TAKING STOCK: JPMorgan Chase's problems

Dear Mr. Berko:

I've owned JPMorgan Chase & Co. for five years, and I need to know whether the lawsuits from this awful Libor scandal are going to hurt the bank and whether I should sell my 150 shares, which I bought in mid-2007 at $51. My new broker recently told me to sell JPMorgan Chase shares because he believes that the Libor scandal and JPMorgan Chase's many other troubles will prevent the stock from going back to my cost basis. Firstly, he thinks this Libor suit could end up costing JPMorgan Chase billions of dollars because it was in the forefront of the scandal. Secondly, he thinks this and the damage done by the trader in London are just the tip of the iceberg. What "many other troubles" is he talking about? I'd appreciate your thoughts on JPMorgan Chase; I think I should keep it.

RJ, Durham, N.C.

Dear RJ:

This Libor scandal is a clever, purposeful, coldly calculated slow rape of the industrialized world. And JPMorgan Chase's (JPM-$42) complicity is so deep that investigators need a bathysphere to find the bottom of this scam. And though the collective damages are probably in the trillions, JPM's fine will be a pittance, just a scant few hundred million dollars.

Other liabilities affecting JPM are 1) manipulation of the electricity market in California, 2) conspiracy with MasterCard and Visa to regulate credit card swipe fees, 3) aiding and abetting Bernie Madoff's Ponzi scheme, 4) aiding and abetting Jon Corzine and MF Global, 5) the $130 billion sale of knowingly bad mortgages to investors during the financial crisis, 6) problems concerning mortgage foreclosure procedures, 7) management's personal involvement in Enron's bankruptcy, 8) pension fund securities fraud, 9) rigging of municipal bond transactions, and 10) promoting the sale of unsuitable JPM mutual funds to clients. And that's just on my fingers!

JPM certainly hasn't been a good citizen. And to quote Thomas Jefferson, of whom I've always been in awe: "I believe that banking institutions are more dangerous to our liberties than standing armies. ... The banks and corporations that will grow up around (the people) will deprive (them) of all property until their children wake up homeless on the continent their Fathers conquered."

JPM's management, like management at Goldman Sachs and other big-investment bangsters, knows that every $1,000 it euchres from the financial system only costs the company about 2 percent of what it can steal, and that includes legal fees plus federal and state penalties. If management steals $1,000 and gets caught, it'll pay about $20 in fines and legals! So the company nets $980 after costs and walks away smelling like eau de toilette!

Assume JPM knowingly sells the public a $10 billion package of AAA mortgages that are truthfully subprime trash. The government prosecutes; JPM pays $200 million in fines and legals, and management denies any wrongdoing. JPM isn't even admonished by the Chamber of Commerce, contestants in the Miss Universe contest or the Boy Scouts of America. However, investors are still stuck with a bankrupt, worthless $10 billion mortgage bond. How lovely, that!

JPM has some of the best-connected mouthpieces on Wall Street. They are drinking friends with the enforcers at the Securities and Exchange Commission, golfing pals with the Justice Department, poker buddies with members of the Cabinet and business associates with members of Congress. This is crony capitalism at its best. What more could a big-box investment bangster ask for?

JPM will always stretch the limits of financial incredulity as it continues to plunder and pillage America with impunity. Most big corporations have that capacity. This unstoppable juggernaut, with 5,600 branches in 60 countries, is an unstoppable force that is strongly compelled by Wall Street to increase its revenues, earnings and dividends year after year after year. And JPM expects to earn $5.10 in 2013 (10 percent on equity) and pay a $1.20 dividend yielding 3 percent. So trading at eight times earnings, this might be an attractive entry point for 50 more shares.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2012 Creators Syndicate Inc.

Published: Wed, Oct 3, 2012