Jul 18 2013

The Good Bank

Chase, Once Considered "The Good Bank," Is About to Pay Another Massive Settlement

By Matt Taibbi, Rolling Stone

July 18, 12:20 PM ET

In the three-year period between 2009-2012, Chase paid out over $16 billion in litigation costs. Noted financial analyst Josh Rosner of Graham Fisher slammed Chase in a report earlier this year, pointing out that these settlements and legal costs represented a staggering 12% of Chase’s net revenue during this time. There couldn’t possibly be a clearer demonstration of the modern banking model, in which companies break rules/laws as a matter of course, and simply pay fines as a cost – a significant cost – of doing business.

For sheer curiosity’s sake, I thought I’d list, in capsule form, some of the capers Chase has been caught up in in recent years:

  • They were fined $153 million for the infamous “Magnetar” fund case, another scam in which a bank allowed a hedge fund to create a “born-to-lose” mortgage portfolio to bet against. Very similar to the Abacus case that’s at the heart of the ongoing “Fabulous Fab” trial;
  • Chase paid $228 million for its role in the egregious municipal bond bid-rigging case we wrote about in Rolling Stone in 2011;
  • Chase paid $297 million to the SEC last November for fraud involving mortgage-backed securities;
  • Chase paid $75 million in cash and generously agreed to forego $647 million in fines in the Jefferson County, Alabama mess, in which a small-town pol was bribed into green-lighting a series of deadly swap deals;
  • In two separate orders this spring, Chase was reprimanded by the OCC and the Fed for money-laundering behaviors similar to the infamous HSBC case, and also for regulatory failures and fraud in the London Whale episode. There was a separate FBI investigation into the London Whale probe in which they allegedly lied to customers and investors about the loss;
  • They’re under investigation for allegedly failing to disclose Bernie Madoff’s trading activities to authorities;
  • They were one of 13 banks asked to pay up in this year’s $9.3 billion robosigning settlement;
  • They were one of four banks last year to settle for a total of $394 million with the OCC for improper mortgage servicing practices;
  • They were ordered by the CFTC to pay $20 million last year for improper segregation of customer funds (this was part of the Lehman investigation). The CFTC also fined Chase $600,000 last year for violating position limits in the cotton markets;
  • Last year, Chase paid a $45 million settlement to the federal government for improperly racking up fees for veterans in mortgage refinancings. Hey, if you’re going to steal from everyone, you can’t leave out those veterans overseas!
  • In 2010, Chase paid $25 million to the state of Florida for selling unregistered bonds to a state-run municipal money-market fund;
  • The bank last year was convicted in Europe along with several other banks for fraudulent sales of derivatives to the city of Milan. A total of about $120 million was seized from Chase and three other banks.

There are some other civil actions left out, too, like the $110 million class-action settlement for improper charging of overdraft fees, or their part in the gigantic $6 billion settlement completed last year involving Visa, MasterCard and other credit card providers for manipulating card service rates. And states like California have only just begun crawling up Chase’s backside for its role in the lunatic filing of erroneous credit card collection lawsuits, a scam outed by whistleblower Linda Almonte.

Chase is turning into the Zelig of the corruption era.

Speaking of Credit Cards-

Chase Made Errors in Nine Percent of Credit-Card Collection Lawsuits, Internal Survey Finds

By Matt Taibbi, Rolling Stone

July 11, 12:05 PM ET

Thirteen states, as well as the Office of the Comptroller of the Currency, a primary banking regulator, are investigating Chase’s insanely sloppy practices in the area of credit-card collections. I’ve been following this for years thanks to an acquaintance with former Chase VP and whistleblower Linda Almonte, who saw horrific abuses firsthand (I have a chapter on Linda’s crazy experiences coming out in my next book).

I’m glad that the states are finally listening to Linda and that this news is starting to come out. The story is actually far worse than is being described in the papers. It involves allegations of a rather complicated scam tied to secondary sales of credit-card debt – it’s easier to sell credit card debt when a judgment has already been obtained, so it seems companies like Chase will go to great lengths, including mass robosigning and other abuses, to obtain judgments.

Chase is the headline target of these new investigations, but most analysts believe the same exact things go on at other banks and credit companies. Once the bigger state lawsuits gain momentum, we’re likely to find out, as we did in the foreclosure scandals, that faulty paperwork and perjured/robosigned affidavits pervade the entire consumer debt industry.


  1. ek hornbeck
  2. BobbyK

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