Thursday, November 21, 2013

The Banksters' Getaway

Imagine if the IRS declared Al Capone’s tax evasion immune from criminal prosecution, that he and his fellow mobsters were the true “untouchables.” Attorney General Eric Holder retracting his earlier “too big to fail, too big to jail” statement has said “Let me be very, very, very clear. Banks are not too big to jail. If we find a bank or a financial institution that has done something wrong, if we can prove it beyond a reasonable doubt, those cases will be brought." He is, of course, lying. Instead JPMorgan is in fact cooperating with criminal cases against its former traders, the equivalent of having Capone investigating Lucky Luciano. Nobody has seen the inside of a prison cell; no criminal subpoenas have even been issued. And the monetary penalties are not shaking JPMorgan Chase or any other bank to their core.

The latest “settlement” of JP Morgan’s ongoing criminal enterprise amounts to a $13 billion for  lawlessness that “helped create a financial storm that devastated millions of Americans,” in the words of Associate Attorney General Tony West.  Part of the $4 billion set aside to help struggling homeowners will go towards knocking down abandoned or foreclosed homes in the urban neighborhoods laid waste by JP Morgan and its cohorts in the racially-targeted subprime mortgage frenzy. . Whole communities have been wounded beyond repair. Black wealth took its deepest dive in history, with reverberations that will impact future generations. Globally, millions have suffered untold misery due to the actions for which the settlement is supposed to atone.

There is no reason whatsoever to believe that the $13 billion fine will have any measurable impact on JP Morgan’s business plan. So far, the Obama administration has assessed a total of $28 billion in penalties against the Dimon mob, with no discernible effect. They are guilty of only being caught. These “settlements” are designed to insulate the banks from the rule of law, an additional cost of conducting their daily business, simply, operating expenses. In the last three years JPM achieved earnings of over $51 billion. Therefore the $13 billion fine leaves them with a net profit of approximately $38 billion during this three year crime spree. The lack of criminal prosecution is a sign to investors that the fraud based business model is successful and will continue going forward.

 $4 billion of this $13 billion figure, over 30 percent, was announced almost a month ago as the conclusion of a lawsuit between JPMorgan and the Federal Housing Finance Agency. Of the remaining  $9 billion nearly half of the figure comes in the form of “mortgage relief,” which an independent monitor (and what’s so independent about a monitor chosen by the bank?) has four years to distribute. No rush is there unlike the foreclosing on homes.

The bank only has to put $1.2 billion of the $4 billion into first-lien principal reductions for homeowners facing foreclosure. [lien = security interest] $300 million goes toward extinguishing second liens, like a home equity line of credit. Another $300 million is earmarked for principal forbearance, where the homeowner still owes the money but gets to skip a few immediate payments. $2 billion would go toward interest-rate reductions or refinancing or even writing new mortgages for moderate-income borrowers (that’s a penalty, writing mortgages that pay the bank interest?), and the balance toward anti-blight provisions like bulldozing homes or buying out properties where the bank has delayed foreclosure.

Almost none of this represents a real penalty for the bank. It performs anti-blight procedures annually in its normal course of business. Principal forbearance has minuscule long-term cost. Second liens that typically cannot be recouped are worthless to a bank, and it’s hard to say it “costs” anything to extinguish them. The bank is even credited for writing down principal on loans owned by mortgage-backed securities investors, paying off their fine with other people’s money (the other people in this case being the very investors they defrauded!). And all the measures to help struggling homeowners actually help JPMorgan Chase in the long run, because it makes financial sense to modify loans rather than foreclose. It’s good to align financial incentives properly to force the bank to help homeowners now instead of kicking them out of their homes. But as a penalty for misconduct, it’s less than meets the eye, all told maybe 10 cents on the dollar to JPMorgan’s bottom line. Factor that in and you get a $5.4 billion deal.

Meanwhile, almost all of the deal, save a $2 billion penalty to the U.S. Attorney’s Office in Sacramento to settle a civil lawsuit, is tax deductible as a business expense. Assuming a 38 percent rate for deductions (as JPMorgan does) on $7 billion in business expenses, this knocks another $2.66 billion off the real cost to JPMorgan Chase. A ballyhooed $13 billion settlement winds up being closer to $2.74 billion.

Liberal activists wanted banks to pay hundreds of billions for their foreclosure fraud crimes through mass write-downs, effectively resetting the housing market and ridding homeowners of their “underwater” mortgages. Instead, the government settled for $25 billion with five banks (that figure is inflated, too).

The bursting of their housing securities bubble may have wrecked much of the global economy in 2008, but bankster Dimon and hisgang consolidated their positions and emerged as the biggest U.S. bank in terms of assets.

Taken from here and here 

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