Even America’s favorite banker can't win a shootout with the U.S. military.
So it is with JPMorgan Chase (jpm) chief Jamie Dimon. He strode into the foreclosure fiasco last fall with guns blazing, as usual, claiming Chase wouldn't be tarnished by the banking industry's mortgage misbehavior.
But Dimon has been silenced by the news this week that Chase improperly foreclosed on 14 military families and milked 4,000 others of $2 million in wrongful fees or improper interest rates.
This news surely comes as a shock to Dimon, who said at least twice last year that he didn’t believe the bank had improperly foreclosed on anyone. The statement raised eyebrows at the time, not least because of JPMorgan’s industry-leading foreclosure pipeline, lately estimated at almost $20 billion (see chart, below right). Not a single mistake in there, he was saying.
Anyone who has had the pleasure of trying to explain a bank's erroneous charges to its tele-representatives might cast a skeptical eye on that claim, but not Dimon. No, he ran with it.
“We don't think there are cases where people have been evicted out of homes where they shouldn't have been,” Dimon said on a conference call with investors Oct. 13. Just for good measure, he repeated that claim in a Dec. 5 profile in the New York Times magazine.
So much for that, then. The military foreclosure debacle drew outrage from two Democratic senators, Jack Reed of Rhode Island and John Kerry of Massachusetts, both of whom called on the attorney general to investigate.
Dimon – who has spent months puffing out his chest over Chase’s supposed immunity to the housing bug – was nowhere to be seen in Chase's response to the foreclosure news.
The issue, of course, is not whether Dimon was lying -- he surely wasn't. The problem is the habit top bankers have of asserting their righteousness without knowing for sure that they're right. Better to pound the table now and quietly apologize later than to admit there are some gray areas.
Perhaps thinking wishfully, JPMorgan Chase now denies Dimon ever claimed there had been zero wrongful foreclosures. Whatever the record might show, the bank is now emphasizing that it has resolved most of the cases and is mailing out checks promptly.
Yes, it now concedes, mistakes will be made. This isn’t the first time the bank or Dimon have said that, but what a shift in tone.
We made mistakes here and we are fixing them. There is no finer group of people than the men and women in the armed services who fight to protect our country every day. We are deeply appreciative of those who fight to protect our country and Chase funds a number of programs that provide benefits to military personnel and veterans - and while any customer mistake is regrettable, we feel particularly badly about the mistakes we made here.
Feeling bad never played much of a part in previous Chase foreclosure commentary, to my recollection. Indeed, one critic of the banks’ mortgage practices, Adam Levitin of Georgetown Law School, took Dimon to task in congressional testimony this fall for downplaying the banks’ apparent wholesale violations of borrowers’ due process.
Mr. Dimon's logic condones vigilante foreclosures: so long as the debtor is delinquent, it does not matter who evicts him or how. (And it doesn't matter if there are some innocents who lose their homes in wrongful foreclosures as long as "for the most part" the borrowers are in default.)
Levitin hasn’t been the only one calling the banks on their implausible claims of foreclosure righteousness. So has Katherine Porter of Harvard, who offered this testimony in October to the Congressional Oversight Panel overseeing the government bailout of the banks.
Given statements by industry that suggest their interpretation of “problem” is limited to outright lying to a court (which the announcement of the moratoriums seems to have acknowledged was an actual problem that needed remedying) or taking the house of someone who has made all their payments, industry numbers of the scope of the problem should be given no weight. The need for outside audit and verification of loans and foreclosure procedures remains urgent.
This episode seems to affirm that view, but don't hold your breath for Dimon and JPMorgan Chase to get on board.