad.
        leoc 8y ago
        https://en.wikipedia.org/wiki/Control_fraud https://en.wikipedia.org/wiki/Control_fraud
- ackidacki 8y ago
  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.
  - jayd16 8y ago
    Lots of court filings and records are sealed. Its really not surprising at all. It's not really unwritten law just because it wasn't public.
  - specialp 8y ago
    Well their job (The Office of the Comptroller of the Currency[1]) by law is to regulate banks for systemic risk. Recall that this same government bailed out the banks due to systemic risks. JP Morgan is then participating in risky activities and wants to expand thus becoming more important in the banking system. The government pushes back as it has had transgressions. The whole "unwritten rule" thing is kinda nonsense. The OCC which was preventing the expansion was chartered to ensure the soundness of the banking system. That is pretty arbitrary and they have the authority to arbitrate on that. That sounds like they can use their discretion. What you would think would not happen in America is that the government bails out private banks that behaved badly. If it were truly American capitalism they would fail. Banks would then not be able to become so large due to people and banks not wanting to have too much liability with any one institution. So it is inconsistent to have a system where the government cannot use their discretion in the growth of banks, yet be on the line for a huge bailout to stop the economy from collapsing when the banks get too greedy. [1] https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_the_Currency https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_t...
    - ackidacki 8y ago
      I think you're mixing up the OCC with the Fed.
    - aldoushuxley001 8y ago
- deleted 8y ago
  [deleted]
- pfarnsworth 8y ago
  Agreed. I was curious what this was above, then as I started reading it, I was saying to myself "wait, I thought this was actually well-known that these TBTF banks were being curtailed out of punishment for their behavior." I don't see how this was secret, nor do I think it was even a problem since they appear to have been doing extremely well since then even with their growth "halted".
- mmanfrin 8y ago
  Recently, Bloomberg has had some very stilted articles -- editorial tone pushed in to articles and choice of coverage. It feels odd, and it feels wrong.
  - mohammedbin 8y ago
    They and some other finance newspapers do seem like the last bastion of separation of facts and opinions
  - intended 8y ago
    Dunno, this article seems pretty much par for the course when it comes to reporting by financial magazines on industry. Pro business (especially finance), anti regulation, with little respect or care for regulations and no admission of culpability and harm.
- JumpCrisscross 8y ago
  > tone of this article is really weird The limits make sense, the secrecy not so much. That guarantees an odd tone for an article to be read by (a) JPMorgan Chase shareholders and (b) Americans who don’t want another financial crisis.
- cheriot 8y ago
  That's common when the financial press is talking about financial companies. Remember their audience. Edit: I'm mainly thinking of Bloomberg and WSJ. The Economist is better on this one.
- mrhappyunhappy 8y ago
  Of course, that evil Obama administration, they punished little billy for not playing nice, boohoo.
gcb0 8y ago
"regulators under President Donald Trump, the people said, it’s planning to open 400 branches" really? "the people said"? who write like this?
- grzm 8y ago
  It's part of Bloomberg style guide.
  - DiabloD3 8y ago
    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.
vxNsr 8y ago
> 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.
- hnmonkey 8y ago
  It seems that if you don't punish them for the bad things the companies they acquired did then companies will just do bad things and then get acquired, even by another subsidiary or holding company just to evade the laws and regulations. Isn't that a huge loophole you'd be opening?
  - TaylorAlexander 8y ago
    Makes sense to me. Unpunished crimes could be seen as an existing liability, and something the parent company acquires when they buy the violating company.
    - hnmonkey 8y ago
      I would argue that they in fact are definitely a liability, but one which has been calculated to be worth it if you continue with the acquisition. Just because you buy a company doesn't mean their previous crimes should now magic-wanded away. It would be far too easy to take advantage of that. (If it wasn't clear, I'm agreeing with you 100%)
- omegaworks 8y ago
  This was also strangely worded. Did the penalties come before or after the acquisitions? Why should penalties on a company go away if that company gets acquired by another?
- 8y ago
travisgriggs 8y ago
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 8y ago
  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.
micv 8y ago
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.
- perfunctory 8y ago
  > no room for manoeuvre left no room for manoeuvre within the current system. So we'll have to change the system. Unfortunately, I have not yet seen dissent proposals of what the new system should look like (I don't consider crypto a feasible alternative). Nevertheless, I am optimistic.
- radicaldreamer 8y ago
  That’s already guaranteed, you can see bubbles everywhere you look today and all of these institutions have grown bigger
- MagnitudeFC 8y ago
  ... and th biggest bubble of them all might be in early stage startups..
- nuguy 8y ago
  What an over-simplification. The crisis depended on so many things. Ratings agencies. Insurance companies. Stupid people getting loans they couldn’t afford. And Goldman Sachs who were very clever in compounding the entire crisis in order to profit from it (good for them in my opinion). The creditors who provided the loans were giving loans to stupid people, those loans were then rated highly as a source of debt by the ratings agencies, all of it being insured by short sighted insurance companies and then Goldman came in and made it all worse by adding more money to the fire. Take away any of those components and you no longer have Great Depression 2.
  - 8y ago
hypershit 8y ago
Good advertisement for the banking industry
BooneJS 8y ago
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
mrhappyunhappy 8y ago
“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 8y ago
  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 8y ago
    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.
sonnyblarney 8y ago
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 8y ago
  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.

211 points by marklyon 8y ago

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".

deleted 8y ago

[deleted]

tehwebguy 8y ago

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

im_down_w_otp 8y ago

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.

slededit 8y ago
During that time period I held investments in JPM. This was material information that should have been available to investors.
hnmonkey 8y ago
Yeah it's a pretty odd article. It seems like things were working as they're supposed to and yet it implies that it's gonna be great now that the regulations have been lifted by the Trump admin. Unfortunately though, I'd imagine the banks will just continue with their bad behavior now that the shackles are off and it seems like there won't be anything in their way to slow down or halt their plans. Doesn't seem like a good thing really...
- wallace_f 8y ago
  I don't find it odd. Economists are typically skeptical of government picking winners and losers. Here this is mentioned as the result of an unwritten rule, and as the title says, it was not done transparently.
  - jmlsf 8y ago
    How did you go from "punishment for multiple crimes and regulatory violations" to "picking winners and losers"? Economists typically think laws governing fraud should be enforced.
    - AnthonyMouse 8y ago
      Laws should also be transparent. If there is a crime, the punishment should be known in advance and be imposed openly. How else will it act as a deterrent?
    - wallace_f 8y ago
      But that's not what happened. The law was an "unwritten rule" which was enforced in secret. As another user here stated, regulatory law needs to be enforced openly and transparently.
  - drb91 8y ago
    You could also use this argument to imply we should have allowed banks to fail in the mortgage crisis.
    - AnthonyMouse 8y ago
      What we should have done is saved the banks only to break them up. And it's not too late to do just that.
    - wallace_f 8y ago
      In fact, at that time, mainstream economists expressed the same concern which I am expressing now: gregmankiw.blogspot.com/2008/12/
travmatt 8y ago
The best part is how scrupulously Michelle Davis avoided any uncomfortable mentions of the crimes that brought said punishments. Wells Fargo’s business tactic of forcing their sales staff to commit fraud and identity theft is instead described as “a pattern of lapses and abuses”.
- rayiner 8y ago
  > Wells Fargo’s business tactic of forcing their sales staff to commit fraud and identity theft That’s just a dishonest characterization. Wells Fargo didn’t “force” their staff to do any such thing. Staff gamed an incentive structure and WF didn’t catch it. “Lapse” is the most accurate characterization.
  - dd36 8y ago
    Coercion combined with ignoring customer complaints is the most accurate characterization.
    - rayiner 8y ago
      No. Words have meaning. Forcing someone to do something means coercion + intent to achieve a specific outcome. There was no evidence that WF intended anyone to commit identity fraud. You don’t get to redefine the meaning of well understood words.
      - dd36 8y ago
        There was a decade of complaints and more than enough to connect the dots. Looking the other way because you like the results goes to intent. Threatening ones job unless they sign up X many customers for a product is coercion. Sales quotas are inherently coercive. If you choose to do zero quality control and employees learn cheating is okay then it is bad.
        leoc 8y ago
        https://en.wikipedia.org/wiki/Control_fraud https://en.wikipedia.org/wiki/Control_fraud
ackidacki 8y ago
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.
- jayd16 8y ago
  Lots of court filings and records are sealed. Its really not surprising at all. It's not really unwritten law just because it wasn't public.
- specialp 8y ago
  Well their job (The Office of the Comptroller of the Currency[1]) by law is to regulate banks for systemic risk. Recall that this same government bailed out the banks due to systemic risks. JP Morgan is then participating in risky activities and wants to expand thus becoming more important in the banking system. The government pushes back as it has had transgressions. The whole "unwritten rule" thing is kinda nonsense. The OCC which was preventing the expansion was chartered to ensure the soundness of the banking system. That is pretty arbitrary and they have the authority to arbitrate on that. That sounds like they can use their discretion. What you would think would not happen in America is that the government bails out private banks that behaved badly. If it were truly American capitalism they would fail. Banks would then not be able to become so large due to people and banks not wanting to have too much liability with any one institution. So it is inconsistent to have a system where the government cannot use their discretion in the growth of banks, yet be on the line for a huge bailout to stop the economy from collapsing when the banks get too greedy. [1] https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_the_Currency https://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_t...
  - ackidacki 8y ago
    I think you're mixing up the OCC with the Fed.
  - aldoushuxley001 8y ago
deleted 8y ago
[deleted]
pfarnsworth 8y ago
Agreed. I was curious what this was above, then as I started reading it, I was saying to myself "wait, I thought this was actually well-known that these TBTF banks were being curtailed out of punishment for their behavior." I don't see how this was secret, nor do I think it was even a problem since they appear to have been doing extremely well since then even with their growth "halted".
mmanfrin 8y ago
Recently, Bloomberg has had some very stilted articles -- editorial tone pushed in to articles and choice of coverage. It feels odd, and it feels wrong.
- mohammedbin 8y ago
  They and some other finance newspapers do seem like the last bastion of separation of facts and opinions
- intended 8y ago
  Dunno, this article seems pretty much par for the course when it comes to reporting by financial magazines on industry. Pro business (especially finance), anti regulation, with little respect or care for regulations and no admission of culpability and harm.
JumpCrisscross 8y ago
> tone of this article is really weird The limits make sense, the secrecy not so much. That guarantees an odd tone for an article to be read by (a) JPMorgan Chase shareholders and (b) Americans who don’t want another financial crisis.
cheriot 8y ago
That's common when the financial press is talking about financial companies. Remember their audience. Edit: I'm mainly thinking of Bloomberg and WSJ. The Economist is better on this one.
mrhappyunhappy 8y ago
Of course, that evil Obama administration, they punished little billy for not playing nice, boohoo.

gcb0 8y ago

"regulators under President Donald Trump, the people said, it’s planning to open 400 branches" really? "the people said"? who write like this?

grzm 8y ago
It's part of Bloomberg style guide.
- DiabloD3 8y ago
  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.

vxNsr 8y ago

> 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.

hnmonkey 8y ago
It seems that if you don't punish them for the bad things the companies they acquired did then companies will just do bad things and then get acquired, even by another subsidiary or holding company just to evade the laws and regulations. Isn't that a huge loophole you'd be opening?
- TaylorAlexander 8y ago
  Makes sense to me. Unpunished crimes could be seen as an existing liability, and something the parent company acquires when they buy the violating company.
  - hnmonkey 8y ago
    I would argue that they in fact are definitely a liability, but one which has been calculated to be worth it if you continue with the acquisition. Just because you buy a company doesn't mean their previous crimes should now magic-wanded away. It would be far too easy to take advantage of that. (If it wasn't clear, I'm agreeing with you 100%)
omegaworks 8y ago
This was also strangely worded. Did the penalties come before or after the acquisitions? Why should penalties on a company go away if that company gets acquired by another?
8y ago

travisgriggs 8y ago

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 8y ago
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.

micv 8y ago

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.

perfunctory 8y ago
> no room for manoeuvre left no room for manoeuvre within the current system. So we'll have to change the system. Unfortunately, I have not yet seen dissent proposals of what the new system should look like (I don't consider crypto a feasible alternative). Nevertheless, I am optimistic.
radicaldreamer 8y ago
That’s already guaranteed, you can see bubbles everywhere you look today and all of these institutions have grown bigger
MagnitudeFC 8y ago
... and th biggest bubble of them all might be in early stage startups..
nuguy 8y ago
What an over-simplification. The crisis depended on so many things. Ratings agencies. Insurance companies. Stupid people getting loans they couldn’t afford. And Goldman Sachs who were very clever in compounding the entire crisis in order to profit from it (good for them in my opinion). The creditors who provided the loans were giving loans to stupid people, those loans were then rated highly as a source of debt by the ratings agencies, all of it being insured by short sighted insurance companies and then Goldman came in and made it all worse by adding more money to the fire. Take away any of those components and you no longer have Great Depression 2.
- 8y ago

hypershit 8y ago

Good advertisement for the banking industry

BooneJS 8y ago

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

mrhappyunhappy 8y ago

“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 8y ago
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 8y ago
  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.

sonnyblarney 8y ago

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 8y ago
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.