Here a Fine, There a Fine, But I Still Feel Fine

Or I would, if I were JP Morgan Chase. (Remember, corporations are people too!)

Ben Protess and Jessica Silver-Greenberg report in today's New York Times that JP Morgan Chase has agreed to pay a total of $2 billion in penalties for charges relating to the Bernie Madoff Ponzi scheme (JP Morgan was Madoff's primary bank for decades). There is a $1.7 billion penalty for violations of the Bank Secrecy Act, "a federal law that requires banks to alert authorities to suspicious activity" (in other words, if they were paying attention, they would have noticed that something funny was going on with Madoff's accounts); that sum is to be distributed to Madoff victims. In addition, the bank will pay $350 million to the Office of the Comptroller of the Currency.

The Times journalists note (full article, here),

It could have been worse for the bank. At one point, prosecutors were weighing whether to demand that the bank plead guilty to a criminal charge, a move that senior executives feared could have devastating ripple effects. Rather than extracting a guilty plea, prosecutors struck a so-called deferred-prosecution agreement, suspending an indictment for two years as long as JPMorgan overhauls its controls against money-laundering.

Still, the size of the fine and the rarity of a deferred-prosecution agreement — such deals are scarcely used against giant American banks and are typically employed only when misconduct is extreme — reflect the magnitude of the accusations.

So, we should be pleased, right? Sort of.  Because the total amount of fines being levied on the bank are really starting to mount up, as I commented late last year (full post, here). We still haven't seen the perp walk I've been hoping for, but the dollars have to be enough to guarantee that the bank will start paying attention, right?

Alas, probably not.

As Peter Eavis reports, also in today's New York Times, the bank is taking these fines in stride. While a total of $20 billion or so in fines in the last year would sink most banks, "JPMorgan has become so large and profitable that it has been able to weather the government’s legal blitz, which has touched many parts of the bank’s sprawling operations." (full article, here)

Wall Street in general certainly isn't worried. In fact, "shares [of JP Morgan] are up 28 percent over the last 12 months."

With something like $100 billion in annual revenue (and $23 billion in profits last year), and very large set-aside legal reserves, the bank can continue operating as though nothing really significant was happening.

But, in the words of a Michigan law professor that Eavis quotes, "[While] JPMorgan’s shareholders may believe these billions of dollars don’t count because they see them as extraordinary expenses, ...they keep popping up one after another — and the bank could have done something about them."

Doesn't anyone else think that $20 billion in fines isn't just a cost of doing business but evidence of a massive criminal organization?