Erika Eichelberger

Erika Eichelberger

Reporter

Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Expert: JPMorgan's $13 Billion Fine Should Have Been 22 Times Bigger

| Wed Oct. 23, 2013 4:58 PM EDT

JPMorgan Chase CEO Jamie Dimon.

JPMorgan Chase is probably going to have to pay a record $13 billion fine because it created and sold dicey financial products that helped cause the financial crisis that sparked an economic crash in 2008. JPMorgan CEO Jamie Dimon has groused that this an unfairly large sum. But some experts beg to differ, noting that if the world were fair, Dimon's bank would have to pay a lot more.

On Saturday, JPMorgan reached a tentative deal with the Department of Justice, which has investigated the megabank for having packaged poor quality mortgages into securities that it sold to investors. (Some of the securities were peddled by Washington Mutual and the investment bank Bear Stearns, two failing firms that JPMorgan absorbed in 2008.) The $13 billion penalty, which is not yet final, would cover about $9 billion in fines paid to the federal government and $4 billion in relief for struggling homeowners. It would be the largest penalty that a single company has ever paid in settling a case with the Justice Department.

The historic deal is a sign that the Obama administration's crackdown on Wall Street is finally gaining steam. But experts note that the $13 billion fine—which seems a gargantuan amount—is not nearly enough. First, the fine is really only $9 billion, says William Black, an associate professor of economics and law at the University of Missouri-Kansas City and a former bank regulator who led investigations of the savings and loan crisis of the 1980s. The $4 billion in relief to homeowners, he explains, represents loan modifications that the bank would have made in any event to minimize losses and avoid foreclosures. (And that $9 million, he adds, is tax-deductible.) Second, Black says, the total damages JPMorgan, Washington Mutual, and Bear Stearns inflicted directly on purchasers of the shoddy mortgage-backed securities is estimated to be $100 billion. "The normal rule in terms of remedies for frauds of this scope," he says, "is that you pay for your damages that you caused." And if those damages were caused by fraud as opposed to mere negligence, Black adds, the US legal system often makes the fraudster pay punitive damages of at least twice that amount. "A normal recovery would be in the range of $200 billion," he says.

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Elizabeth Warren to Wall Street Regulators: Put Big Bank CEOs in Jail

| Wed Oct. 23, 2013 3:33 PM EDT

This past weekend, the Department of Justice slapped a record fine on JPMorgan Chase for packaging and selling the mortgage-backed financial products that helped cause the financial meltdown. But Sen. Elizabeth Warren (D-Mass.) wants the administration to know that fines are not enough. On Wednesday, she called on Wall Street regulators to hold all those responsible for the 2008 crisis accountable.

In a letter to the Federal Reserve, the Securities and Exchange Commission (SEC) and the Officer of the Comptroller of the Currency (OCC), Warren lauded the overseer of the TARP bailout program for cracking down on financial industry players who wasted, stole, or abused the federal emergency funds doled out to banks during the financial crisis, and implied that the three banking regulators should also punish individuals who helped cause the financial meltdown.

Although the budget for TARP's inspector general was "a small fraction of the size of the budgets and staffs at your agencies," Warren pointed out, the program's watchdog has brought criminal charges against nearly 100 senior executives; obtained criminal convictions on 107 defendants, including 51 jail sentences; and suspended or banned 37 people from working in the banking industry.

How about you guys, Warren asked. She called on the Fed, the SEC, and the OCC to provide records on the number of people the agencies have charged criminally and civilly, the number of convictions and prison sentences they have obtained, the number of people banned or suspended from working in the industry, and the total amount of fines leveled against Wall Street ne'er-do-wells.

Warren knows the answer to most of these questions, but wants to shame the agencies into action. Yes, big banks have been forking over billions of dollars in civil settlements for bad behavior in the lead up to the crisis. There have been prosecutions of various smaller mortgage brokers, and some civil charges and settlements against executives who helped cause the crisis. But zero Wall Street CEOs are in jail for bringing down the economy, and no CEOs have faced criminal charges.

Earlier this year, U.S. Attorney General Eric Holder seemed to concede that some banks are "too big to jail." But Warren doesn't buy it. "There have been some landmark settlements in recent weeks for which your agencies and others deserve substantial credit," Warren said in the letter. "However, a great deal of work remains to be done to hold institutions and individuals accountable for breaking the rules and to protect consumers and taxpayers from future violations."

The September Jobs Report Is Glum, But October's Might be Worse

| Tue Oct. 22, 2013 11:24 AM EDT

The US economy added 148,000 jobs in September, fewer than expected, according to new numbers from the Labor Department, which were released Tuesday—more than two weeks late due to the government shutdown. The jobless rate fell from 7.3 to 7.2 percent, but as in previous months, the drop in unemployment is mostly due to the fact that fewer people were seeking work last month, and thus were not officially counted as unemployed.

The percentage of Americans who are working remained unchanged, at only 63.2 percent, the lowest labor force participation rate since 1986. As economist Dean Baker of the Center for Economic and Policy Research said Tuesday, "This continues the pattern that we have seen throughout the recovery as the unemployment rate falls mainly because workers leave the labor market. The unemployment rate is now down by 2.8 percentage points from its 10.0 peak in October of 2009. However, the employment rate is up just 0.4 percentage points from its low point hit in June of 2011."

The unemployment rate for blacks and Hispanics remained disproportionately high. The jobless rate for African-Americans fell one percentage point in September to 12.9 percent; for Hispanics, the number dropped three percentage points to 9 percent.

The leisure and hospitality industry lost the most jobs since December 2009, a stark change from recent months which have seen gains in low-wage service sector jobs. Retail employment increased 20,800. Here's a chart showing September gains and losses by sector, via Quartz:

There was some mildly positive data in the jobs report. Part-time employment dropped 594,000, suggesting that the surge in part-time employment earlier this year was an aberration. That's good news for the Obama administration, which has been trying to convince Americans that Obamacare's requirement that employers offer insurance to people who work more than 30 hours has not caused employers to cut hours.

In other lukewarm news, average hourly earnings increased three cents in September. And construction payrolls increased 20,000, which could ease some economists' fears that home building was leveling off.

As the Times reports, the dual battles over funding the government and raising the debt ceiling likely worsened the employment situation, "because hundreds of thousands of federal workers and contractors were furloughed and also because anxiety and uncertainty over the budget battle caused consumer confidence to plummet." But we won't see those effects until next month's jobs report. Economists estimate the shutdown cut about 0.6 of a percentage point off fourth-quarter GDP.

More shenanigans over the budget and debt ceiling this winter, not to mention a possible extension of the deep budget cuts known as sequestration, could dampen the economy further. "It’s clear that the conservatives’ long march to austerity spending cuts has sapped aggregate demand from the recovery," says Adam Hersch, an economist at the liberal think thank, the Center for American Progress. The stagnant economy and Congressional spats have led economists to predict that the Federal Reserve will likely delay scaling back it's stimulus program.

Hersch says the report is "a stark reminder that it’s time for Congress to focus on the real economic challenges facing ordinary Americans: jobs, incomes, and the public institutions critical to our economy."

No, Sen. Inhofe, Obamacare Would Not Have Killed You

| Mon Oct. 21, 2013 12:35 PM EDT

Sen. James Inhofe (R-Okla.)

On Sunday, Sen. James Inhofe (R-Okla.) said that if Obamacare had been fully in place this year, he probably would have died of a heart attack. That's not true.

After going in for a routine colonoscopy a few weeks ago, Inhofe’s doctors found that his arteries were dangerously clogged, so they immediately took him to the ER, the 79-year-old senator told Aaron Klein on his WABC radio show Sunday. He suggested that if he had been living a part of the world with "socialized medicine like Obama is trying to impose upon America," he never would have gotten the life-saving surgery: "A person can find out, here in the US, that he has this emergency situation where he has got to have immediate heart surgery. And if you are in a country other than the US, a lot of them, you can't get it done. In my case, with my age, that would have been about a six-month wait. Because I hadn't had a heart attack," Inhofe said.

"It's preposterous and couldn't be further from the truth," says Ethan Rome, executive director of Healthcare for America now, a non-profit that backs Obamacare. "When people in authority say such ridiculous things," he adds, "It's a dangerous thing because people will take him seriously." Here's what the senator got wrong:

1. Obamacare is not socialized medicine. "Obamacare bears no resemblance to Canadian-style socialized medicine," says Jonathan Gruber, an MIT economist who helped craft the massive health care law. Obamacare expands private health insurance coverage for most people, and in states that are allowing it, the law also expands one of our existing public health programs, Medicaid.

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