Does JP Morgan Have a Special Exemption from the SEC in Complying with Securities Disclosure Laws Too?
“Take a look at the excerpt I have provided below from a recent NY Times article. How is it possible that JP Morgan provided profitability estimates to shareholders when they acquired Bear Stearns and Washington Mutual back in 2008, and yet have provided no disclosures to shareholders regarding the actual profitability of these acquisitions since? Shareholders can’t judge the success of these acquisitions and JP Morgan’s acquisition prowess, without this information. Also, without this information, how can shareholders really understand whether JP Morgan’s overall earnings growth in the past several years has come from core business activities or non-recurring purchase accounting from deals made during the global financial crisis? We already know that firms like JP Morgan and Goldman Sachs have become ‘Too Big to Fail’, are they also ‘Too Big to Disclose’? Mike Perry, former Chairman and CEO, IndyMac Bank
“Little suggests that JP Morgan bought Bear Stearns and Washington Mutual against its will. It was avidly watching both in 2008, hoping to snatch them up at low prices…And when JP Morgan actually did the deals, the bank told its shareholders that it had looked closely at both firms…..The big question is whether Bear Stearns and Washington Mutual have produced profits to offset the proportion of the litigation expenses that stem from both entities. JP Morgan stopped saying how much it expected each entity to make soon after it bought them. But if JP Morgan’s early profit estimates are used, Bear Stearns and Washington Mutual may have contributed $16 billion in net income since the end of 2008. JP Morgan also used acquisition accounting in such a way that would have softened the future blow from both deals. For instance, at the time of the deal JP Morgan estimated the future losses embedded in Washington Mutual’s operations and assets. It then wrote down Washington Mutual’s assets by more than $30 billion to reflect perceived losses. The exercise was advantageous: it meant JP Morgan itself would not have to bear the losses after it had subsumed Washington Mutual. While the accounting move benefited JP Morgan, its legal liabilities were another matter. In corporate America, it is common for acquiring companies to assume the legal liabilities of any entities they acquire. Acquirers can write deal terms in such a way that certain legal risks are removed. It appears JP Morgan did not take adequate steps to do this.” Excerpt from October 22, 2013, NY Times article, “Considering the Fairness of JP Morgan’s Deal”