In ancient times, when gladiators did battle to arbitrary rules, one hand gesture would determine who lived and another who died. The $13bn JPMorgan Chase has agreed to pay to end US government investigations into mortgage bond sales appears just as capricious.
In the depths of the financial crisis, when institutions looked about to crumple like gingerbread houses, regulators encouraged JPMorgan to provide limited life support to leading US banks: Bear Stearns and Washington Mutual. In doing so, they prevented a crisis turning into a catastrophe. As a thank you, the Department of Justice requires JPMorgan to pay a combined fine and penalty that is unwarranted and unprecedented. It is also harmful to law enforcement initiatives aimed at corporations and US capital markets.
What did JPMorgan buy for its $13bn? The price does not include any agreement to close criminal investigations. But it does include the right – no, the privilege – to assist prosecutors with investigations of former employees who helped create the mortgage instruments. Banks have been providing information to investigators for the past five years without noteworthy criminal cases arising.