The FT brings welcome news this morning, noting that:
US authorities are demanding JPMorgan Chase pay more than $6bn to settle allegations it mis-sold securities to government-backed mortgage companies in the run-up to the financial crisis, according to people familiar with the discussions.
The Federal Housing Finance Agency, a government regulator, sued JPMorgan and 17 other banks in 2011. It said the bank falsely claimed that loans backing $33bn of mortgage-backed securities complied with underwriting guidelines and that it “significantly overstated the ability of the borrowers to repay their mortgage loans”.
Holding banks to account for their misbehaviour is the first stage to making them realise that they cannot do whatever they wish. That's why I welcome this.
That said three thoughts follow. The first is that welcome as this is unless the penalties levied are used for the focussed supply of new capital to the productive economy - through green investment banks, for example - such behaviour will have a negative impact on the credit available within the economy as a whole, and that would not be helpful. I hope the US government makes clear its intended use of these funds and that they are not simply lost into the US deficit.
Second, the question obviously arises as to why such action has not been replicated by demands for compensation in the UK.
Thirdly, if actions of this scale occurred it cannot have been without board consent. The inevitable question of why prosecutions have not followed does, of course, arise.
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i agree with George Galloway ( I man I don’t generally like) on this that they need to hear the cell door closing behind them before things change!
I agree with that too.
Though making the bank itself pay will just reduce the bank’s funds and hence funds available for lending to businesses etc. … I suspect, so some downside potentially.
On the other side you’re right too, the funds will just ‘disappear’ into the federal coffers and won’t be used to help those affected by the financial crisis – other than indirectly perhaps.
What bugs me is that ‘someone’ should be held responsible and the bank is not a person – in my mind it’s the people behind it that should be prosecuted – i.e the board, senior managers etc. – anyone involved in the decisions making that led to teh disaster. Plus they should be banned from holding such positions again to avoid the possibility they’ll do the same again (some hope). Problem is you wouldn’t get €6bn from them so it would be a substantially smaller amount.
Couldnt agree more with the above comments. One question remains, who will compensate the people who have been unlawfully deprived of their homes during this abominable swindle?
The level of this fraud is so large and far-reaching that the banks involved should have their licenses revoked, must immediately cease trading and have their assets confiscated. This would bring it to a stop but new banking facilities must be in place first, with a very different control system, to enable a reasonably smooth transition and of course these steps have not been taken even though the position became clear in 2008.
This is intolerable and surely this can not continue. When will the cascade of corruption end? When will the litanies of ordinary decent people be answered? When will the day of reckoning come?