If you’re having trouble keeping track of the fines paid in recent years by major banks such as JPMorgan Chase & Co., there’s good reason for that.
The list is getting long.
From problems with foreclosures to mortgages to credit cards to energy trading, Chase, central Ohio’s largest private employer, has found itself in the cross hairs of regulators taking issue with the bank’s practices.
Last week, Chase agreed to pay $136 million to settle charges that it used illegal tactics to go after delinquent credit-card borrowers.
Add it all up, and the bank has paid $38 billion in 22 settlements from 2009 through March of this year, according to a report by the financial-services company Keefe, Bruyette & Woods.
Only Bank of America Corp. has paid more, $76.6 billion, during that period, in 31 cases, according to the report.
Citigroup Inc. was third, paying settlements of $15.8 billion in 15 cases.
Those three banks combined have paid more than half of the $187 billion that has been assessed against U.S. and foreign-owned banks since the financial crisis of the past decade, a downturn that helped push the U.S. economy into the worst recession since the Great Depression.
The massive fines are the result of increased attention from regulators, said Paul Rose, an Ohio State University law professor. Also, the great size of global operators such as Chase and others also adds to the amount, he said.
“After the financial crisis and Dodd-Frank [a financial regulation overhaul by Congress], we’ve really had more attention paid to these entities. These are systemically important entities. We can’t have them fail or act as some contagion on the financial system,” Rose said.
Cultural issues get the blame for at least some of the misconduct, said Will Schwartz, head of the U.S. financial institutions group for bond-rating agency DBRS.
“These are pretty alpha kind of guys … They are trained to take risks, and see that profit opportunity,” he said.
The biggest settlements against Chase and some of the other big banks, such as BofA, have been tied to the nation’s mortgage mess.
In 2012, Chase and four other mortgage-servicing companies agreed to pay $25 billion to settle charges over shoddy foreclosure paperwork.
Two years ago, Chase said it would pay $13 billion over problems with mortgage-backed securities it sold. BofA paid $17 billion last year to settle similar charges.
Also in 2013, Chase agreed to pay $1 billion to settle investigations by U.S. and British regulators into the “London Whale” trading scandal that caused $6.2 billion in losses for the bank.
Last week’s $136 million settlement alleged the bank illegally relied on robo-signing — signing mass quantities of documents without verifying the data in those accounts — and provided inaccurate information to third-party debt collectors when it sold the accounts.
After all those penalties, the bank doesn’t seem to have been hurt financially — and it has adequate reserves to withstand more, Schwartz said.
The bank, with a market capitalization of $252 billion, earned a record $21.8 billion last year on revenue of $97.9 billion and its shares have been trading at record levels. The bank scores well on various customer-satisfaction studies, especially compared with other big banks.
On Tuesday, the bank reported profit of $6.3 billion, or $1.54 per share, for the three months that ended June 30. Revenue totaled $24.5 billion.
“The saving grace is that JPMorgan Chase is a very strong performer, one of the strongest in the industry,” Schwartz said.
Rose said one concern is the black eye that comes with being punished.
“The difficult thing banks have … is reputational risk,” he said. “JPMorgan and others have really tried to manage that.”
Some of the bank’s troubles stem from its acquisitions of Bear Stearns and Washington Mutual, both made in 2008 during the height of the financial crisis. The bank ended up paying penalties stemming from actions both of the companies made long before Chase bought them.
“In case you were wondering: No, we would not do something like Bear Stearns again …,” Chase CEO Jamie Dimon wrote in his annual letter to shareholders this year. “The WaMu deal might still make sense but at a much lower price to make up for the ongoing legal uncertainty … These are expensive lessons that I will not forget.”
Dimon wrote that part of the problem around legal costs is that banks are frequently paying penalties to five or six different regulators over the same issue.
“The good news is that our legal costs are coming down and, we hope, will normalize by 2016.”
To Chase’s credit, it is working to create a more ethical environment and rein in those who have gone too far, Schwartz said.
“It takes time. It takes a lot of resources.”
