77% of JP Morgan’s Net Income Comes from Government Subsidies

Corporate Welfare, anyone?  Why yes, thank you!  I'll have billions, please!  Zero Hedge.

JP Morgan’s credit rating would be much lower without government backing.
As Bloomberg noted last week:

JPMorgan benefited from the assumption that there’s a “very high likelihood” the U.S. government would back the bank’s bondholders and creditors if it defaulted on its debt, according to the statement. Without the implied federal backing, JPMorgan’s long-term deposit rating would have been three levels lower and its senior debt would have dropped two more steps, Moody’s said.

And as the editors of Bloomberg pointed out a couple of weeks ago:

JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fundand our own analysis of bank balance sheets. The money helps the bank pay big salaries and bonuses. More important, it distorts markets, fueling crises such as the recent subprime-lending disaster and the sovereign-debt debacle that is now threatening to destroy the euro and sink the global economy.***
With each new banking crisis, the value of the implicit subsidy grows. In a recent paper, two economists — Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the University of Mainz — estimated that as of 2009 the expectation of government support was shaving about 0.8 percentage point off large banks’ borrowing costs. That’s up from 0.6 percentage point in 2007, before the financial crisis prompted a global round of bank bailouts.


To estimate the dollar value of the subsidy in the U.S., we multiplied it by the debt and deposits of 18 of the country’s largest banks, including JPMorgan, Bank of America Corp. and Citigroup Inc. The result: about $76 billion a year. The number is roughly equivalent to the banks’ total profits over the past 12 months, or more than the federal government spends every year on education.

JPMorgan’s share of the subsidy is $14 billion a year, or about 77 percent of its net income for the past four quarters. In other words, U.S. taxpayers helped foot the bill for the multibillion-dollar trading loss that is the focus of today’s hearing. They’ve also provided more direct support: Dimon noted in a recent conference call that the Home Affordable Refinancing Program, which allows banks to generate income by modifying government-guaranteed mortgages, made a significant contribution to JPMorgan’s earnings in the first three months of 2012.

Way to suck at the government teat, Mr. self-proclaimed free market champion.

Psst..  I think he's talking about you, Jamie Dimon..  Also:  Does this make me a shareholder in JP Morgan?  Because I have more than a few Post-It Notes of suggestions that might de-shitify current circumstances..

UPDATE: JPMorgan (JPM) Falls After Surprise Call, Mark-to-Market Losses

Whoopsie.  Things just got wobbly for JP Morgan.  Street Insider.  Excerpts:

Shares of JPMorgan (NYSE: JPM) are under heavy pressure after-hours Thursday after announcing a surprise conference call and large surprise mark-to-market loss in its chief investment office and exposure to a possible credit downgrade.



Since March 31, 2012, the company said its CIO has had significant mark-to-market losses in its synthetic credit portfolio. JPMorgan said the portfolio has proven to be "riskier, more volatile and less effective as an economic hedge than the Firm previously believed."


The company said it now see a loss of $800 million in its CIO unit, versus an expected profit of up to $200 million. (A one billion dollar swing from projections!)  Although CEO Jamie Dimon said it could "easily get worse."

The company said the loss was driven by $2 billion trading loss in its synthetic credit portfolio.

Despite the loss, JPMorgan said at this time it still expects to earn $4 billion in the quarter.

My guess is this is just the first of many surprise calls and losses in store for many, many corporations, finance-related or not.  If JP Morgan cannot sustain, the worldwide economic repercussions will be significant and quick.  Could JP Morgan be that falling domino that starts the chain reaction crash?