Pre-election lawsuits
For a few days the recently announced lawsuits against JPMorgan Chase and Wells Fargo, plus the projected anti-trust suit(not filed) against Google, have been on my mind. The timing is such a coincidence. The lawsuits are basically "unfair", the breaking of faith with major businesses and employers.
As was mentioned here on Sunday, it's a crowded space for new thoughts and I did not get a comment out right away. Today in the New York Times business section, Andrew Ross Sorkin does an excellent job of laying out the issue with the banks, but here is my 2 cents worth.
Wells Fargo was sued by the Obama Justice Department for passing on loans to the FHA for 10 years(1999-2009) that had defects. With great "encouragement" from the FDIC, Wells took over the collapsing Wachovia in 2008, a great relief to the FDIC fund. Securities analysts, investors, and even most competitors acknowledge that Wells Fargo has the best run mortgage business in this country. So how did they and why would they "dupe" the FHA for ten years with defective loans? And what does the FHA do, sleep at their desks like some other mortgage related government supported agencies. They too are supposedly mortgage experts but now the government sues Wells for "misdeeds" going back as far as13 years?
JPM took over a completely collapsing Bear Stearns in 2008 at the urgent request of the Treasury Department. They were given some guarantees but the chance for real due diligence was minimal. It has not been a great proposition by any means. Now the Justice Department and the State of New York's Democratic attorney general have announced lawsuits against JPM for actions that took place in the Bear mortgage business from 2002-2007. That's before anyone from JPM had any control over the company that the government virtually forced on them. If that's not a break in faith, what is? Sorkin in the NYT points out that the next time there is a crisis and the government goes looking for private sector support, it is unlikely to be there.
It should be noted that JPM also took over Washington Mutual in 2009, again with government encouragement, and some suggest that the takeover saved at least 30,000 jobs. Given that WAMU was an extremely undisciplined mortgage lender, it can be certain that there is angst at JPM over when they will be sued by the government for actions there well before they had any control.
As for Google, there is no anti-trust lawsuit yet, but the Justice Department chose to announce that it was well into an in depth analysis of whether to file one. Timing? They say that many competitors are complaining about Google's practices so, my comment, why not punish success. Is Google responsible for competitor Yahoo's 10 years of inept management. Google is a gem of a U.S. company, global and innovative, and they are in an intensely competitive business. What a great target for the Justice Department right before the election.
It should also be noted that Google is a company that absolutely does nothing to pump up its stock price or influence the market, other than perform. It does not give earnings guidance, it does not talk individually to securities analysts except possibly to state factual issues already public, it only gives conferences when it is making an acquisition or having a new product roll out, and again they just stick to the facts.
The Sorkin article mentioned above is highly recommended --- title---"Nowadays, Wall St. Saviors May Wish They Weren't".
"Unfair" was put in quotes above because whether something is "fair" or not seems to the ultimate litmus test for Obama's economic policies. The perception of fairness is not necessarily consistent with creating economic growth and job growth. Smart people could no doubt work out ways to make these goals consistent, and level the playing field for these goals. Now, however, there is no way to say that the Justice Department's recent lawsuits fall under the umbrella of "fairness", with the Obama administration now breaking its one abiding economic principle.
As was mentioned here on Sunday, it's a crowded space for new thoughts and I did not get a comment out right away. Today in the New York Times business section, Andrew Ross Sorkin does an excellent job of laying out the issue with the banks, but here is my 2 cents worth.
Wells Fargo was sued by the Obama Justice Department for passing on loans to the FHA for 10 years(1999-2009) that had defects. With great "encouragement" from the FDIC, Wells took over the collapsing Wachovia in 2008, a great relief to the FDIC fund. Securities analysts, investors, and even most competitors acknowledge that Wells Fargo has the best run mortgage business in this country. So how did they and why would they "dupe" the FHA for ten years with defective loans? And what does the FHA do, sleep at their desks like some other mortgage related government supported agencies. They too are supposedly mortgage experts but now the government sues Wells for "misdeeds" going back as far as13 years?
JPM took over a completely collapsing Bear Stearns in 2008 at the urgent request of the Treasury Department. They were given some guarantees but the chance for real due diligence was minimal. It has not been a great proposition by any means. Now the Justice Department and the State of New York's Democratic attorney general have announced lawsuits against JPM for actions that took place in the Bear mortgage business from 2002-2007. That's before anyone from JPM had any control over the company that the government virtually forced on them. If that's not a break in faith, what is? Sorkin in the NYT points out that the next time there is a crisis and the government goes looking for private sector support, it is unlikely to be there.
It should be noted that JPM also took over Washington Mutual in 2009, again with government encouragement, and some suggest that the takeover saved at least 30,000 jobs. Given that WAMU was an extremely undisciplined mortgage lender, it can be certain that there is angst at JPM over when they will be sued by the government for actions there well before they had any control.
As for Google, there is no anti-trust lawsuit yet, but the Justice Department chose to announce that it was well into an in depth analysis of whether to file one. Timing? They say that many competitors are complaining about Google's practices so, my comment, why not punish success. Is Google responsible for competitor Yahoo's 10 years of inept management. Google is a gem of a U.S. company, global and innovative, and they are in an intensely competitive business. What a great target for the Justice Department right before the election.
It should also be noted that Google is a company that absolutely does nothing to pump up its stock price or influence the market, other than perform. It does not give earnings guidance, it does not talk individually to securities analysts except possibly to state factual issues already public, it only gives conferences when it is making an acquisition or having a new product roll out, and again they just stick to the facts.
The Sorkin article mentioned above is highly recommended --- title---"Nowadays, Wall St. Saviors May Wish They Weren't".
"Unfair" was put in quotes above because whether something is "fair" or not seems to the ultimate litmus test for Obama's economic policies. The perception of fairness is not necessarily consistent with creating economic growth and job growth. Smart people could no doubt work out ways to make these goals consistent, and level the playing field for these goals. Now, however, there is no way to say that the Justice Department's recent lawsuits fall under the umbrella of "fairness", with the Obama administration now breaking its one abiding economic principle.
posted by John Borden at 11:30 AM
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