Case Scenario:
In October 2013, JP Morgan and the U.S. Government announced an historic settlement agreement where JP Morgan agreed to pay $13B to end U.S. civil probes of its mortgage-bond sales. Most of the probes stemmed from wrongdoing alleged to have occurred at Washington Mutual (WaMu) and Bear Strearns (Bear).
Many people believe that JP Morgan was a hero of the 2008 financial crisis. JP Morgan was asked by then treasury secretary Hank Paulson to purchase Bear and WaMu to prevent a collapse of the financial system. Since JP helped the government by stepping in and buying these companies, they should not now be made responsible for the sins of the predecessors, particularly when government regulators were asleep at the wheel. This is further reinforced by the hundreds of business and special licenses needed by the bank.
Other people believe that JP Morgan bought these companies at an extremely discounted price. JP Morgan asked for but didn’t receive an indemnification at the time they bought these companies, so therefore JP Morgan knew the risk. Accordingly, it is only right and just that JP Morgan be responsible as someone has to be accountable for the bad behavior that went on at WaMu and Bear.
- Where do you come out on this? Was it unethical for the Government to come after JP Morgan?
- Didn’t the Government just penalize the shareholders of JP Morgan?
- Could JP Morgan have effectively litigated their case against the government knowing that the government could withhold renewal of all the special business licenses needed to operate as a bank in 50 states?