Here is How JPMorgan Posts $19B Annual Profit Despite Housing Hangover


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EDITOR’S ANALYSIS: You might ask how any bank could post such huge profits while the economy is in the toilet, Europe is falling apart and Asia is having problems. The answer lies — yes here it is again — in the level 2 yield spread premium they stole from investors. The way I add it up, the Banks collectively stole nearly 3 Trillion dollars from the investors before they even started funding loans out of investor money. According to some documentation that I received anonymously and a some documentation I received accidentally, that money was whisked off-shore through Bermuda, who asserted tax jurisdiction over the money and then waived the tax.
  1. The yield spread premium was achieved through the use of smoke and mirrors, which is to say business as usual on Wall Street. By making loans at higher interest interest rates or higher stated interest rates on stated asset and subprime loans, Wall Street reduced the amount that was needed to fund loans — and pocketed the difference without telling investors or disclosing to borrowers as required by the Federal Truth in Lending Act. On the one hand they say they are lenders so they can foreclose, and on the other they say they are not subject to the TILA disclosure requirements.
  2. The spread was enormous — each one as much as 100 times the yield spread premium that brokers were paid for steering hapless borrowers into more expensive loans.
  3. In a frequent example, the investor was expecting a return of 5% based upon loans of only the highest quality which of course would carry an interest rate that was the lowest the market had to offer — at around 5% average. If that had actually been done, Wall Street wouldn’t have been interested because the fees were too low. Instead, the Wall Street Banks sought out loans that carried a stated interest rate of 10% — obviously to borrowers who were either less credit worthy than the borrowers that the investors were expecting or borrowers who were convinced they were less credit  worthy, or they were convinced that the loan in front of them was a better deal even though they qualified for a lower interest rate.
  4. By doubling the interest rate the banks halved the principal funded by investors, pocketing the rest which they booked, for the most part as trading profits. They simply sold the 10% loan for the value of the 5% loan and doubled their money without using any of their own money to begin with.They kept the profit and didn’t report it while putting the investors at far greater risk than they were led to expect.
  5. So now, when the recession is gripping the world, Banks are reporting higher profits because they are able to feed the off-shore off-balance sheet transactions back in as needed to maintain the appearance of profitability. It is a living lie.
  6. Besides the obvious fact that these were ill-gotten gains from the past and not profits from current operations and the banks’ auditors will pay for this one day when shareholders wake up, there is a much more insidious and dangerous aspect to this shell game. If the law is applied as many scholars and writers, including myself, believe it should be, there is no doubt that the result would be a reversal of most foreclosures and an obligation that is unsecured or secured with some modified deal or settlement.
  7. It is highly likely that the the most dreaded result would occur — homeowners would actually pay the full balance of their debts after deductions for payments by third parties and set-off for TILA and other lending violations.
  8. This would result in a requirement of full accounting to the investors who would quickly find out that although the loans were paid in full, the amount they advanced was still not covered — because of the theft by the banks and reported as trading profits. It would also lead those who advanced money on the premise that the pools were insolvent to demand their money back because the loss they were covering in the insurance contract or contract for credit default swap never materialized — except for the intentional act of theft by the Banks.
  9. The resulting effect would be unraveling and reversing a lot of the profit made by selling the loans multiple times through exotic instruments that obscured the fact that they were in essence just selling the same loan over and over again — as much as 40 times the original loan. The consequences are by no means assured, but it seems logical that the Tier 2 YSP would be required to be disgorged. And then, it is possible they would be required to disgorge the money they received from Federal Bailout, insurance, credit default swaps and other derivatives and credit enhancement tools.
  10. Which means that loan you had that was $200,000 in principal is a liability to the Wall Street banks IF YOU PAY IT OFF — and that liability could be in excess of $8 million. When you reverse engineer the Wall Street process that led us into the mortgage meltdown and recession you see several things — false securitization, a fake default rate, fake losses, fraudulent foreclosures and a recession that only happened because the banks sucked the money out of the system. Just follow the money — everyone including government is a loser except the banks. The conclusion is inescapable.
By: Carrie Bay 01/13/2012
JPMorgan Chase kicked off the earnings reporting season for major U.S. lenders on Friday with its announcement that the company earned a record profit of $19 billion for the 2011 fiscal year. That compares with $17.4 billion in net income for the prior year. Earnings per share were $4.48 for 2011.
The company reported net income of $3.7 billion for the fourth quarter of 2011, compared with $4.8 billion for the fourth quarter of 2010.
Although the numbers paint a picture of a company in full recovery mode from the financial crisis and recession, JPMorgan’s latest results missed analysts’ expectations as
the company continues to struggle with legacy issues stemming from the housing downturn.
Mortgage net charge-offs and delinquencies modestly improved over the final quarter of 2011, but both remained at elevated levels, the New York-based lender noted in its earnings report.
JPMorgan’s total nonperforming assets declined by 33 percent compared to a year earlier, but legal wranglings involving mortgages and investors’ repurchase demands cut heavily into the company’s profits.
The company doled out more than $3 billion in 2011 to cover legal proceedings related to its mortgage business. That tally marks a decline from the $5.7 billion that was laid down in 2010 but still represents a hefty sum of what could have gone to boosting the bottom line.
CEO Jamie Dimon says the company set aside $528 million in the final quarter of last year alone to address mortgage-related legal issues.
The handling of foreclosures and defaulted mortgages also carried a steep price tag. In the fourth quarter, JPMorgan’s cost related to this part of the business added up to $925 million.
“There’s still a huge drag [from housing issues],” CEO Jamie Dimon told investors. “You’re talking about several billion dollars a year in mortgage [operations] alone.”
©2012 DS News. All Rights Reserved.

Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Websites:; and
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

18 Responses

  1. NG said above

    “there is no doubt that the result would be a reversal of most foreclosures and an obligation that is unsecured or secured with some modified deal or settlement.”

    I’m confused. WS sold investments with a return of 5%, and knowing they were going to do this, they sought subprime-type loans written at 10%, which allowed them to use less investor money to buy the loans? They pocketed the difference? Assuming that’s true, how does this result in unsecured notes? Is it because of the amt of money the investors actually paid and so it’s being said here that that amt might have and or should have paid off some of the notes’ balances? Would the reversal of foreclosure be premised on an overstatement of the amt due on notes?


  3. That should read the biggie funded 94k which included the ‘vig’ charged by B or C. The borrower would have had to show up with
    cash for the 6k unless it were a cash-out refi and there was room in the cash out to pay the 6k. If refi loan is 100k, payoff old loan of
    50k, there was room and borrower didn’t have to show up with the 6k. It was just deducted from amt of cash out.

  4. Imo, some of this post doesn’t add up. Like 1 + 1 leads to three, which it doesn’t. But, I had never given any thought to who owns or should own certain monies / fees assoc’d with loans, like svc release premiums, built into the stated interest rate at 3/8ths, which are calculated as part of the price paid for a loan when it is sold. If a loan is sold with servicing rights released with it, it is sold at a premium because of the value of servicing loans. Servicing has historically meant big bucks for servicers. What they are getting now is some
    serious gravy.

    Now when it comes to outrageous fees charged on the loan, generally discount points, who got them and who should have gotten them? Companies like B of A, WF, CW, etc crafted loan perameters
    which sometimes but not always had to meet the approval of FNMA and FHLMC. If they weren’t going to or thru those agencies, then they wouldn’t need to. I doubt sub-prime loans did, a separate market having been created by private entities. Then the boa’s the wf’s and the cw’s sent out those loan parameters under one name or another for each loan product to their brokers (“B’s”) and correspondents (“C’s”), of which there were many, many. The difference between a broker and a correspondent was mainly in the net worth of the broker or corr and its ability and desire to fund its own loans and then sell them at better pricing to the biggies than if the biggie funded them. Fwiw, a difference was also in the remedy available to the biggies for things like first payment default.** Even if a broker had signed a re-purchase agreement, it would be unenforceable given that the biggies knew the broker did not have the wherewithall to re-purchase anything. But, it was a stick nonetheless.
    Moving right along… The biggies sold the money to the B or C at a certain price. The B and C made money by 1) charging an origination fee and more discount points and or jacking the rate given to them by the biggies. There was a spread between what the biggies paid for the money and what they sold it to the B’s and C’s for. (The biggies cost would be more akin mol to overnight or at any rate short term funds because the biggies knew they were going to turn around and re-sell the loans and retire the short term funds). Then there was the “bump” from B or C to the consumer over what B or C had to pay the biggie and everyone jabbed it but good to the borrower, especially in subprime loans. If a loan is for 100k, the funder deducts the amt the loan costs the borrower in points and certain other fees from the funds for closing and so that means a lot less moolah to be funded. If one were charged 6 pts on that 100k, that alone would be a funding deduction of 6k. So for this discussion, let’s just say that was it (which it wasn’t). The biggie could sell the loan at its face value, 100k, but only funded 94k less the ‘vig’ charged the borrower by B or C. Nice. The biggie and the B or C also got more money for bumping the interest rate over their respective cost of funds and the biggie probably if not definitely charged a premium for the inflated rate on the note when selling the note. Teasor rate loans went from 2% to 12% in a NY minute. There is a formula which would determine the actual expected return to the next guy and or the ultimate investors. But the investors didn’t get any of the fees charged for the loan and as far as I can tell, they paid full price or more for a 100k note which cost 94k to fund, depending on the terms of the note.
    But should they have? I guess from the hip that answer depends primarily on whose funds were really used to fund the loan.
    ** It’s this remedy for first payment default, the repurchase agreement, which makes me believe the 6 or 12 mos. seasoning requirement (payments made by borrower and no one else) I heard about for loans before they may be securitized is true.

  5. […] Here is How JPMorgan Posts $19B Annual Profit Despite Housing Hangover […]

  6. @enraged – you are so right. forgot about that little deal. I still say having someone re-calculate your finance charge and a.p.r. (on your truth in lending Reg Z disclosure from closing) is your good friend for rescission especially IF you can prevail on what I see as a fact that rescission tolls from the time of discovery of the error in those calculations, which some courts have held in well-reasoned
    decisions. I.e., time not up to rescind and then use the cases wherein it has been held, as imo it should be, that ‘tender’ is not the first consequence of rescission: the “lender” must act first, and they don’t. You know, even if one can’t draft a pleading or complaint and one doesn’t have an attorney, there’s always plagerism of a successful
    case. (I say plagerism, but it isn’t really.) The apr’s and amt financed are a bit more difficult to calculate on subprime loans with the nasty teaser rates, but it can be done, of course. And I would hazard a guess many if not most of them are fatally inaccurate.

  7. @javagold – the duplicity and bull started imo with the advent of MERS and assignments of deeds of trust not being recorded. Our reliance on public record by and large did not fail us. I’m working on a piece regarding pre-MERS mechanics, but it’s a little more challenging than I anticipated. I am having to find factual basis for when, for instance,
    pre-MERS must an assignment have been executed. I know they had to be recorded to enforce. Period. To the best of my knowledge and experience, pre-MERS assignments were executed and delivered concurrently (and recorded) with the sale of the note, while the transferor still had an apparent interest in the dot to assign. But there would be an occasion, though rare, when public record did not show an assignment and we would have to go hunt it down and get it recorded.
    But I think the reason you just now see some things is that a lot of those things didn’t exist pre-routine-securitization and “MERS”. I can’t speak to things like the creation of funds by a note because well, it’s just not up my alley.

  8. @Java,

    Every rule of underwriting flew out the window around 2002, 2003. before that, there still was some underwriting and fewer people faced with exotic mortgages. Also, reverse mortgages (an atrocity visited on the elderly) contributed to that debacle.

  9. @joann – I think the ruling will come down in February. Not sure.
    A ruling by the MA SC is not precedent in other states as you know. But, the same logic if not law which leads to a conclusion in MA has application in other states. So even if not precedent, one may “borrow” the MA SC’s logic (read don’t just cite the case, articulate the logical / factual basis of the ruling and use one’s own state law that a court should rule the same.)
    I think some people cite to a case like MERS v Johnston in VT, think it was, but don’t “borrow” more of the logic used by the court in arriving at the conclusion. The law and logic applied by that court found MERS to be bull and no one mol. Same is true of a case like Koontz in Indiana where when squarely confronted with the fact that the person who executed the assignment was not an employee of MERS, the court threw it out with, as I’ve said, undisguised contempt for the act. No, it’s not precedent, but the logic used for conclusion applies anywhere.
    And I don’t know why you think it’s too late for people who have lost their homes, especially if this ruling has retroactive application, which imo it must. Even if the court rules otherwise, i.e., “from now on”, and I say this with the utmost regard for those MA jurists, such a ruling can and should be challenged if the law used in making a ruling in favor of unity were the law at the time anyone lost a home to the boogie man. Unfortunately, many, many people who have been horribly demoralized and defeated by that gang and all the collateral damage will not have even the energy to take up the fight. I’m certain the banksters counted on this woeful dynamic when playing the odds taking a home in which they had no interest. Well, trick them, and find the wherewithall.

  10. johngault

    It seems like the court is saying “Do you think we should follow the Rule of Law wherever that leads and at whatever the consequence or not and if not why not”….geez

    When it comes to retroactive, a ruling by that same court comes to mind:

    Bevilacqua v. Rodriguez, 10880, Supreme Judicial Court of Massachusetts (Boston) October 18, 2011

  11. @Joann,

    Don’t hold your breath: even if the arguments are due on the 23rd, it may take six months or longer for a decision to be reached. The wheels of justice are very slow moving…

  12. the thing i still do not understand has this always been the case with the banks doing this for close to 100 years or did just start to happen around the late 1990s…..i like to think to think of myself as an intelligent person who never trusts anybody when making a business transaction , so why is that only now do i understand what they did and not all the other times i bought houses and made monthly payments… it just that the supply of money dried up and finally exposed the fraud or were we all just asleep (including everyone who are much smarter than me)


  13. johngault

    “The parties are invited to indicate on what authority they
    believe (or do not believe) the court could make such a holding
    prospective only”.

    I so look forward to reading these “authorities” especially the ones in favor of “prospective only”. Will this be published? Who will declare that the Emperor has no clothes and who will say he is well covered and that it is against the law for anyone to say otherwise.

    When will this ruling come down? Is it possible to know that in advance? It is too late for millions and probably too late for me.

  14. Excellent explanation of why banks want homes back.

  15. My comments about Eaton on my comments are not from Dan
    Edstrom. His post ends at the quote from the case. Just to make that clear so it doesn’t appear I misquote him!

  16. I sent my own thoughts to the MA SC a couple months ago. Now I’d like to support the ruling being retro-active and I am interested in contributions to my little effort. So far, as I said, I feel that of course the ruling should have retro-active application. The law on which the decision is being based is not new. The only thing new will be in the
    interpretation and application of that existing law. Maybe there is case law which holds a decision may or must be applied retroactively when that decision rests on existing law, the law in place at the time of past actions now being ruled mol invalid. If so, I could use some. Joann, you’re pretty good at that – got anything?
    What the court’s ruling in favor of unity would mean imo is that banksters may not foreclose based on their alleged (self) assignments of the dot alone.
    It also means, if applied retroactively, that many foreclosures already done have fatal defects when the forecloser had no interest in the note.
    The court’s take on this is that such titles are clouded. We would call it wrongful foreclosure. I’m sure the court has an eye on the impact of retroactive-ness and its consequences to the titles to many homes which have since been (allegedly) purchased by new buyers. If there were no constructive notice to the new buyer of any “irregularities”, in the title, will MA lower courts rule the new buyer was a bona fide purchaser without notice of the defect(s)? If so, MA residents, and others when this spreads to other jurisdictions, need to start lining up their positions that something in public record either showed the
    “irregularity” or lead to a legal duty of inquiry. A broken chain of title on the dot comes to mind, if you subscribe to the mandate that all assignments must have been done even if not recorded at the time of their execution. (MERS nominee status as placeholder for a spell in public records did not change this – the assignments needed to be done if unrecorded. But, for reliance and enforcement, they must have all been recorded) Or alternatively, if we cannot get these homes back because of the bona fide purchaser doctrine (altho this needs serious research on the duty of inquiry imposed on the new buyer), then causes of action against the bankster to compensate for our losses need to be formulated.
    A case in Nevada is currently claiming that when MERS (read member) assigns a deed of trust to, say, Bank of America, but the note is allegedly owned by a trust, the note and the deed of trust are now bifurcated. I don’t know how it could be ruled otherwise in the absence of a legitimate (written and timely) agency or poa between B of A and the trust. Such a poa or agency agreement will likely never be found to exist because the trustee has no authority to enter into such an agreement that I know of. In fact, I don’t think those sec’n trustees have authority to do much of anything except collect fees.
    This argument might lead to favorable rulings for those who lost their homes after a “MERS” assignment to a bankster.

    The banksters when sued for wrongful foreclosure pursuant to the
    MA ruling I hope I see coming will do their best to convince a court they had possession of the notes at issue in past foreclosures, particularly those done by them in MERS’ name where no alleged assignment of the dot was done.
    Those foreclosures, done prior to MERS’ Consent Order for no foreclosures in MERS’ name, were been done in MERS’ name (by members), with alleged reliance that MERS’ straw officer at the servicer’s possessed the bearer note and MERS is named in the dot, so there was unity of the note and deed of trust, although the truth is neither MERS nor the servicer held any interest in either the note or the deed of trust, which may lead to some of the same past arguments. We need some new and better ones.

    Still, this will be a monumental ruling, and in that regard we need to support its retroactive application just now. If it is not made retroactive, it could close the door, at least as to some very valid arguments, on many people who have already lost their homes in MA (and other states if and when other states follow suit) for
    “no good reason” by pretenders. So, like I said, a few minutes of your time and a stamp are needed right away.

  17. “You might ask how any bank could post such huge profits while the economy is in the toilet…” How did you guess? As a matter of fact, I do ask. All the time!

    Won’t stop Dear Jamie from pocketting another obscene $20M bonus for last year’s outstanding work he did, will it?

    Enough said. When are we moving in and starting the dismantlement of those incredibly profitable entities on permanent life support? Answers, I want answers!!!

  18. “Massachusetts Supreme Judicial Court Deciding Hundreds of Years of Real Property Law Regarding MERS

    By Daniel Edstrom
    DTC Systems, Inc.

    In Eaton vs. FNMA, the Supreme Judicial Court is asking for
    additional briefings to help with the following “issue”:

    1/16/2012 #17 (january SIXTEEN – ?)

    ORDER :Having heard oral argument and considered the written
    submissions of the parties and the various amici curiae, the court
    hereby invites supplemental briefing on the points described
    below. Supplemental briefs shall not exceed fifteen pages and
    shall be filed on or before January 23, 2012. 1. It has been
    claimed that requiring a unity of the mortgage and the underlying
    promissory note, in order for there to be a valid foreclosure,
    would cloud any title that has a foreclosure in the chain of
    title, regardless of how long ago the foreclosure occurred. The
    parties are invited to address whether they believe that such a
    requirement would have such an effect, and if so, what legal or
    practical measures exist that might limit the consequences of such
    a requirement. 2. It also has been suggested that, if the court
    were to hold that unity of the mortgage and note is required under
    existing law, the court’s holding should be applied prospectively
    only. The parties are invited to indicate on what authority they
    believe (or do not believe) the court could make such a holding
    prospective only”.
    The question which was heard at oral arguments was “can a party
    without interest in the note who has an (alleged) assignment of
    the dot nonetheless foreclose”?
    I have personally already opinied vigorously and numerous times
    that it’s an absurd question: A collateral instrument without the
    right to payment on the debt the note evidences is a worthless
    piece of paper.
    If you agree, please include copies of your thoughts or even
    situations to the MA SC. Or send other court decisions which
    support the unity of the note and deed of trust. Something!
    The MA SC has invited briefs to address a hugely significant collateral issue: if the court rules in favor of unity of the note and dot, should its ruling apply to past foreclosures or just ‘from now
    on’. IF the court rules in favor of unity, and I don’t know how it
    can’t, the decision should apply retroactively.

    The decision on unity is being made on the same law which existed at the time many homes were wrongfully foreclosed.

    You can have your voice heard for a few minutes of your time and
    the cost of a stamp to the MA SC.
    As to your voice: “Use it or Lose It!” Not using it is killing
    us, whether or not is should. Copy something online, even a link
    to a case decision which you found reflects your view – give due
    credit as applicable, if you don’t want to write your own opinion
    or mini-thesis or share your experience. Copy somthing from LL.

    This is a very, very important ruling and could lead the way to real
    application of the law (remember that?) nationwide and reclamation of the homes which were stolen from us (phrased by the court as clouds on titles by invalid foreclosures mol) and our families and friends, we the citizens of the U S of A. This is OUR country. Please do not miss this golden opportunity to be heard.
    The address for the MA SC is:

    John Adams Court House
    One Pemberton Square
    Boston, MA 02108

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