JP Morgan Chase, the second largest bank in the United States behind Bank of America, received $25 billion from the government as a bailout to stem off the bank possibly crashing. Since then, all of the funds have been repaid, along with the interest, netting the government a cool $1.74 billion. Not bad for government work, but it is a little telling they were able to pay it all back so quickly, not to mention the multiple buyouts orchestrated during the crisis.
JP Morgan and Company has had a sorted past filled with conspiracy theories about their “aid” in the banking crisis of 1907 which eventually resulted in the Federal Reserve. Nicknamed the “banker’s bank”, the Fed came to JP Morgan’s aid during the bailout, injecting $25 billion to stabilize the massive bank. At the same time, the Fed backed a loan to JP Morgan to allow them to buyout the dying Bear Stearns. This didn’t really arouse much suspicion, probably rightfully, as the crash of a giant like Bear Stearns captured headlines.
As the economy worsened, JP Morgan was hit, but continued to turn a profit. In 2008, the worse year of the recession, they were still able to pull a profit of over $5.6 billion. That’s a lot of dough and while it doesn’t exceed the bailout received from the government, it still is a sizable chunk for an apparently failing bank. What JP Morgan Chase did next spawned a lot of controversy: they choose to pay out bonuses to managers based on 2008 numbers, stating that 2009 had been a bad year and it hadn’t been anyone’s specific performance that caused it, but an industry-wide epidemic. It is true that the whole banking sector suffered, but no one is dumb enough to believe there were no guilty parties. You can’t fail on such a massive level and expect to get through scot free.
Unfortunately for really everyone who doesn’t work for JP Morgan Chase, they not only survived, but thrived in this new world. Their acquisition of Bear Stearns took two iterations as their first bid of $2 a share offended shareholders and they refused to agree to such terms. When Chase came back with around $10 a share, it was begrudgingly accepted. Rumors of a failure had caused massive runs on Bear and JP Morgan Chase would go after another accidental casualty of the recession: Washington Mutual.
I suppose no one could be considered “innocent” in the systemic writing of millions of mortgages doomed for failure, but business practices had kept WaMu afloat long enough for the government to ruin their bounty (A detailed description of WaMu’s demise can be found here). JP Morgan Chase originally made a bid to WaMu when it looked like the bank would go under. The bid wasn’t exactly laughed at ($8/share isn’t much), but it was denied. As the Office of Thrift Supervision (OTS) circled the wagons and prepared to squash WaMu, JP Morgan took the opportunity to distance themselves and wait for the result. After a couple weeks, they got their wish and bought WaMu from the OTS for significantly less than their original bid. Now I’m not one for conspiracy theories and tend towards coincidence, but even I have to admit that it’s a bit odd JP Morgan Chase was snubbed by Bear Stearns, forced to a higher bid than they originally desired and only 6 months later were able to complete a takeover of WaMu at a drastically reduced price. The “banker’s bank” surely helped out JP Morgan Chase in the long run. Surely they will be around for ages to come as they’ve proved themselves indispensable to the Federal Reserve and as a possible buyer of nearly everything. At this point, their 700 lb. gorilla is only being topped by the 800 lb. gorilla in the room: Bank of America.
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Chase orders Southlake bank to remove Christmas tree | Northeast Tarrant | News from For… « Down on the Pharm
December 6th, 2010 - 4:00:29 PM
[...] some people were offended. Perhaps this corporation is adhering to new rules associated with the bank bailout which they accepted. (Yes this is a taxpayer supported [...]
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