Just when it seemed that there was nothing more to learn about the illegal and immoral culture which has permeated JP Morgan Chase, the nation's largest bank, more facts emerge. Its recent Justice Department settlement, which has been oversold as a "$13 billion" agreement, airs some new dirty laundry -- and gives us another look at the old stuff.
Here are 10 things we learned, or were reminded about, in this latest settlement announcement:
1. JPM defrauded investors on a grand scale.
The Justice Department didn't work very hard in its review of JPM's mortgage securities business. But then, it didn't have to. It's easy to find evidence of JPM's crimes.
In her excellent analysis of the settlement for the New York Times, Gretchen Morgensen points out that the DOJ only looked at 10 of the bank's securitizations. An analysis for the Dexia investors' lawsuit, by contrast, reviewed more than 50 of them. (The Dexia lawsuit is much more informative than the Justice Department's, and has been publicly available since last year.)
Once again, a lawbreaking bank has not been required to admit guilt as part of a settlement. But the Justice Department's "Statement of Facts" states its findings fairly plainly:
"As discussed below, employees of JPMorgan, Bear Stearns, and WaMu received information that, in certain instances, loans that did not comply with underwriting guidelines were included in the RMBS sold and marketed to investors; however, JPMorgan, Bear Stearns, and WaMu did not disclose this to securitization investors."
The word for that kind of behavior is "fraud."
2. JPM lied to investors in order to knowingly and willfully defraud them out of billions.
As the Statement of Facts makes clear, employees of JP Morgan Chase were engaged in deliberate and systematic fraud. From the Statement of facts:
"JPMorgan employees were informed by due diligence vendors that a number of the loans included in at least some of the loan pools that it purchased and subsequently securitized did not comply with the originators' underwriting guidelines..."
What happened then? You guessed it:
"JPMorgan represented to investors in various offering documents that loans in the securitized pools were originated 'generally' in conformity with the loan originator's underwriting guidelines; and that exceptions were made based on 'compensating factors,' determined after 'careful consideration' on a "case-by-case basis."
In other words, they knowingly lied in order to cheat investors into thinking these mortgage-backed securities were sound investments -- even though they already knew they were terrible.
3. JPM lied to the public.