One member of Congress, Peter Welch (D-VT), is outraged that JPMorgan may get off easy in its settlement agreement with the Department of Justice.
Reacting to reports earlier this week that a large share of the pay-out could be written off of the mega-bank’s tax bill, Welch is preparing legislation that would prevent JPMorgan and other banks from shifting the costs of such settlements onto the American taxpayers.
In a letter the representative is preparing to send to JPMorgan CEO Jamie Dimon, Welch writes:
Should a wrongdoer whose conduct caused harm to the taxpayer ask the taxpayer to help pay the fine for the wrong done?
We think not.
Yet news reports indicate that JPMorgan, in its negotiations with the Justice Department over a $13 billion fine related to its mortgage activities, is seeking to do just that – shift a significant portion of its penalty to the American taxpayer.
It was the taxpayer who initially funded the bailout of Wall Street. It was the taxpayer who continues to endure the consequences of the worst recession since the Great Depression. The taxpayer should not, therefore, be required to contribute a nickel towards the fines imposed for conduct that got America into this mess in the first place.
The $13 billion settlement, which is yet to be finalized, would be the largest in American history. But in context, it looks a bit different. It would represent $1 billion less than the mega-bank receives every single year from the government in subsidies, according to a study by the International Monetary Fund.
And William Black, a former banking regulator who played a key role in the prosecution of thousands of top executives following the Savings and Loan crisis of the 1980s, told Mother Jones’ Erika Eichelberger that the bank should be on the hook for about 20 times as much:
First, the fine is really only $9 billion, says William Black, an associate professor of economics and law at the University of Missouri-Kansas City …. The $4 billion in relief to homeowners, he explains, represents loan modifications that the bank would have made in any event to minimize losses and avoid foreclosures….
Second, Black says, the total damages JPMorgan, Washington Mutual and Bear Stearns inflicted directly on purchasers of the shoddy mortgage-backed securities is estimated to be $100 billion. “The normal rule in terms of remedies for frauds of this scope,” he says, “is that you pay for your damages that you caused.” And if those damages were caused by fraud as opposed to mere negligence, Black adds, the US legal system often makes the fraudster pay punitive damages of at least twice that amount. “A normal recovery would be in the range of $200 billion,” he says.
More details on Welch’s legislation can be found at Buzzfeed.