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What did this cost JPMorgan? From the outside looking in, it seems like they walked away with assets and little to no liabilities.

consp 3y ago
Isn't the liability the accounts they also acquired? If the assets don't cover it whole?
- DebtDeflation 3y ago
  Yes. From the perspective of the bank, the deposit is the liability and the loan is the asset. People online always get this wrong because they look at it from the perspective of the individual/business on the other end of the transaction.
HPsquared 3y ago
Bank deposit is a debt owed by the bank to the customer. So by assuming the deposits they assumed this debt. On the other hand they will also have assumed the assets of the bank (including these problematic bonds).
HWR_14 3y ago
They took over the bank, taking all its assets but also assuming responsibility for all its liabilities to its depositors.
- xeromal 3y ago
  The assets being loans and such and the liabilities meaning the bank accounts people held?
  - HWR_14 3y ago
    Exactly. The important thing to the people who deposited money is that they get made whole, but the shareholders will still get nothing (or a nominal sum) so they still have an incentive to hold the bank executives accountable in the future.
loeg 3y ago
They claim a net windfall of $2.6B, with projected $2B in future costs associated with the takeover. So in some sense it cost them negative $2.6B; in some other sense (if those cost projections are accurate), negative $600M.
- dxhdr 3y ago
  > They claim a net windfall of $2.6B, with projected $2B in future costs associated with the takeover. So in some sense it cost them negative $2.6B; in some other sense (if those cost projections are accurate), negative $600M. Additionally their own slides on the transaction highlight an "IRR > 20%." Who knows how they calculated that. Either way, JPM is definitely not losing money on this.
  - loeg 3y ago
    > Either way, JPM is definitely not losing money on this. Well, the FDIC anticipate a total cost of $13B, right? Which will be paid by assessment on member banks, including JPMorgan.

consp 3y ago

Isn't the liability the accounts they also acquired? If the assets don't cover it whole?

DebtDeflation 3y ago
Yes. From the perspective of the bank, the deposit is the liability and the loan is the asset. People online always get this wrong because they look at it from the perspective of the individual/business on the other end of the transaction.

HPsquared 3y ago

Bank deposit is a debt owed by the bank to the customer. So by assuming the deposits they assumed this debt. On the other hand they will also have assumed the assets of the bank (including these problematic bonds).

HWR_14 3y ago

They took over the bank, taking all its assets but also assuming responsibility for all its liabilities to its depositors.

xeromal 3y ago
The assets being loans and such and the liabilities meaning the bank accounts people held?
- HWR_14 3y ago
  Exactly. The important thing to the people who deposited money is that they get made whole, but the shareholders will still get nothing (or a nominal sum) so they still have an incentive to hold the bank executives accountable in the future.

loeg 3y ago

They claim a net windfall of $2.6B, with projected $2B in future costs associated with the takeover. So in some sense it cost them negative $2.6B; in some other sense (if those cost projections are accurate), negative $600M.

dxhdr 3y ago
> They claim a net windfall of $2.6B, with projected $2B in future costs associated with the takeover. So in some sense it cost them negative $2.6B; in some other sense (if those cost projections are accurate), negative $600M. Additionally their own slides on the transaction highlight an "IRR > 20%." Who knows how they calculated that. Either way, JPM is definitely not losing money on this.
- loeg 3y ago
  > Either way, JPM is definitely not losing money on this. Well, the FDIC anticipate a total cost of $13B, right? Which will be paid by assessment on member banks, including JPMorgan.