Monday, February 8, 2010

CHASE BANK: Let Them Eat Cake!

Flash back to October, 2008.  The U.S. financial system is threatening to collapse.  JP Morgan Chase takes  $25 billion in TARP funds in exchange for preferred stock.  Jump forward to June, 2009.  Chase wants to pay pack the rescue funds plus interest equal to approximately 4% APR.

“We accepted TARP funding because we believed it was in the best interests of our financial system and our country, even though our company did not need the capital,”claims their CEO in a memo to employees.  That seems true enough.  Chase reported profits of $5.6 billion in 2008.

But that's good, right?  They suddenly had an extra $25 billion in capital laying around courtesy of the American taxpayer that they did not need!  Chase could dedicate 100% of the TARP money to extend credit to small businesses and average citizens to help get the economy moving again. 

You know any small business or individuals out there that got a loan from Chase at 4%?  No?  Well, I bet you do know Chase credit card holders who rates were jacked up to 19%,  25%, and more.  Chase also took their low APR promotional "balance transfer" rates and jacked up the repayment schedule from 2% per month to 5%.  A $500 monthly payment was suddenly $1,250 month: a 250% cash-flow hit to consumers while unemployment was skyrocketing.

JP Morgan Chase:  The Good Neighbor Who Just Wants to HelpSince JPM just wants what's best for the country, then Chase Mortgage must be helping the millions of Americans struggling on the mortgage side, right?  They even say so in this January 2010 letter they sent out to thousands of homeowners who were 60 days behind on their mortgage payments;

"Your house is your home.  We want to keep it that us today so that we can help turn things around.  We need to talk--call (800) 848-9380 today....One of our loan specialists will work with you to determine your options."

The neighborly cover letter adds a P.S. " The enclosed legal letter outlines, in detail, your current situation... " But what does the attached letter say?

"Acceleration Warning (Notice of Intent to Foreclose)...If you fail to cure the default within 32 days, we will acclerate the maturity of you loan, terminate your credit line...and commence foreclosure proceedings....If this happens, Chase... will [also] be entitled to's fees....We have no obligation to accept less than the full amount owed....While the loan remains in default, we will...visit your property at regular intervals...

Well, my, my.  Chase really is just being a good neighbor. You can't get much more friendly than that.  If you are unemployed and delinquent on your mortgage, they will regularly come out to visit you without being invited!  (Not actually you but the property and you're there too so it's kinda the same.) 

Meanwhile, just call the 800 number for help. (Well yes, it actually connects you to the collections department--but that's just semantics.)  Their 'loan specialists' is actually the collections department but they will help you and give you options.  (OK, so they really just compile a lot more information about you, your friends, and family, your employer and finances to help them with even more collection calls.)

They will help you get a loan modification if you qualify.  (Of course, you must agree up front that any information you give them will be used to help Chase collect a debt.)  But hey, what are friends for?

The bank might even 'help' you with a loan modification like they did a senior programmer in hard hit Michigan who has been unemployed for 18 months:  The bank agreed to modify his mortgage by pushing back the two payments he was behind.  In turn, they would just increase his $900 mortgage payment that he can't make to $1,200 per month.  Now why didn't he think of that?

Or, Chase may go the extra mile to help like they did for the executive in Virginia who had never missed a payment in over six years but hadn't had a paycheck in 14 months. He paid early withdrawal penalties from his IRA in order to make mortgage payments to Chase payment until recently. 

When he called to tell Chase that he scraped enough money together to make a payment, he asked for just a little help like their letter said: Could Chase just waive the two months of late payment fees that had accumulated?

Chase to the rescue!  Well, not quite.  They wouldn't waive their own arbitrary late fees but they would be happy add them on to what he owed to the mortgage.  Oh, and by the way, even though the account would now only be past due 8 days, they would still exercise "their right' to call him every 5 days.

JPMorganChase:  Never a Truer Patriot
Well, that's just business, right?  If super patriot Chase accepted $25 billion of taxpayer dollars just for the best interest of our country, they must have some patriotic plan for the rest of us taxpayers.

The New York Times gained access to a confidential conference call just four days after JPM accepted the money.  When a senior JPM executive was asked about the impact on lending, he explained the real plan: “What we do think (the $25B] will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling....I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”

Oh, so JPMorganChase never planned to use the money to loan to small businesses, stimulate the economy, or help the housing market.  JPM would use it to buy up other companies or keep it for their own rainy day fund.

So JPMorganChase for suffering taxpayers who actually put up the $25 Billion is this:  Let them eat cake.

Marie Antoinette would have been proud. 

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