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> 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

by 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?
nine_k 8y ago
I can imagine that paying for the wrongdoings of the banks being bought was a part if the deal.
AnthonyMouse 8y ago
> 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 8y ago
  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 8y ago
    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-stearns-for-2-a-share https://www.marketwatch.com/story/jp-morgan-to-buy-bear-stea...
- wahern 8y ago
  IIRC, Bank of America was told in no uncertain terms by Bernanke and Paulson that they were buying Merrill Lynch. It was a shot-gun wedding at a pivotal moment in the crisis. I don't remember if JP Morgan had a gun to their head, but there was likely significant pressure. Combined with the fast pace of events and uncertain liability (the crimes were not all known), the purchase prices were very rough guesses. I hesitate to say that it was unfair that BofA and JPM were punished for the sins of the banks they bailed out. For one thing, neither of them were exactly innocent. Secondly, 10 years on they're both doing really well. While it's great they both took one for the team, so to speak, it's not like either made a great sacrifice.
wj 8y ago
It kind of felt like to me that the government had a backdoor agreement in place for them to purchase WM well before they declined to offer WM a bailout and declared them insolvent. It was a matter of hours between those two events and there is no way any due diligence was done and negotiations couldn't happen that quick. I had bet money on the bailout so I was bitter for a while. First real market lesson for me.
bsmrea 8y ago
Both the Bear Stearns and Washington Mutual purchases were during the Bush administration.
- vxNsr 8y ago
  you're right, I should've been clearer, the fines came from the Obama admin.
- maxxxxx 8y ago
  I find it funny how the partisans blame the bailouts on one party or the other but in reality it was one of the few perfectly bipartisan efforts during the last decades.
  - macintux 8y ago
    I thought about that recently, specifically the tight (at least, so it seemed) integration of the Obama transition with the Bush crisis management team when the sky was falling. It truly was a remarkably bipartisan moment in time.
    - icelancer 8y ago
      When it comes to bailing out billionaires, both parties can agree that it's a great thing to do.
ejstronge 8y ago
> that Obama had pushed them to buy This is just anti-Democrat bias. How could Obama have forced this sale when the election hadn’t even taken place? https://www.nytimes.com/2008/03/16/business/16cnd-bear.html https://www.nytimes.com/2008/03/16/business/16cnd-bear.html

by vxNsr 8y ago

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?

nine_k 8y ago

I can imagine that paying for the wrongdoings of the banks being bought was a part if the deal.

AnthonyMouse 8y ago

> 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 8y ago
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 8y ago
  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-stearns-for-2-a-share https://www.marketwatch.com/story/jp-morgan-to-buy-bear-stea...
wahern 8y ago
IIRC, Bank of America was told in no uncertain terms by Bernanke and Paulson that they were buying Merrill Lynch. It was a shot-gun wedding at a pivotal moment in the crisis. I don't remember if JP Morgan had a gun to their head, but there was likely significant pressure. Combined with the fast pace of events and uncertain liability (the crimes were not all known), the purchase prices were very rough guesses. I hesitate to say that it was unfair that BofA and JPM were punished for the sins of the banks they bailed out. For one thing, neither of them were exactly innocent. Secondly, 10 years on they're both doing really well. While it's great they both took one for the team, so to speak, it's not like either made a great sacrifice.

wj 8y ago

It kind of felt like to me that the government had a backdoor agreement in place for them to purchase WM well before they declined to offer WM a bailout and declared them insolvent. It was a matter of hours between those two events and there is no way any due diligence was done and negotiations couldn't happen that quick. I had bet money on the bailout so I was bitter for a while. First real market lesson for me.

bsmrea 8y ago

Both the Bear Stearns and Washington Mutual purchases were during the Bush administration.

vxNsr 8y ago
you're right, I should've been clearer, the fines came from the Obama admin.
maxxxxx 8y ago
I find it funny how the partisans blame the bailouts on one party or the other but in reality it was one of the few perfectly bipartisan efforts during the last decades.
- macintux 8y ago
  I thought about that recently, specifically the tight (at least, so it seemed) integration of the Obama transition with the Bush crisis management team when the sky was falling. It truly was a remarkably bipartisan moment in time.
  - icelancer 8y ago
    When it comes to bailing out billionaires, both parties can agree that it's a great thing to do.

ejstronge 8y ago

> that Obama had pushed them to buy This is just anti-Democrat bias. How could Obama have forced this sale when the election hadn’t even taken place? https://www.nytimes.com/2008/03/16/business/16cnd-bear.html https://www.nytimes.com/2008/03/16/business/16cnd-bear.html