J.P Morgan is the global leader in investment banking and assets management with their business operations reaching to more than 110 countries worldwide. The company follows a strategic planning in order to satisfy their customers and investors and also provide services to them as it is the leading issuer of credit cards in the United States. J.P Morgan & Co. has been awarded on various occasions for being one of the best investment banking companies in the world. J.P. Morgan possesses assets worth $2.1 trillion and excels in businesses operations involving asset management all the way to treasury services. Nevertheless, the company in the recent past has been involved with a significant amount of lawsuits but still maintain a top stop at the Stock Exchange showing a remarkable amount of earnings and profits amidst the global recession.
J.P. Morgan is one of the global leaders in the sector of financial services that provides customer with client solution all across the globe. J.P. Morgan has been helping their clients to do business and manage their wealth for more than 200 years. Their business has been built upon the core principle of putting their clients' interests first. John Pierpont Morgan was the orchestrator behind the formation of this investment dynasty in the late early 19th century. He was an art collector, an American banker and a financer who dominated or rather controlled the industrial consolidation and corporate finance during his time.
J.P. Morgan is a leader in investment banking leading the market in terms of hedge funds providing clients with apt solutions. At present, this global investment company and is headed by Jamie Dimon who holds the designation of CEO and Chairman and was named to Time Magazine's 100 most influential people for three consecutive years from 2006-2009.
In the year 2000, Chase Manhattan Corporation merged with J.P. Morgan & Co. and thus formed the J.P. Morgan Chase & Co. J.P. Morgan Chase is the U.S. banking institution having the second largest market capitalization in the country (Grocer, 2010). Additionally, its hedge fund unit is the largest hedge fund in the United States with $53.5 billion in assets as of the end of 2009 (Grocer, 2010). This American banking institution is above other giants' viz., as Wells Fargo and Bank of America having assets worth above $2 trillion (Grocer, 2010).
J.P Morgan & Co. posted a 23% growth in the third quarter of the year amidst the economic meltdown and surpassed the market estimates with regard to the lower provision on the credit losses (Chellel, 2010). For the third quarter ended Sept. 30, JPMorgan earned $4.4 billion or $1.01 a share, higher than $3.6 billion, or 82 cents a share, in the same period last year. Jamie Dimon commented by saying that their net-income of $4.4 billion in Q3 was the reflection of the way they have reacted to the financial market and even highlighted the performance of the business as a whole in the recent past (Pente, 2010). Being one of the top credit card issuers and mortgage lenders, it generated profit of $735 million from card service related businesses and revenue of $4.25 billion (Chellel, 2010).
In the field of its bank assets management, revenue of $2.17 billion was generated which saw an increase from $2.08 as compared to the previous year. Assets under supervision rose 6 percent to $1.8 trillion.
As of Sept. 30, the bank's estimated Tier 1 Capital ratios were 11.9 percent, compared to 10.2 percent last year. Estimated Tier 1 Common ratios were 9.5 percent versus 8.2 percent in the year-ago period. In late April 2010, J.P. Morgan picked up two awards for technological innovation in the Profit & Loss 2010 Digital FX Awards. In making its determinations, the magazine based its decisions on its own editorial assessments, along with user feedback and client comments.
J.P. Morgan won for Best Interest Rate Platform, a new category for these awards, and Best Corporate Platform. In selecting the firm for Best Interest Rate Platform, the magazine praised MorganDirect for institutional FX and Rates trading. Recognizing the firm for Best Corporate Platform, Profit & Loss also commended J.P. Morgan's sophisticated suite of tools that appeals to corporates.
As much was witnessed on the recent economic turmoil all over the globe and investment banks such as Goldman & Sachs and Lehmann Brothers declaring bankruptcy, the Dow Jones was in a condition of utter chaos (Vlastelica, 2010). Nevertheless, J.P. Morgan Chase & Co. was the first company which reported to have a 47% increase in its fourth quarterly profit and James Dimon, the CEO predicted signs of stability and consistency in the U.S. economy. In the beginning of January 2010, the company has risen 4.8%. Regardless of the figures, there were certain periods where they witnessed a fall in earnings aswell as a drop in Emea profit.
In the beginning of March 2010, J.P. Morgan witnessed a $1.9 billion drop in profits from its Europe, Africa and Middle East business operations (Chellel, 2010).The net-income from the Emea operations fell from $5.6 billion in 2009 to $3.7 billion in 2010 which reflects a fall significant fall of 33%. As for the gross revenue, a decrease of 17% to $14.1 billion was reported (Vlastelica, 2010). The company having more than 5,100 bank outlets in roughly 12 states across the U.S. reported a decline in its banking revenues by 29% to $5.35 billion. The profit for the segment dropped 33% to an astonishing $1.29 billion. The fees for investment banking were $1.5 billion which showed a 9% decline compared to the previous year (Kopecki, 2010).
Bernard Madoff was one of the most valued customers at J.P. Morgan. He was arrested on the 11th of December 2008 with the greatest Ponzi scheme on record. The company had designed some complex derivatives in 2006 which allowed their clients to enhance their odds on the investments or the funds run by the Fairfield Greenwich Group and were interested to invest with Madoff (Kopecki, 2010). The CEO, Jamie Dimon on the other hand was not informed about this till the arrest of Madoff and the exposure of the firm's full accounts (Fitzpatrick, 2011). Furthermore, Madoff's trustee, Irving Picard charged J.P Morgan Chase with a $6.4 billion suit in the end of November 2010 by claiming that the bank ignored the swindling activities performed by Madoff (Shifrel, 2010). According to the lawsuit filed against them, Irving Picard wanted the bank to disgorge an amount of $1 billion in terms of profits and additionally another $5.4 billion for the damages caused to Madoff (Frank, 2010).
J.P. Morgan with regard to the suit initially alerted the regulators about the suspicions it had on Madoff in late October 2008. This was followed by filing a Suspicious Activities Report in relation to Britain's Serious Organized Crime Agency. The bank took their stand by emphasizing on the fact that the CEO is not always notified as results of such kind are numerous as they file such reports more than 1,000 times in a complete year (Fitzpatrick, 2011). The lawsuit charged against J.P Morgan claimed that the bank d turned a blind-eye to the billions of dollars that was transacted through the Madoff firm's primary J.P. Morgan account, most of it which was in the form of a cheque and also included a $95 million loan made in 2005 (Rothfeld, 2011).
In response to the lawsuit charged, the bank said that Madoff's firm was not a top priority or important customer in the scheme or the field of J.P. Morgan's overall commercial business operations. Madoff's trustee on the other hand claimed that the bank had accumulated $0.5 billion in interest payments and fee (Rothfeld, 2011). The bank later on admitted that they were suspicious about Madoff's returns keeping in mind how down the financial market was unbelievable at a certain point. This was said months after Madoff's arrest (Shifrel, 2010).
Bernie Madoff, his securities and his family were a loyal customer of the bank for than two decades and involved the processing of billions of dollars through his account. Shortly after the arrest and the filing of the lawsuit, Judge Lifland kept is sealed at the bank's request over the trustee's objections (Frank, 2010). Picard earlier in the month of December 2010 sued the Swiss banking giants UBS for sending over clients to Madoff and additionally another 40 former employees that were engaged in uber-swindler. As the case had been sealed, no organization gave it a thought to be unsealed due to its obvious implications. Later on, the Wilpon family and their issues with the New York Mets' sparked up the flame and Madoff was thrown back under the spot light. The immense pressure put on by the news organizations and their lawsuits must have been enough for J.P. Morgan to realize that their case was soon going to be exposed (Frank, 2010).
J.P. Morgan controlled and created Mahonia Ltd., an energy trading business involved in the extraction of crude oil and natural gas. As a venture company, Manhonia's operation took place out of the channels islands of the U.K. and was created in December 1992. Out of all its transactions, 60% of those were made with Enron, which was named by Fortune Magazine as America's Most Innovative Company for six consecutive years. Enron, an American energy company went bankrupt in 2001 was involved in one of the greatest scandals that involved the manipulation of their books of accounts, their assets and liabilities aswell as their auditing fraud (Mitchell, 2007).
Mahonia Ltd. was engaged with the transactions involving Enron as a means to defer the taxes. The company's debt increased gradually and Enron began to experience losses thus the transactions became a means to finance the operations. Manhonia Ltd. would defer the taxes through following a certain procedure. By acknowledging the pre-paid sales as debt whenever it is necessary in its tax statements was the ultimate operation in order to defer the taxes. The debt would be moved forward at the end of every year and manipulating as it had incurred profits during a specific year and thus would drop its taxable earnings.
On the 8th of April 2002, UCLA, lead plaintiff in the Enron scandal, put in their list J.P. Morgan and eight other reputed financial institutions who were involved in the Enron fraud that had caused the investors and the shareholders a loss of nearly $25 billion. J.P. Morgan purchased four assets of Enron that allowed them to show positive misleading revenue in 1999. Later on, Enron re-purchased those assets as J.P Morgan developed Mahonia Ltd. In this process, Enron hid a debt of $3.9 billion, made the loans which were debt appear as profit and thus J.P. Morgan accused of helping Enron disguise its debt.
During the end of September 2008, J.P. Morgan was accused of orchestrating the downfall of Lehman Brothers, which follows the same nature of investment banking. It filed for bankruptcy in October which marked the beginning of one of the worst financial crisis since the Great Depression in 1929 (Teather, 2008). Creditors claim that J.P. Morgan froze an amount of $17 billion which belonged to Lehman prior to the day before it collapsed. Furthermore, the creditors claim that the denial to allow Lehman Brothers access the money was the main reasons which lead to the liquidity crisis and thus forced them to go bankrupt (Teather, 2008).
Prior court documents showed that Lehman owed $23 billion to J.P. Morgan in the form of secured loans. Lehman's clearing bank was J.P. Morgan which connected it to the third-party lenders. The filing accused J.P. Morgan Chase's action as unethical and the creditors hence asked the court for permission in order to collect the required information of the entire scenario which may help them better to understand what exactly caused the bankruptcy of Lehman Brothers.
J.P Morgan Chase in response to the lawsuit replied by saying that they actions of the creditors were based on inconclusive or incomplete evidence and the issue related to bankruptcy will be addressed upon appropriately at the court (Teather, 2008).
J.P. Morgan in the beginning of March 2011 settled a fraud lawsuit over missing bonds (Stempel, 2011). The bank was accused of defrauding the bond investors which resulted from poor record keeping and the deletion of certain information. The amount which was generated as a result was $1.2 billion. The investors said that J.P Morgan Chase & Co. in order to retain or keep for themselves the unclaimed bond proceeds which belonged to investors ranging roughly from 800-1,000. In addition to that, the bank was accused of deleting records on $46.8 billion from 6,500 of the bonds which had not been cashed in. They kept on covering up their error in order to generate a huge profit form themselves through the money of their investors (Stempel, 2011).
J.P. Morgan therefore has to call for a redemption program which is a part of the settlement agreement for investors showing that the amount due to them have yet to be paid through the maturity of the bonds or those called by the issuer. As a result of the legal procedures, J.P Morgan claimed to predict a loss of $4.5 billion and resulted in a significant fall of 0.7% in the Stock Exchange during that period (Stempel, 2011).
The mid-week of February 2011 witnessed Ambac Financial Inc. which is a bond insurer but later became bankruptcy file new legal claims on J.P. Morgan and its acquired global investment company Bear Stearns for its insurance on the mortgage- backed securities (Baldwin, 2011). J.P Morgan Chase & Co. bought Bear Stearns in the beginning of 2008 which is involved in brokerage, securities trading and investment banking. Ambac filed for bankruptcy in November 2010 due to heavy suffering from the losses on mortgage bonds. Prior to that incident, Ambac was the second largest and most reputed issuer of bonds in the U.S (Berkowitz, 2011).
Ambac claims that Bear Stearns intentionally gathered the bad loans and turned them to insured securities. Furthermore, they accused J.P. Morgan of failing to abide by the contractual and terms of agreement (Baldwin, 2011). In the filed lawsuit, Ambac said that it had ejected more an amount of $641million of four transactions and therefore is seeking the losses and damages aswell as the claim payments it intends to make in the near future (Berkowitz, 2011).
Ambac as a whole accused Bear Stearns of exposing it to potential losses through its insured bonds through making early payment defaults rather than applying it as the bonds which will be backed by the loans (Baldwin, 2011).
The Securities and Exchange Commission declared the case of an established civil injunctive action at the United States which was not favor of J.P. Morgan Securities Inc. and was taken to be addressed at the federal court in relation to the firm's allocation of its stocks to the institutional investors in the Initial Public Offerings (IPOs). The SEC filed a lawsuit according to which J.P. Morgan Securities Inc. violated the NASD Conduct Rule 2110 and Rule 101 of the Commission and were ordered to pay $25 million as civil consequence.
J.P. Morgan influenced certain customers to make after-market purchases before the finishing of the distribution of IPO shares. It solicited investors to give their own idea as to at which price and quantity they would intend to order the after-market IPO stock (Sorkin, 2010).
There has been no doubt that J.P. Morgan has maintained great reputation in the last century. Regardless of the lawsuits and cases charged against them, they still maintain the title of 'The Kingpin of Wall Street'. They are global leaders in Asset Management and continue to provide brilliant service to their customers all through the world. In the light of the recession that has shocked the world economically and financially, J.P. Morgan & Co. has reacted to the global market with great expertise and knowledge. The awards and recognition such as the Gold Standards Award (UK), Investment Trust of the Years Awards, The Triple A Investment Awards, Thomson Reuters Extel Survey, Pension & Investments' - Annual Money Manager Survey, Asia Asset Best of the Best Awards etc. and the many more awards they have achieved under their belt have shown their performance in the recent past and keep them well ahead of their competitors such as Wells Fargo and Bank of America. In conclusion, having the reputation of being the number one largest hedge fund managers in the world, J.P. Morgan has secured the number one spot at the Pensions & Investments' category with regard to the world's largest hedge fund firms
