JP Morgan Chase Pulls Another Rabbit Out of Banker’s Hat

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JP Morgan Chase, which announced a 23% increase in profits this quarter, also says that its mortgages are A-OK. From Bloomberg:

JPMorgan Chase & Co. probably will pay an “incremental” sum to settle foreclosure investigations and there’s almost “no chance” the bank made mistakes in seizing homes, Chief Executive Officer Jamie Dimon said.

“It will cost us some money to go back and make sure it’s done right; it will delay some foreclosures,” Dimon told reporters on a conference call today after posting quarterly results. “But the whole mortgage issue costs us so much money now, to me it will be incremental.”

The lender is in talks with state attorneys general and will correct any errors tied to foreclosures, Dimon said. About 115,000 files are under review, according to the bank’s website. It’s unlikely the New York-based firm made mistakes as it seized homes from borrowers who couldn’t pay, he said.

According to Zero Hedge, JP Morgan basically officiated that it lets homeowners live in their homes for 14 months without paying mortgage before starting a foreclosure sale. By correlation, the JPM profits are “voodoo”:

In a nutshell – the bank which missed total revenue expectations of $24.28 billion by almost half a billion at $23.824 (which you may find unadjusted on one place somewhere in the attached presentation but most likely not), and which is entering Q4 with the foreclosure fraud crisis chip on its shoulder, and halted mortgages, somehow is lowering its net charge-off provisions estimate by over a billion. Which is why, hey presto, earnings of $1.01 “beat” expectations of $0.88, and the robotic headline scanners go nuts over the stock.

More importantly, in discussing fraudclosure, JPM admits that by the time there is a foreclosure sale, borrowers are on average 14 months delinquent. In other words, all those who end up being “thrown out” on the street, live mortgage-free for over a year! And one wonders where all the excess marginal money to buy worthless trinkets comes from…

Zero Hedge breaks down the numbers here.

Reports of bank reluctance to foreclose started as early as 2008. Since then, banks have had government incentives to enter loan modifications, but not to stay with them. There are several other accounting tricks, like mark-to-market inflation, that banks use to pillow their profits. That’s not to mention the 2008-9 mass layoffs, a (now-regulated) jump in credit card fees, and (but not limited to) the laundry list of profit-makers Nouriel Roubini put forth in 2009:

In brief, banks are benefiting from close to zero borrowing costs and fewer competitors; they are benefiting from a massive transfer of wealth from savers to borrowers given a dozen different government bailout and subsidy programs for the financial system; they are not properly provisioning/reserving for massive future loan losses; they are not properly marking down current losses from loans in delinquency; they are using the recent mark-to-market accounting changes by FASB to inflate the value of many assets; they are using a number of accounting tricks to minimize reported losses and maximize reported earnings; the Treasury is using a stress scenario for the stress tests that is not a true stress scenario as actual data are already running worse than the worst case scenario.

What was that about JPM profiting from consumer loans again?

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Written by Drea Knufken

Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.