This is one of those "good news, bad news" stories.
Many of you are probably aware that JP Morgan was fined $13 billion for allowing their brokers to sell shoddy mortgage backed securities to market players. As part of the fine JP Morgan will also pay for the shoddy market products sold by Bear Stearns and Washington Mutual, both which were acquired by JP Morgan during the financial crisis. This is the "good news" part of the story.
The $13 billion fine comes on top of the roughly $5 billion in fines that JP Morgan paid between 2011 and 2013 for - what else? - illegally rigging, manipulating, and gaming the market. These fines include the famous London Whale fine of $920 billion, which JP Morgan top executives claim they knew nothing about.
Then we have the "bad news" part of the story.
Because of corporate tax law, about $11 billion of the $13 billion fine is tax deductible. With a 38 percent tax rate (assuming there are no other deductions) JP Morgan can expect to get more than $4 billion of that fine back in the form of a tax rebate (or credit).
So, yeah, that $13 billion fine is actually about $9 billion.
- Mark
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If we're looking for a silver lining here, according to Reuters $9 billion still makes the fine the biggest in bank history. In the larger scheme of things that's still good news, I guess ... especially if not fixing the problem that breeds this kind of behavior is considered good news.
- Mark
UPDATE: Correction. JP Morgan's Chief Financial Officer says that $7 trillion of the $13 trillion is tax deductible.
1 comment:
I got a fix it ticket, where's my tax deduction on it?
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