$1 billion legal bill for fine-magnet JP Morgan

15 Jan 15 | Author Lindsey Kennedy |

A slew of fines by regulators saw JP Morgan’s legal costs mount to $2.9 billion last year, with an unexpectedly high $1 billion bill for the fourth quarter of 2014.

Between 2009 and 2013, the company paid out $55 billion for legal-related costs, according to the Conduct Costs Project.

“Banks are under assault,” boss Jamie Dimon told the Guardian. “We have five or six regulators coming at us on every issue. Obviously companies make mistakes. We try to resolve it, we try to fix it, we admit it,” he said.

This month, the bank paid a $660m settlement to regulators for its part in the manipulation of foreign exchange markets. Five other banks have also incurred penalties.

Despite the additional costs, JP Morgan has enjoyed a highly profitable year, with income of over $22bn - a jump from just $18bn the previous year.

J Harley

During the begining of the last century, land reform it was called by the socialists; we must redistribute the land to the masses to create an equal society. It failed to create stable equitable societies because private property rights were not recognised. It destroyed the incentive by which wealth is created, that they who create wealth can enjoy it. Why is this important? Because at this point in time, the socialists of the world have turned to financial markets as their reform target, and like land reform, they are the experts in financial reform.. and regulation, the “right thinking” of our times. Why is global wealth creation slowing? Well the socialists are deincentivising it through regulation. The cries of “but what about the criminal behaviour” just like prohibition’s “but for the children’s sake”; a society cannot prosper where it removes the rights of the individual to make mistakes, the basis of learning as human beings, as it empowers those whom are gifted to seize power/control of that which regulated. Fundamentally theft is theft, evidenced and proven in a public court, yet when we the people accept a fine, without acknowledgement of guilt, these are not fines any longer, they are tributes to the despot.
- LindseyKennedy
  
  J Harley, thanks for commenting. This is a classic free market economics argument, but it rarely reflects real life. If you look at the past 30 years or so, China and South Korea saw the most impressive, sustained growth of just about any country in the world during periods of time when they had the most onerous regulations in place. Across Africa as a whole, growth was pretty respectable prior to 1974, but has dropped 11% since efforts were made to liberalise the market and scrap protectionism. Similarly, both the US and the UK saw incredible leaps in productivity and GDP growth during times of high regulation/protectionism. As this has decreased, we’ve seen contracting cycles of boom and bust and greater wealth concentration on a smaller pool of people - which, when you look at the actual trends, tends to stagnate, rather than stimulate, long-term growth. I agree that financial institutions found guilty of criminal activity should be tried as such, but proving individual guilt is notoriously complex and doesn’t really offer an incentive to change general company culture, only to get better at passing the buck. Financial institutions are run for short term gain, and if unethical practices threaten (rather than incentivise) those profits, this seems likely to have a more powerful cumulative effect on corporate culture than protracted criminal charges. Finally, the fines charged don’t go into the personal wallet of an all-powerful despot (at least not in this country), they go back into public funds; since the financial crash has caused far greater hardship for the general population than the financial sector, this hardly seems unreasonable.
  - J Harley
    
    History is replet with examples of experimentation, and as a consequence of such experimentation, whether successful or not, generally becomes a reaffirmation of the fundamentals of the environment where the examples reside. In your reply you have selected examples of history, as I have, however more recent, and focused against measurements, which if taken contextually within history, a recent “trend”. I would argue from these two points that the later, clouds the former, hence the concept of “the crash” becoming more prevalent, a result of failed experimentation, not just because of this point, but because of the socialist ideal, to control the effects of individual behaviour to create equality for all. When the government had divorced business from the responsibilty it had to its own survival i.e. good business, when the JP Morgan bailout (of the US Government) created the Federal Reserve, so that it could write a cheque to itself when needed, an oversimpliflication for brevity yes, however still a departure from fundamental or classical economics, an experiment nonetheless in bureaucratic control of an environment in which the outcome does not effect its existance. This creates the perfect storm of experimentation without consequence for governments, which is analogous to Tyranny or Despotism. The brilliance of the US Constitution is its affirmation that power should not reside in the unelected, any individual/institution or the mob/majority. I offer the regulatory bodies as experiments in ignoring at least two of the former sentence. My hope for this great nation, is that it turns back to history to find its answers, not give the social engineers a little more power again and again to fix experiments that are misguided. My final comment, is to the concept of a corporation, an abused construct yes but the only refuge left. Corporations where used in very limited occasions when danger and liabilty where expected, so much greater than that of a regular company. The continued assault by socialist government control business, my focus separate from criminal activity, to effect social change, which when obviously unsuccessful, turned to the punitive measures effecting wealth of individuals, the prevalance of corporations grew in mid last century. I thank you for you considered reply Lindsey.

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$1 billion legal bill for fine-magnet JP Morgan

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