At the height of the financial crisis, the curtain was pulled back on the ugly practices of the financial sector to reveal unfair and deceptive actions by some of the country's largest and, at the time, most trusted financial institutions.
Throughout that time, our Miami consumer rights lawyers know, J.P. Morgan Chase somehow managed to get a reputation as "the good bank." One of the most high-profile examples of this was an article published in July 2009 by The New York Times, praising CEO James Dimon as President Barack Obama's "favorite banker" and going on about his continued sway in Washington.
At one point, there was even discussion that Dimon might replace Timothy Geithner as Treasury Secretary.
But as it turns out, this reputation was more farcical than factual.
As recently reported by The Wall Street Journal, the Federal Energy Regulatory Commission (also known as FERC) is working on the final draft of an agreement that would have Chase paying hundreds of millions of dollars - if not upwards of $1 billion - for its involvement in the manipulation of the state of California's energy markets between 2006 and 2008. Already, British bank Barclays has been ordered to pay a record $435 million in the matter, though Barclays officials have vowed to fight this judgement in court.
It's not yet clear whether the New York-based Chase will admit to any wrong-doing as a result of the settlement, though we suspect not if previous settlements of similar ilk are any indication.
FERC, which oversees natural gas pipelines, power trading markets and transmission lines across the country, has been more empowered to take such action in the wake of Enron Corp.'s collapse several years ago. It's been using its increasing clout to take a closer look at energy market manipulation by Wall Street. This may be just the beginning.
While $1 billion may seem significant, it's worth noting that Chase spent some $16 billion in litigation just between 2009 and 2012. It tends to be more beneficial to firms like Chase to break the law and then simply pay the fine. In fact, about 12 percent of Chase's net earnings during that time were spent on lawsuits, a clear indication that shady practices are simply par for the course and part of doing business at firms like Chase.
To give you an idea of some of the exploits in which Chase - ie., "the good bank" - was caught in recent years, here's a tentative list:
- A $153 million fine in which the bank allowed a hedge fund to establish a "born-to-lose" mortgage portfolio to bet against;
- A nearly $230 million fine for municipal bond-rigging;
- A nearly $300 million fine paid to the Securities and Exchange Commission late last year for fraud with regard to its mortgage-backed securities;
- A $75 million payment made in cash made to help rectify the mess in Jefferson County, Alabama, where a small-town politician was bribed into approving a series of bad swap deals, ultimately contributing to the county's bankruptcy;
- Reprimands received by the Fed and the Office of the Comptroller of the Currency for engaging in money-laundering-like behaviors, similar to what we saw in the HSBC case;
- A $395 million fine split with three other banks for improper mortgage servicing practices;
- A $20 million fine by the U.S. Commodities Futures Trading Commission for improper segregation of consumer funds, plus another $600,000 fine for violating rules in the cotton markets;
- A $45 million fine paid to the federal government for illegally ratcheting up fees against active-duty soldiers who sought to refinance their mortgages;
- A $25 million fine in Florida for the sale of unregistered bonds to a state-run money-market fund.
The list goes on. Any illusions we had about Chase as one of the "good guys," by this point, should be thoroughly shattered.