JP Morgan Chase to pay $27 billion, largely in bonuses

[Joanne98]

I was skipping around the Web, seeking news and analysis regarding the banking collapse, the taxpayer bailout and the massive profit and bonuses that the bailout has generated for an industry that still prefers to believe it did nothing wrong and that few changes need to made.

When I stopped by Forbes.com, I was greeted by its “Thought Of The Day”:

“When a deep injury is done to us, we never recover until we forgive.”
– Alan Paton

Well, that’s nice, I thought. On the other hand, there’s this:

“In a remarkable rebound from the depths of the financial crisis, (JP) Morgan earned $11.7 billion last year, more than double its profit in 2008, and generated record revenue. The bank earned $3.3 billion in the fourth quarter alone.

Those cheery figures were accompanied by news that JPMorgan has earmarked $26.9 billion to compensate its workers, 18 percent higher than in 2008, much of which will now be paid out as bonuses.”

You read that right: $27 billion. much of it in bonuses. Ka-ching!!

The Masters of the Universe who helped engineer this mess — although blame certainly extends from top government circles down to folks sitting at kitchen tables in homes about to be foreclosed — are merrily going about their way, paying themselves huge bonuses while the rest of the country looks on in astonishment from the unemployment line.

Earlier this week, CEOs of the four biggest Wall Street banks testified before a bipartisan commission created to investigate how this mess was allowed to happen. In his column today, Nobel-winning economist Paul Krugman says that “the bankers’ testimony showed a stunning failure, even now, to grasp the nature and extent of the current crisis”:

“There were two moments in Wednesday’s hearing that stood out. One was when Jamie Dimon of JPMorgan Chase declared that a financial crisis is something that “happens every five to seven years. We shouldn’t be surprised.” In short, stuff happens, and that’s just part of life.

But the truth is that the United States managed to avoid major financial crises for half a century after the Pecora hearings were held and Congress enacted major banking reforms. It was only after we forgot those lessons, and dismantled effective regulation, that our financial system went back to being dangerously unstable.

As an aside, it was also startling to hear Mr. Dimon admit that his bank never even considered the possibility of a large decline in home prices, despite widespread warnings that we were in the midst of a monstrous housing bubble.”

Over at Calculated Risk, Bill McBride echoes that conclusion. “The bankers are apparently clueless, or if they have any inkling about what happened, they will not say it. The first morning of hearings were a waste of time.”

But he also offered a suggestion for how the commission might get at the real roots of the problem:

“…. first, start from the bottom, not the top. Don’t interview any more bankers or heads of regulatory agencies, at least not yet.

My first suggestion is that the Commission start interviewing – in private – the field examiners at the Fed, FDIC, OCC and OTS (the four federal banking regulatory agencies). There is no need to publicly embarrass any examiner. The various Inspector General reports on bank failures would provide a starting point.

Ask the examiners what they saw and when – according to the Inspector General’s reports, the field examiners were warning about lending problems in 2002 and 2003.

Follow the trail. Did this information generate warnings inside the organizations? If so, why wasn’t action taken? Was the action blocked by political appointees?”

That’s exactly right. I’ve read and reported on some of those inspector-general reports regarding failed banks here in Georgia, and they read just as McBride suggests. I’ve also heard first-hand but off-the-record accounts of examiners being discouraged from looking too hard at banking practices that until a few years ago would have set off alarm bells.

Continued>>>
http://blogs.ajc.com/jay-bookman-blog/2010/01/15/jp-mor...