77% of JP Morgan’s Net Income Comes from Government Subsidies

George Washington's picture

JP Morgan’s credit rating would be much lower without government backing.

As Bloomberg noted last week:

JPMorgan benefited from the assumption that there’s a “very high likelihood” the U.S. government would back the bank’s bondholders and creditors if it defaulted on its debt, according to the statement. Without the implied federal backing, JPMorgan’s long-term deposit rating would have been three levels lower and its senior debt would have dropped two more steps, Moody’s said.

And as the editors of Bloomberg pointed out a couple of weeks ago:

JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fundand our own analysis of bank balance sheets. The money helps the bank pay big salaries and bonuses. More important, it distorts markets, fueling crises such as the recent subprime-lending disaster and the sovereign-debt debacle that is now threatening to destroy the euro and sink the global economy.

 

***

 

With each new banking crisis, the value of the implicit subsidy grows. In a recent paper, two economists — Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the University of Mainz — estimated that as of 2009 the expectation of government support was shaving about 0.8 percentage point off large banks’ borrowing costs. That’s up from 0.6 percentage point in 2007, before the financial crisis prompted a global round of bank bailouts.

To estimate the dollar value of the subsidy in the U.S., we multiplied it by the debt and deposits of 18 of the country’s largest banks, including JPMorgan, Bank of America Corp. and Citigroup Inc. The result: about $76 billion a year. The number is roughly equivalent to the banks’ total profits over the past 12 months, or more than the federal government spends every year on education.

 

JPMorgan’s share of the subsidy is $14 billion a year, or about 77 percent of its net income for the past four quarters. In other words, U.S. taxpayers helped foot the bill for the multibillion-dollar trading loss that is the focus of today’s hearing. They’ve also provided more direct support: Dimon noted in a recent conference call that the Home Affordable Refinancing Program, which allows banks to generate income by modifying government-guaranteed mortgages, made a significant contribution to JPMorgan’s earnings in the first three months of 2012.

Way to suck at the government teat, Mr. self-proclaimed free market champion.

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watch2x's picture

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howardtlewisiii's picture

Aw... Now isn't that special? No wonder they can keep those white shiny shoes so polished and new looking. I believe work release maintaining ghetto apartments is in order.

howardtlewisiii's picture

Aw... Now isn't that special? No wonder they can keep those white shiny shoes so polished and new looking. I believe work release maintaining ghetto apartments is in order.

batterycharged's picture

Oh I thought you were going to talk about the huge revenues JPM gets from the welfare system.

How lucky for them that everyone uses welfare to hate on the poor, when really it's welfare for JPM. They go totally blameless.

The EBT and welfare distribution system not only lines JPM's pockets, it also exploits the poor with outrageous fees.

http://www.npr.org/templates/story/story.php?storyId=136072292

In Michigan, the state added a single $1 to every EBT account, i.e. each food stamp recipient had $1 cash ONLY on their card. The cost to get that $1? Well you paid an ATM fee of a $1.

Those damn poor people!

 

W10321303's picture

On the 'liberal' intelligenzia....

The implementation of The-Affordable Corporate-Welfare-For-Obama's-BEST-Golf-Buddies Act may well be the final solid lesson that doing the right thing/compassion is also good politics as we prepare to confront the inevitable end of civilization. (Derivatives, Radiation/Free Radicals, Imperial/Corporate war-mongering, Climate Change, Mentally Ill politcal/economic elites, think of it as a "Creative Destruction Omelette)

If you have been paying attention to the political situation and you are not a yapping lap-dog for the morally bankrupt power elite of the DemoRAT party, then you know that MAYBE in California, Hawaii, Oregon, and Vermont there may be some benefit for REAL people from this smorgesborg, but that for most Americans it represents STATE imposed Welfare for one faction of the Plutocracy.

Just think if Obama had done the right thing and advocated for REAL healthcare reform (Public Option, healthcare as a human right) he would be rallying his supporters from 2008 to finally 'overthrow' the tyranny of the GOP Serial Killers. Instead, due to cynicism and political expediency, he has given his biggest enemies their first real advantage. (Am I the only one who has read Tolstoy and Chekov here?)

"And you ride yourselves over the fields, And you make all your animal deals, and your Wise Men don't know how it feels, to be Thick As A Brick! Jethro Tull

Whoa Dammit's picture

I don't think there are any big businesses in the USA  that don't receive some form of government subsidy. Corporate socialism should be outlawed.

Jstanley011's picture

The reason the Pecora Commission kicked butt is because Congress was more afraid of the electorate than the banksters in 1932. The majority of today's electorate is made up of leeches, doofuses, and varying combinations of the two.

tony bonn's picture

not only is the criminality of wall street infuriating but so is the stupidity.....so many people worship in awe these fucktards who pull down princely salaries but the reality is that they are ceating economic mayhem on the taxpayer's back and are of profoundly low intellect because they cannot produce economically profitable products and services.....these people are not smart - they survive by racketeering and mobster activities....sloshing around taxpayer money by the trillions and pocketing the rounding errors....fuck you wallstreet

Bicycle Repairman's picture

If we could get those single mothers off of welfare and kick granny into the street, we'd be OK.

hangemhigh77's picture

See, wording means EVERYTHING with regard to PERCEPTION..  A welfare illegal Mexican mother buying a twinkie for her child has all the people screaming about waste and fraud and blah blah blah. And while that IS true let's look at the REAL FRAUD that is going on. We call the illegal Mexican mom feedin g her kid on food stamps an ENTITLEMENT. Yet we call the TARP and other QE programs a "BAILOUT".  What did the banks DO with this money they received from the people and continue to receive? They paid themselves huge salaries and bonuses. So the people scratch each other's eyes out over a welfare twinkie yet the banksters walk away with TRILLIONS in "bailouts".  Let's call it what it really is, all those houses in the Hamptons, expensive cars, and all the rest of the opulent wealth these crooks have STOLEN comes from BANK E N T I T L E M E N T S!!!!!!  Call it what it is, it's an ENTITKLEMENT.  But the banksters call it a "bailout" so all the sheeple THINK it's "bailing out" the bank. HA!  It's an ENTITLKEMENT and the banksters are robbing us blind stuffing their pockets with it. So before you take a mere Twinkie away from even an ILLEGAL Mexiucan kid, TAKE THE ENTITLEMENT WEALTH AWAY FROM THE BANKSTERS. Call it what it is, it isn't a "bailout" it's an NTITKLEMENT.  The banksters manipulate the perception of what it is so the sheeple fight with each other over the crumbs they leave behind. HANG THE BANKSTERS.

Conax's picture

So the magnificent and powerful Dimon, and his commodity witch Blythe can't even make an honest dollar without their congressional stooges giving them an allowance every year, huh.

Presidential cuff links, smug little smirk, all from a glorified welfare queen.

 

Widowmaker's picture

Nope --

You pay for their fraud in the name of Gods work.  Greatest racket going.

Dimon is just another faggot pissboy in pinstripes above the law.

 

Winston Smith 2009's picture

"77% of JP Morgan’s Net Income Comes from Government Subsidies"

No, when referring to money spent by governments, always substitute "taxpayer" for "government."

So, it should read:

"77% of JP Morgan’s Net Income Comes from US Taxpayer Subsidies"

Everyone should make a habit of doing that.  It makes it clearer for the many sheeple who stupidly think the government has its own money.

TrulyStupid's picture

Taxpayers don't pay enough taxes to balance the budget, so the deficit is simply created out of thin air and printed on Bernanke's ink jet. Most taxpayers receive direct subsidies from this pile as well.

Burticus's picture

The debasement of the purchasing power of the dollar by the (not really) Federal (with no) Reserve creating "money" and handing it to its shareholders is effectively a hidden tax on all those who hold currency, which includes most taxpayers.

Winston Smith 2009's picture

But ALL "government" debt is a taxpayer liability.  And money created out of thin air simply devalues every dollar asset held by taxpayers, a hidden (to the ignorant) tax.

Governments produce nothing, they simply take and redistribute.

Conax's picture

You forgot death, despair, dependence and red tape.

They produce these things by the kiloton.

 

See, we get our money's worth after all.

d edwards's picture

Spot on! Also, doesn't JPM administer the federal food stamp (EBT, whatever) and get more taxpayer dollars?

matterhornclimber's picture

two planets in the universe meet. One planet is Pluto the other the earth. Earth asks Pluto how he was, Pluto

answers quite well. Then Pluto ask the Earth how she is. Earth answerd I have "people"! Pluto answers, do'nt worry

this will all disappear!

Element's picture

Well now, here's a novel bit of empiricism:

--

Why be tortured about torture?

Published: 26 June, 2012, 17:34

There are some simple ways to resolve this argument.

1. We can water board the former assistant to the President and the man who led the interrogations and see if either one will recant and change their mind.

2. We can round up all accredited journalists of major news agencies, water board them, and then let them tell us first hand.

3. We can water board the Supreme Court and then let them vote on the subject.

http://www.rt.com/news/blogs/contrarian-view/torture-water-president-let/

--

This test would settle it, I'd say, at least then we'd all have no opportunity to doubt that the USSA is currently run by a bunch of blatant war criminals.

Random_Robert's picture

Any method of deriving information (whether truthful, or simply an expected resonse) by placing a human being under psychological stress or emotional duress is torture and is plainly the cumulative effect of State-intensified sadism.

 

Protect the state (the system) at the expense of the people. 

 

History will regard this period as the "Darker Ages"

 

 

reader2010's picture

wElcome to the Serfdom.

Centurion9.41's picture

JD is a lying hypocritical dirt bag outdone only by politicians; at least JD never took an oath to serve "the people".

There is an easy way to sum up/ show the Sheeple who JD really is.

Ask them if it makes sense that the division of a bank charged with making sure the bank has investment positions designed and intended to act like an insurance policy when things go bad, should make money every quarter? Then ask them if it should make up ~25% of the banks profits every quarter.

Ask them if they make money off of the money they spend on insurance each month...

There's only one reason JD and the rest are not in jail or executed; the American public is filled with self-absorbed morons who are more interested in someone else paying for their "entitlements" than getting @ss-raped.

You get everything you vote for America.

El Hosel's picture

 "The Vote" has nothing to do with the assfuking that is taking place... the politics are a small sideshow in the grand sceme of things. The revolution that is not taking place is the real death call of America today.

geoffb's picture

The reason JD is not in prison is because the government regulatory agencies are captured by the banks. End of story. Its possible American's are everything you say, but its irrelevant to the story here.

I bring this up everytime I see the argument, "you deserve it because you voted for them". Do you really think the bankers are going to allow anyone in the Whitehouse or Congress that will substantially threaten that subsidy?? And even if by some miracle Ron Paul or someone else got in, do you really think they would just lay over and have the subsidy taken away?? Ron Paul would have a sex scandal or boating accident within weeks of taking office.

WTFx10's picture

Stop avoiding reality . WHO owns those PRIVATE BANKS? Rothchilds. Take out the self proclaimed KING and the rest will shit their pants. Follow the Money ,it alll leads to the BIS.

geoffb's picture

If I had to guess I'd say its less of a monarchy and more a mafia-like cartel. Power is comparmentalized so if you kill the top guy the other members battle for control with what power they have. I don't believe whoever is running the show has consolodated power yet, otherwise, they would have subjugated the host (US) out in the open. Although, I'd say judging from the ammo purchases and gulags being built in this country I'd say whoever it is feels they are close.

casey13's picture

If you are going to rig the game then you have to rig the whole game. Judicial, Legislative and Executive.

Why leave anything to chance?

MrBoompi's picture

JP Morgan seems to be the "unofficial" bank and hedge fund of the US government and the bondholders and creditors of JP Morgan are probably composed of the world's financial elite.

LawsofPhysics's picture

Correct, this is why ZH has been so helpful because these fuckers have been frontrunning themselves since 2001.  ZH has simply pointed it out and help many of us profit  Only two options moving forward, bloody revolution or beat the establishment at it's own game.  Eventually the "game" fails and all monetary tools and fiat die.  Got physical?

Benjamin Glutton's picture

Positively hilarious post George...pardon my arrogance but tis old news for those few paying attention. Add in the regulatory subsidies and the figure exceeds 100% of income.What does this say about our entire fake government?

 

The Federal Reserve and all those sucking on it Just Print Money whenever they need it.

 

Thanks George.

RECISION's picture

Dare I suggest that the problem with government benefits/handouts has never been about the poor people, it has always been about handouts to the rich.

Why work for a living and actually make anything if you can suck on the tit. And the best and biggest at that are the Corporates... and always have been...

LawsofPhysics's picture

It's called crony-capitalism, fascism, and tyranny.  Wake up, there hasn't been any consequences for bad behavior or bad management for quite some time now.

Offthebeach's picture

Ever notice capital domes look like tits? That's why we ha e two houses, so that we can have two tits, spewing EBT cards, favors.and cash.

Fred Hayek's picture

So . . this is how you construct a "fortress balance sheet"?

Zero Govt's picture

"Way to suck at the government teat, Mr. self-proclaimed free market champion."

Seconded

Resolution 'Dimon is a nappy-wearing Banker Wanker' passed

orangegeek's picture

 

"77% of JP Morgan’s Net Income Comes from Government Subsidies ..."

 

And 77% of corporate America's revenues comes from governments at all levels.  $16T federal debt and counting.

 

What a house of cards. 

 

Beam me up Scotty.  We're in a helluva mess.

Paul451's picture

Wait a minute!

Since 2008, arent ALL the major banks relying on government subsidies for most of their net income? 

LouisHill's picture

Nice George :) Great Catch.

KK Tipton's picture

What about this:

"Home Affordable Refinancing Program"

H.A.R.P.

Hmm?

 

OldPhart's picture

That's a crock of shit.  I bought my house in 1998 for $75k at 7.5% on 30 year.  Since that time I never pulled equity, never refinanced, never had a second....nothing but pay the fucking mortgage.

Last week I get a call, even though I'm on the 'Do Not Call' registry from some shithole refinance outfit that wants to lower my interest rate and payment.

I'm all for that, bring the interest down, put me on a ten year plan and I'll keep making the payments I've been making to pay it off faster.

They ask how far behind I am on my mortgage.  I tell them it's paid through October 2012.  What is my balance?  About $40k.

"I'm sorry, this program is only for those who owe $100k or more on their mortgage." [click]

Fuck Obama, fuck congress, fuck the fed, fuck the banks.  When the time comes, I volunteer to be first in line to hold the fucking rope.

 

lynnybee's picture

people...... it's all about the fraud, the trillions being looted from the U.S.TREASURY by CORPORATE WELFARE.     don't dump on the unemployed souls of this country.    granted, some deservedly are called lazy.     but, those having a hard time even feeding their children due to lack of jobs in this country do not deserve to be targeted as the problem with the budget.    the Federal Reserve Bank & their European shareholders who earn interest on money created out of thin air are the problem, not the working poor.       (bunch of god damn criminals.   this country is being run by a bunch of god damn criminals.)

Benjamin Glutton's picture

Big money is working very hard to turn us against one another. I admit I don't have the answer but I am certain blaming average people cannot be the solution.

 

Ditto.

KK Tipton's picture

You are a true American heroine lynnybee. Well said!