The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.Rep. Barney Frank • Discussing a $2 billion trading loss that JPMorgan Chase had suffered recently as the result of a misguided hedge fund strategy. Frank, whose Dodd-Frank financial reform law has come under scrutiny by the banking industry for being too restrictive, is using this as an opportunity to argue against loosening the standards — pointing out that the company argued it was going to lose $400 to $600 million from the regulations. ”In other words, JPMorgan Chase, entirely without any help from the government has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them,” Frank said.
» This is both the largest consumer protection fine ever levied by the Fed and the first time the institution has punished a bank for nudging customers into subprime loans. There’s more to come, too; in addition to the fine, the order also “requires that Wells Fargo compensate affected borrowers,” although it’s unclear how this will work. It’s better than nothing, but $85 million just seems a bit low; as a point of comparison, the bank made $2.5 billion in the first three months of 2010 alone.
» A fight that directly affects small businesses: We’ve been to many small businesses in our day that have gone out of their way to avoid using debit cards, specifically for this reason. We’re with them in this case; really high charges for every purchase, even tiny ones, is straight up greedy. Fortunately, a key senator, Dick Durbin, agrees with us: ”Honestly, are we going to stand here and say we can’t protect small businesses across America struggling to survive?” The fight for keeping the fees has bipartisan support; the main guys backing banks in the Senate are Bob Corker (R-TN) and Jon Tester (D-MT). They claim that banks will have to replace the interchange charges with higher fees on consumers. Maybe they should; the benefit to small business as an economic driver makes it worth it.
» Why such a big charge? Apparently, someone at Bank of America (or Countrywide) was really bad at doing paperwork, or was trying to push through half-baked mortgages. Because both were named as factors in creating the huge charges which resulted from investors making claims against them. Most of the fees are headed to Fannie Mae and Freddie Mac, by the way. Had this charge (and a separate $2 billion goodwill charge related to the Countrywide merger) not been there, Bank of America would’ve been profitable in the fourth quarter.