Tag Archives: $13 Billion settlement

And How About the Just?

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Some believe that there are 36 righteous people whose existence justifies the whole of humanity.  Each bears the world’s pain and the world would come to an end without these Just ones. Oddly enough, I was thinking about this story when reading about the the JPMorgan Chase settlement with the Department of Justice.

I was glad to see that the company was being held accountable for its behavior (the Statement of Facts outlines the basis for the settlement).  I was also glad to see that Justice is not giving a free pass to the individuals who may be individually guilty of wrongdoing. The settlement does not bar future prosecutions and Justice seems energized to hold individuals accountable for their intentional and wrongful acts that contributed to the financial crisis. These actions by Justice will hopefully deter some potential wrongdoers going forward.

But what is missing from all of this allocating of responsibility is an acknowledgment that some people in these financial institutions tried to do the right thing. They tried to underwrite mortgages properly; they tried to rate securities properly; they tried to follow established due diligence procedures. These people were overrun by their superiors who were chasing short term profits for their employers and bigger annual bonuses for themselves. Some of these Financial Industry Just were fired, some retired, some moved on.

How might the FI Just view their actions so many years later? Their supervisors likely received large bonuses and promotions and very few of them will be held responsible for their bad acts. The FI Just, on other other hand, got harsh words, poor treatment and relatively poor compensation for their troubles.

Just as we want to disincentivize bad behavior, we should also seek to incentivize good behavior. This does not necessarily require financial compensation. For many people, an acknowledgement of their good judgment might be enough. Is there a role for government in such an initiative? Can their be a medal for financial rectitude; an honor roll for underwriting: a listing of the Just by Justice?

 

Reiss on $13B JPMorgan Settlement in CSM

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The Christian Science Monitor quoted me in JPMorgan Chase settles. Is $13 billion for role in mortgage crisis fair? The story reads in part,

The settlement does not, however, release any individuals within JPMorgan from further criminal or civil charges. The bank has agreed to cooperate fully in any investigations related to the fraud covered in the agreement.

“I think that the Department of Justice has heard the public in terms of saying, if people were criminally responsible, they should be held liable,” says David Reiss, a professor at Brooklyn Law School, who has written extensively on the mortgage crisis. “Just a handful of people have faced any serious personal liability as a result of the events of the financial crisis of the 2000s.”

But some feel that the unprecedented scope and size of the penalty is unfair for the bank behemoth, which was seen as something of a financial savior when it took on the imploding assets of Bear Stearns and Washington Mutual after the financial collapse. Some estimate that employees at these banks conducted up to 80 percent of the fraud found by the Justice Department. JPMorgan assumed these firms’ legal jeopardy when it took on their troubled assets.

“There’s a moral narrative about this, that it’s unfair to go after JPMorgan because they stepped in to help,” says Mr. Reiss.