CHASING JPMORGAN CHASE / THE NEW YORK TIMES EDITORIAL

September 1, 2013

Chasing JPMorgan Chase

By THE EDITORIAL BOARD

Not too long ago, JPMorgan Chase and its chief executive, Jamie Dimon, were celebrated for navigating the 2008 financial crisis, which brought other big banks to their knees. Now this one-time darling of federal regulators, long thought to be the best managed of all the big banks, is in trouble or apparently headed there on multiple fronts. While the outcome of the various investigations into the bank’s dealings remains unclear, they raise the obvious question of whether banks have become not only too big to fail but too big to manage.

      

In the past month alone, JPMorgan paid $410 million to settle accusations by federal regulators that it had manipulated energy markets in California and Michigan. Federal prosecutors are pursuing criminal and civil investigations into mortgage securities that JPMorgan sold to investors before the housing bust.

      

Meanwhile, two JPMorgan employees have been criminally charged in the London Whale fiasco. The Securities and Exchange Commission is investigating whether the bank’s hiring practices in China violated federal bribery laws.

California is investigating the bank’s mortgage business; New York is investigating JPMorgan’s retail banking practices; and two federal agencies are reportedly on the verge of seeking damages for the bank’s alleged abuses of its credit card customers. All this and more comes on top of earlier settlements over allegations of abusive foreclosures and tainted tactics in a municipal bond deal.

      

The question now is whether federal officials can be persuaded by evidence that the government is gathering to make fundamental changes to America’s banking landscape. Even Mr. Dimon must know that the underlying problem is not only this or that violation, but the fact that the sheer size and scope and complexity of the banking behemoths defy controls, encouraging speculation and bad behavior.

      

Administration officials, lawmakers and regulators know this, too. But they remain at odds over the Volcker Rule and other reforms that, done properly, would curb the size and complexity of banks. For their part, prosecutors have consistently balked at seeking criminal prosecutions of big banks and their senior executives, or even at extracting admissions of wrongdoing in civil settlements, even though deterrence and accountability are impossible without prosecutions and admissions.

      

For the investigations of JPMorgan and other banks to make a real difference, the federal authorities would have to show a willingness that has thus far been lacking to get tougher with banks and bankers and move from there to carry out broader reforms of the nation’s financial system.