This thread out to bring out the strong opinions (which I see has already started).
Chase was in a strong position in 2008 and able to snap up weak players. Most of these were strongly encouraged by the Federal Reserve who was desperate to find buyers of distressed banking institutions like Washington Mutual and Bear Stearns.
The fact is that the US Government asked JP Morgan Chase to buy Bear Stearns. Bear was in such bad shape that the Fed offered to finance $30 billion in Bear Stearns mortgage backed securities in order to get Chase to do the deal.
The situation with Washington Mutual was similar. Wamu was hemorrhaging deposits quickly, and became the largest failed bank in US history. When Lehman declared bankruptcy on September 15, 2008, WaMu depositors started a run on the bank, and WaMu lost 9% of their overall deposits in just 10 days ($16.7 billion). Not long afterwards (September 25, 2008), the FDIC had to step in and take over WaMu and sold it to JP Morgan Chase. It is important to note that NO OTHER BANK bid on WaMu. NONE.
As part of the bail out funding of various institutions, the Treasury/Federal Reserve TOLD the few strong banking institutions that they needed to take the government investment for the good of the country. If they had not, the run on the weak institutions would have continued. As part of that meeting, JP Morgan chase agreed to take $25 billion in loans, which they re-payed with interest in 2009.
In a 2012 testimony, Jamie Dimon stated:
“JP Morgan took TARP because we were asked to by the Secretary of the Treasury of the United States of America. Put the FDIC in the room; the head of the New York Fed, Tim Geithner; chairman of the Federal Reserve, Ben Bernanke.
He added: “We did not, at that point, need TARP. We were asked to, because we were told, I think correctly so, that if the nine banks there, and some may have needed it, take this TARP, we can get it into all these other banks and stop the system from going down.”
Later, the federal government fines JP Morgan for mortgage issues, which the vast majority of which were from .... Bear Stearns and WaMu prior to Chase's takeover of those failing institutions....to the tune of $19 billion.
So:
1) Institutions were failing
2) Chase is asked (almost begged) to help the country by buying Bear and WaMu
3) Chase is asked to take bail out money
4) Chase repays the bail out money as soon as it was legal to do so with interest
5) Chase gets screwed by the government for issues associated with the very same institutions the government asked Chase to take.
Chase now recognizes this. In a 2015 letter to shareholders, Dimon wrote:
“In case you were wondering, No we would not do something like Bear Stearns again — in fact I don’t think our Board would let me take the call.”
He also wrote in 2015 that 70% of the legal costs that they have paid as a result of the mortgage crisis were directly attributable to the Bear Stearns and WaMu asset purchases.
One of my favorite sayings: No good deed goes unpunished.
