Is J.P. Morgan Chase the enemy?


We all have aspirations about where we want to work after college. Many people dream of working for a non-profit or taking over their families business. I unfortunately have never been interested in these specific fields and have always found finance as a fascinating subject. The biggest issue with finance is that the industry is extremely corrupt. You can blame it on the types of people that are recruited into the industry or the culture within the banks. These banks were the architects of the 2007 financial crisis and were motivated by huge bonuses and salary increases. I would like to think that I would have acted differently if I had been working for one of these firms but the reality of it is that the system probably would have coerced me into taking part in the fraudulent activity.

One of the biggest players in the financial crisis was J.P. Morgan Chase, who happens to be the company that I will be working for this summer. I feel torn between wanting to make excuses for the company and stating the fact that they were a corrupt organization that took advantage of innocent people. Either way you look at it, I find it saddening to hear from employees speak about the fraud occurring from the lowest level employees to the CEO Jamie Dimon. One key employee that has been speaking out about some of the issues that occurred inside the company is Alayne Fleischmann. She worked at Chase as a transaction manager, which meant that she was supposed to ensure that the mortgages that were being packaged together as mortgage-backed securities were not subprime mortgages. During 2006 she was given the task of investigating if a package of loans from GreenPoint had quality loans. What she found was that the $900 million dollar mortgage-backed security had a bunch of terrible quality loans that had been formerly been rejected by J.P. Morgan. She voiced concern about the package but the Managing Director specifically told her that her research was incorrect. Fleischmann and a couple of other analysts who voiced concern were then given more and more work until they began to change their opinion of the loans sold from GreenPoint. This continued to happen and lead to the billion of dollars of losses suffered during the financial crisis of 2007.

The SEC and the Department of the Justice never dealt with this fraud that may seem obvious to the general public. Instead the DOJ used the knowledge of the banks wrongdoing as a bargaining chip to make J.P. Morgan Chase pay over $9 billion dollars of penalties. This was touted as a win for the Justice system because it was the largest white-collar settlement ever. In reality J.P. Morgan Chase, specifically the CEO Jamie Dimon celebrated the payout. Before the financial crisis they made billions more of profit than what they had to pay out. Even the shareholders were happy with the settlement because the stock price for J.P. Morgan Chase rose six percent after the announcement, increasing the market capitalization of the company by $12 billion dollars. Furthermore, Jamie Dimon’s salary was raised by 74 percent. If this doesn’t show you that the banks were the winners, I don’t know what will.

I am hoping that I will be surprised this summer by the large culture change, but I think that the reality is that banks will wait out the financial crisis woes until they can find another way to take advantage of the general public. I can’t truthfully say that I will not work in finance because of this bad stigma surrounding the industry. But what I would like to believe is that the best way to change a company is from within. Even though you may view this as a very convenient solution with the largest benefit to me, I would like to argue that I can and will make a change. I may only be an analyst when I begin working there, but hopefully someday I will be high enough up within the company to make a cultural change.

Sources:

Article: http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106

Illustration by Victor Juhasz

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5 thoughts on “Is J.P. Morgan Chase the enemy?

  1. I find finance interesting, just as you do, but maybe for different reasons. I enjoy reading about all of these things because its fun to see big business and big numbers being thrown around , but could not quite understand how I would see myself working for a finance company doing a cubicle job that is simply numbers based, but to each their own. I find that the report Fleischmann did on the mortgage backed securities being dismissed as false or incorrect to be the largest issue here. If there was somehting wrong, the higher level employees should have taken it serious if we want to avoid another crisis. The company here is clearly deomstrating that profits and shareholder benefit is of the highest concern for the company, not the rest of the stakeholders involved. This does not appear to be a surface level problem either. This culture seems to be embedded well into the core of the firm to the point that it is almost impossible to eradicate until another crisis hits them. They just paid 9Billion dollars and laughed it off. Right now they see nothing wrong with what they are doing, but it will also be too late for when it finally matters.

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  2. I appreciate your honesty about working there. It reminds me of the sociological imagination reading. You would rather experience well-being, but you have cherished values, a financial system that serves the interests of its clients, that is threatened by the organizational culture and structural incentives of finance.

    Some change can come from people on the inside. Some can also come from changes to the finance sector which, sadly, did not happen.

    I would suggest you read whatever Elizabeth Warren is saying about finance, or Sheila Blair, every day or week of your internship just to get some balance.

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  3. I have always been taught that it is important to have multiple opinions on a situation. Whether you are deciding your political preferences or making a choice on where you are going to go to college. You always need to weigh the pros and cons of each outcome. I think that I have to realize this when going to work this summer. I may be working for a corrupt company, but I hope that I can make a change for the better. Jordi, I will also make sure to read Elizabeth Warren as an alternate source. A large part of the job is reading up on news, but the usual source is WSJ. Getting a different opinion will be good to have and allow me to get a overall picture of the situation.

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