I put two new columns up at Forbes recently that talk
about JPMorgan, PwC, Senator Levin's "Whale" hearings, and all the other stuff
JPMorgan and Jamie Dimon are really worried about. The New York Times had
an interesting scoop about JPMorgan and Deloitte and the foreclosure reviews
that I followed up on, too, in "JPMorgan Chase Still Haunted By Foreclosure Reviews, And
Update April 4: The
GAO has now issued its report on the regulators and their use of the
third-party consultants. I wrote about it at Forbes.com.
If you're wondering when it's all going to end, it will
end with Jamie Dimon leaving JPMorgan. Although I predicted that he'd be ousted in 2012 based on MF Global
problems it's now more possible than ever. It's no small thing that the New
York Times is openly talking about a mutiny by the bank's directors.
Here's the second paragraph from a Jessica Silver-Greenberg/Ben Protess March 26 New York Times
At least two board members are worried about the mounting
problems, and some top executives fear that the bank's relationships in
Washington have frayed as JPMorgan becomes a focus of federal investigations.
One of the quisling directors? I think it could be none
other than KPMG's Tim Flynn. From my Forbes column on April 1:
Why is Flynn the director most vulnerable to pressure
from regulators and prosecutors? He's
the guy who threw his own partners under the bus and agreed to pay almost
$500 million to save KPMG when it risked criminal indictment for tax shelter
abuses. Flynn saved his own skin and his own reputation. I think he'll do what
has to be done at JPMorgan when the Feds come looking for scalps.
The rest of my April 1 column talks about a mysterious
error that the New York Times reports caused JPMorgan to plan on paying
more to foreclosure review eligible borrowers. How could that happen? Well,
it's not what it seems.
Each bank was given a total settlement payment and an
"other assistance" number and then tasked to "back into" the amounts due
borrowers by assigning them to one or more harm categories. JPMorgan must have
put 5,000 more borrowers into the wrong category, probably #3, foreclosed on
while in bankruptcy. Why bankruptcy? It's the category with the highest
potential payout for a borrower. Putting too many people in that category would
have shortchanged others given a fixed amount to allocate. So JPM agreed
to pony up more bucks.
What's wrong this picture? My sources tell me that at
least 50% of JPMorgan's bankruptcy portfolio was riddled with payment and fee
calculation errors at the start of the process. Any estimate of the number of
borrowers harmed during the review period for this category by Deloitte, or
JPMorgan, is probably still significantly understated. A strategic mistake made
by the regulators when the consent decrees were signed exacerbated the problem.
Regulators forced all twelve servicers to move bankruptcy processing activities
out of specialized units to their general cash management unit. Processing of
Chapter 13 payment plans, for example, went haywire when it was transferred to
inexperienced groups with no knowledge of the rules that differ across fifty
states. No servicer has a data repository with automated processing rules
designed to keep files and calculations up to date with the constant changes.
There's more, a lot more.
Read this article in its entirety at the re: The Auditors, a blog
by Francine McKenna.
For more information about LexisNexis
products and solutions connect with us through our corporate site.