FacebookTwitterGoogle+RedditEmail

JP Morgan and Payday Loans

by CHRISTOPHER BRAUCHLI

“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”

— Attributed to Henry Ford

JP Morgan Chase did a good thing and everyone should applaud. Its good thing was noted at the same time its bad things were making news.  A good thing too.  The good thing came within days of Senate hearings that would have caused all but Jamie Dimon to think there was little good to be said for the institution.

On March 15, 2013, the United States Senate Subcommittee on Investigations issued a 307 page report entitled “JPMorgan Chase Whale Trades: A case History of Derivatives Risk and Abuses.” The report was issued on the same date the subcommittee was conducting a hearing on the same subject.  The hearing and report focused on the bank and its top executives as a result of the multi-billion dollar trading losses it suffered in 2012.  Credit for the losses was primarily given to the activities of outsize derivative trades effected by one of the bank’s traders known as the “London Whale.”  In the “Overview” of the report that appears in the Executive Summary, the Subcommittee states that the investigation determined, among other things, “that JPMorgan Chase’s Chief Investment Office used its Synthetic Credit Portfolio (SCP) to engage in high risk derivatives trading; mismarked the SCP book to hide hundreds of millions of dollars of losses; disregarded multiple internal indicators of increasing risk. . . . and misinformed investors, regulators , and the public about the nature of its risky derivatives trading.“  A lay person would not think well of an institution that engages in that kind of activity (to the extent a layperson understands things like “Synthetic Credit Portfolio”).  The report then goes on for 304 more pages to describe in some detail the activities in which the bank engaged. It observes that in April 2012 when media reports were beginning to circulate about the financial difficulties of the bank,  Jamie Dimon, Chief Executive Officer of the bank described those reports as a “tempest in a teapot.”

Responding to the report and the Senate hearing Joe Evangelisti, a spokesman for the bank, who may have been hired as much for his name as his skills, said: “Our management always said what they believed to be true at the time.  In hindsight, we discovered some of the information they had was wrong.”  Three hundred seven pages of the senate report consist of hindsight. The teapot to which Mr. Dimon had earlier referred was probably the bank and as a result of the tempest some of its tea leaves were removed by the board.  Mr. Dimon’s 2012 compensation went from $23 million to $11.5 million.  $11.5 million in tea leaves is not chicken feed but as Mr. Dimon jokingly told a questioner at a bank investor day in February, “I’m richer than you.” It is not clear from press reports that either Mr. Dimon or the bank is chastened.  Nonetheless, they should be given credit for their good works.  The bank has parted company with other large banks and cracked down on payday lenders.

Payday loans are loans designed to give momentary financial relief to workers and permanent relief to those making the loans. According to the Center for Responsible Lending, pay day loans interest rates can run as high as 465%, a rate that benefits the lender more than the borrower. Banks have joined the typical store front payday lenders and arrange with debtors for automatic withdrawals from the borrower’s checking accounts in order to repay the borrowed amounts.  That is a real convenience for the borrowers since they don’t have to do anything except make sure there are adequate funds to repay the loan on payday.  If the checking account does not have adequate funds to repay the loan the banks charge overdraft fees and continue to attempt to collect from the borrowers’ checking account, adding an additional overdraft fee each time the payment is declined. The bank is, of course, pleased to generate the income from the overdraft fee and the borrower is pleased that it got the money it needed before pay day and slightly less pleased at the fees charged when the loan is not repaid in a timely fashion. There are presently six banks, including Wells Fargo and US Bank that engage in payday lending.  And here is JPMorgan Chase’s good news.

JPMorgan Chase has decided to place limits on procedures involving payday loans, both those made by the bank and those made by storefront lenders. Beginning in May the bank will limit overdraft fees that can be collected and will permit customers to close accounts or have stop payment orders promptly enforced.  Heretofore customers found it could be impossible to put an end to automatic withdrawals by terminating the authority or closing the account with the result that fees continued to mount.  JPMorgan will now make it easier to close accounts even when there are accrued charges.  It goes to show that even an institution as venal as JPMorgan appears to have been, occasionally gets something right.

Christopher Brauchli is attorney in Boulder, Colorado. He can be emailed at brauchli.56@post.harvard.edu

 

 

Weekend Edition
April 29, 2016
Friday - Sunday
Andrew Levine
What is the Democratic Party Good For? Absolutely Nothing
Roberto J. González – David Price
Anthropologists Marshalling History: the American Anthropological Association’s Vote on the Academic Boycott of Israeli Institutions
Robert Jacobs
Hanford, Not Fukushima, is the Big Radiological Threat to the West Coast
Ismael Hossein-Zadeh
US Presidential Election: Beyond Lesser Evilism
Dave Lindorff
The Push to Make Sanders the Green Party’s Candidate
Peter Linebaugh
Marymount, Haymarket, Marikana: a Brief Note Towards ‘Completing’ May Day
Ian Fairlie
Chernobyl’s Ongoing Toll: 40,000 More Cancer Deaths?
Pete Dolack
Verizon Sticks it to its Workers Because $45 Billion isn’t Enough
Moshe Adler
May Day: a Trade Agreement to Unite Third World and American Workers
Margaret Kimberley
Dishonoring Harriet Tubman
Deepak Tripathi
The United States, Britain and the European Union
Eva Golinger
My Country, My Love: a Conversation with Gerardo and Adriana of the Cuban Five
Richard Falk
If Obama Visits Hiroshima
Vijay Prashad
Political Violence in Honduras
Paul Krane
Where Gun Control Ought to Start: Disarming the Police
David Anderson
Al Jazeera America: Goodbye to All That Jazz
Rob Hager
Platform Perversity: More From the Campaign That Can’t Strategize
Pat Williams
FDR in Montana
Dave Marsh
Every Day I Read the Book (the Best Music Books of the Last Year)
David Rosen
Job Satisfaction Under Perpetual Stagnation
John Feffer
Big Oil isn’t Going Down Without a Fight
Murray Dobbin
The Canadian / Saudi Arms Deal: More Than Meets the Eye?
Gary Engler
The Devil Capitalism
Brian Cloughley
Is Washington Preparing for War Against Russia?
Manuel E. Yepe
The Big Lies and the Small Lies
Robert Fantina
Vice Presidents, Candidates and History
Mel Gurtov
Sanctions and Defiance in North Korea
Howard Lisnoff
Still the Litmus Test of Worth
Dean Baker
Big Business and the Overtime Rule: Irrational Complaints
Ulrich Heyden
Crimea as a Paradise for High-Class Tourism?
Ramzy Baroud
Did the Arabs Betray Palestine? – A Schism between the Ruling Classes and the Wider Society
Halyna Mokrushyna
The War on Ukrainian Scientists
Joseph Natoli
Who’s the Better Neoliberal?
Ron Jacobs
The Battle at Big Brown: Joe Allen’s The Package King
Wahid Azal
Class Struggle and Westoxication in Pahlavi Iran: a Review of the Iranian Series ‘Shahrzad’
David Crisp
After All These Years, Newspapers Still Needed
Graham Peebles
Hungry and Frightened: Famine in Ethiopia 2016
Robert Koehler
Opening the Closed Political Culture
Missy Comley Beattie
Waves of Nostalgia
Thomas Knapp
The Problem with Donald Trump’s Version of “America First”
Georgina Downs
Hillsborough and Beyond: Establishment Cover Ups, Lies & Corruption
Jeffrey St. Clair
Groove on the Tracks: the Magic Left Hand of Red Garland
Ben Debney
Kush Zombies: QELD’s Hat Tip to Old School Hip Hop
Charles R. Larson
Moby Dick on Steroids?
David Yearsley
Miles Davis: Ace of Baseness
FacebookTwitterGoogle+RedditEmail