Wednesday, November 20, 2013

JPMorgan Will Be Just Fine After Fine

The media needs to quit making a big deal out of JPMorgan's record $13B fine.  The fact that it's the biggest  fine in history means little to a firm that reported $21B in net income in 2012 and $471B in cash on hand.  Only $2B will be a cash payout; the rest is the equivalent of a tax reduction gift.  The worst legal troubles are probably over for the firm.  The chance of government regulators bringing criminal charges against an entire SIFI are IMHO slim to none even if some junior mortgage brokers have to walk the plank.

JPMorgan's senior executives were ready to backstop Social Security and EBT payments while their risk managers scratched their heads figuring out whether such a move would materially hurt the company.  It's obvious to me that very little outside of a comet impacting this planet could materially affect JPMorgan's viability as a going concern.  It really pays to have a great relationship with government regulators and to have senior government officials as clients of a private wealth management division.

BTW, any ongoing criminal investigations should provide an excellent opportunity for ambitious managers to conduct internal housecleaning by fingering their rivals for elimination.  Moving up the ladder inside a big bank is all about throwing someone else under the bus.  I have no special insights into JPMorgan's internal politics or culture that would lead me to guess who will be the sacrificial lambs.  I just know human nature pretty well.

Full disclosure:  No position in JPM at this time.