Too Big To Fail? JPMorgan Pays Billions In Madoff Settlements And Keeps On Trucking

January 8, 2014  |  

You’d think having to settle fines totaling billions of dollars would slow down a company. But not JPMorgan.

“JPMorgan Chase will pay $2.6 billion to settle criminal and civil charges that it failed to alert authorities about warning signs that might have stopped Bernard Madoff’s Ponzi scheme long before the scam’s 2008 collapse,” reports USA Today.

It seems that the nation’s largest bank was not in the dark about Madoff’s criminal doings and could have stepped in and stop him for stealing millions from people. According to federal prosecutors, JPMorgan officials expressed concerns internally about Ponzi scheme mastermind Bernard Madoff years before his 2008 arrest. In 2009, Madoff pleaded guilty to criminal charges and is serving a 150-year prison term.

By acknowledging it but failing to act on suspicions about Madoff’s financial operation for years — even though it withdrew hundreds of millions of its own funds from Madoff’s accounts — the bank has avoided prosecution.

“JPMorgan — as an institution — failed, and failed miserably,” said Manhattan U.S. Attorney Preet Bharara at a news conference announcing the settlements. “The bank connected the dots when it came to its own profits, but was not so diligent when it came to its legal obligations.”

In all, the international bank will dole out $1.7 billion to settle the reporting violations, said Bharara, with “every penny” of that amount helping repay the thousands of ordinary investors, celebrities, charities and others who were victims of Madoff’s $17.3 billion fraud. It will pay an additional $350 million to settle a related case by the Office of the Comptroller of the Currency and $543 million to resolve U.S. Bankruptcy Court actions by the trustee seeking Madoff assets on behalf of scammed investors.

So far, about $11.9 billion had been recovered prior to the new round of settlements. If JPMorgan lives up to its obligations, the government will seek to dismiss the charges in two years. These are record-breaking payouts.

But despite these steep penalties it’s business as usual for JPMorgan.

Including other penalties (like the mortgage settlement with the Justice Department cost it a record $13 billion), the tally is now up to $20 billion, enough to cover the annual education budget of New York City or finance the Yankees’ payroll for 100 years, reports The New York Times.  In fact, most of the nation’s banks could not continue if they had to pay these fines. But JPMorgan has grown so large and profitable that it really is too big to fail.

The bank’s shares are up 28 percent over the past year. And, Wall Street analysts estimate that it will earn an incredible $23 billion in profit this year, more than any other lender. JPMorgan’s investment bankers, who on average earned $217,000 in 2012, will have another great payday as bonus season approaches.

Since JPMorgan planned ahead by setting aside reserves over the last few years to finance future legal payouts, it can now absorb the $20 billion. It is estimated that, as of last year’s third quarter, JPMorgan had deposited $28 billion into its legal reserves since the end of 2009. So keep those fines coming! JPMorgan is ready.

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