Is JPMorgan Chase out of control?

JPMorgan has paid more than $8.5 billion in legal settlements stemming from a slew of major investment mistakes – yet the banking giant keeps rolling on. How?

Neil Hall/Reuters/File
A sign is seen on the Canary Wharf offices of JPMorgan in London last week. The bank has been surprisingly unaffected by the litany of lawsuits, investigations, and fines that have come its way over the past four years, Brown says.

Is the headline risk finally catching up with JPMorgan? The relentless barrage of legal problems hasn't hurt the company's business one whit so far from outward appearances, but might it be affecting the stock price?

Josh Rosner's latest investigative report at Graham Fisher suggests that the nation's most notorious Too Big To Fail bank is an absolute swamp.

Over the four years ending 2012, Rosner notes that JPMorgan has paid more than $8.5 billion in legal settlements, equal to roughly 12% of all company net income generated during that period. And with the investigations and actions continuing to pile up, it seems as though there's no end in sight.

How are they able to do this?

Simple - no high-ranking executives at the company are ever at any personal risk, it's just the company's profits at risk - and those profits have been fattened to such a huge extent, for so long, by the Federal Reserve and Treasury, that it almost doesn't matter. There's probably no amount of money that JPMorgan can be forced to settle for that can stop the company from rolling on. And if a handful of people have to lose their jobs every once in awhile, so what?

This is what happens when you make it clear to the marketplace that a firm is too important systemically for it to ever truly be in danger. The big banks would have to be caught openly funding assassinations in a third world country to actually be at existential risk - and even then they'd probably claw their way out using the near-limitless amount of money and influence at their disposal. Five years after the financial crisis, we now have banks that are even bigger and more unmanageable, despite the rickety latticework of new regulation we've attempted to encircle them with.

I'm not casting judgment on this system, I'm just pragmatically relaying to you the facts and the way things currently work. It is for you to decide if there is a better way or if we should allow the TBTF banking hegemony continue in the interest of the nation's economy.

JPMorgan's CEO Jamie Dimon has made the case that America needs giant, global banks so that we can compete for giant, global deals. He seems to believe very strongly that this is somehow worth the risks that his firm's giant-ness engender. Apparently, there is consensus in Washington for this view, because his bank has only grown larger in the wake of the bailouts.

The stock market looks to be voting on whether or not the bad press matters once again. In the wake of the London Whale fiasco, the markets rewarded JPM shares for the deftness with which the bank put the issue to bed. But now, from a technical standpoint, the headlines appear to be keeping equity buyers away from the name as the recent lower-high put in might represent the right hump of a textbook head-and-shoulders pattern.

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