JPMorgan Chase & Co’s $13 billion settlement with the federal government has received a lot of attention. Some have even said that it’s the largest settlement between a corporation and the government. While it is undoubtedly a step in the right direction, this settlement is not as historic as it sounds, and it highlights the inherent challenges of trying to hold huge banks like Chase accountable.
It would be difficult to come up with a dollar amount that would suitably punish Chase for its hand in the mortgage crisis, considering the bank’s almost unbelievable stockpiles of assets. A loss of $13 billion doesn’t sound like a lot compared to the bank’s $21 billion in profits last year or its $2.5 trillion in assets. In fact, Chase set aside $23 billion just to deal with legal costs.
On top of that, the bank will likely be able to write off most of that settlement money on it’s taxes, saving them up to $4 billion according to one Reuters article.
The recent court decision against Bank of America is mostly the same story. Although lat year’s $4.1 billion profit wouldn’t cover the $6 billion the government hopes to get from the bank, it’s a drop in the bucket compared to BofA’s $2.1 trillion assets.
For JPMorgan Chase, the settlement doesn’t protect the bank from criminal charges, but judging by recent proceedings against hedge fund SAC Capital, criminal charges against big banks might be more bark than bite.
SAC Capital, the company itself, plead guilty to insider trading and paid a settlement of $1.8 billion. In return, Steve Cohen, the fund’s manager, will be spared from any personal criminal proceedings. His hedge fund will no longer be allowed to accept outside investors and instead will only manage Cohen’s $9.3 billion of assets.
Across the board, banks and financial criminals are getting off relatively easy. Thankfully, a significant portion of Chase’s settlement will go towards relieving distressed homeowners. The big banks may come out of this mostly unscathed, but hopefully the settlement money is enough to help homeowners get back on their feet.