Bloomberg Writes: Is JPMorgan Getting a Bad Deal?

 

In resolve a handful of state and federal investigations, JPMorgan Chase (JPM) has tentatively agreed to pay $13 billion—more, as my colleague Nick Summers points out, “than the combined salaries of every athlete in every major U.S. professional sport, with enough left over to buy every American a stadium hot dog.” Thirteen billion is also equal to 61 percent of the bank’s profit for 2012, so it’s a significant sum. But does that make it a “shakedown,” as some have suggested?

But there’s no getting away from the fact that the Obama Administration has taken a great deal of criticism over the lack of accountability pertaining to the financial crisis and for not punishing those who had a role in bringing the economy near collapse.

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I am no fan of big banks nor the bailout of said banks in 2008. In fact, I was a big proponent then, as I am now, that those banks should have failed. Yes, it would have caused a lot of economic pain, but we would have been on the way to a real economic recovery now.  Instead, they have created even a bigger moral hazard.

With that said, I am troubled by this settlement. The US Government is now going after the those who were  willing to step in and backstop the economic collapse by taking over failed financial institutions on request from the US Government. It’s like begging your neighbor for money to buy food (because you are starving) only to slap him with a lawsuit a few years later for lending you that money.  Not only is it unfair, it is downright idiotic as it brings even more risk into the financial system.

Listen, I understand that there was a lot of back room dealings and billions of dollars changing hands that we do not know about. Yet, one thing is clear. If this is to happen again, good luck finding anyone willing to step in. Yes, I am talking to you US Government.  

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