Banks and Borrowers

In a hierarchy every employee tends to rise to his level of incompetence.
-- Laurence John Peter, The Peter Principle

The consumer doesn't understand how hard it is to be a Big Bank and, therefore, expects the Big Bank to be just as concerned about its customers as was the little bank Big Bank swallowed. I was reminded of that by Bill Moyers' Journal. It was a discussion of JPMorgan Chase (JPMC) that clients of mine had recently been taught was so big it could not possibly take care of its customers. In teaching them that lesson, it also taught them that it could charge tuition for the lesson. It was a very valuable lesson for me as well as for JPMC's customers but I'll share my lesson at the end of this column. First, Bill Moyers.

One of the participants in the Moyers interview was Marcy Kaptur (and the quotations herein are all taken from that interview). She is a member of Congress from Ohio. Serving her 14th term in Congress, she is the longest-serving Democratic Congresswoman in the history of the House. She discussed foreclosures.

Foreclosures in Toledo have gone up 94 percent. When Ms. Kaptur was home in Toledo she met with realtors and asked them what she should know about what was happening and they said: "Well, first of all, you should know the worst companies that are doing this to us." Ms. Kaptur asked who the worst offender was and she was told it was JPMorganChase. That same night she had dinner with Jamie Dimon, the bank's president and during the course of the evening said to him: "{Y]our company is the largest forecloser in my district. And our Realtors just said to me this morning that your people don't return phone calls. We can't do workouts." In response Mr. Dimon told Ms. Kaptur that he talks to the Governor of Ohio frequently and also talks a lot to the Mayor of Columbus, an interesting, if irrelevant response, since it is unlikely any of those conversations pertained to the governor or the mayor trying to refinance his house in order to avoid foreclosure. Ms. Kaptur suggested he needed to talk to people in the Northern part of the state where foreclosures were abundant. His response was to give her his business card and tell her he'd have someone call her.

People at JPMorganChase are very busy. No one called Ms. Kaptur even though her office repeatedly called the bank. Then a funny thing happened. Ms. Kaptur was on a national news show and told the interviewer how her calls were not returned by JPMC. Within ten minutes the bank called her office and said: "Oh, we'll work with you. We'll try to do some workouts in your area." As Ms. Kaptur explained: "We planned the first one after working with them for weeks and weeks and weeks. Their people never showed up. . . . We kept calling saying, 'Where's your person? Where's your person? And they finally sent somebody down from Detroit by 3:00 in the afternoon. But our people had been waiting all morning . . . ."

Ms. Kaptur's experience resonated with me and causes me to share with readers the Tale of Two Trusts. JPMorganChase was the trustee. This tale would never have made it into print but for the fact that it proves that JPMorganChase is no respecter of persons. It treats the mighty and the lowly alike-shamefully. The lowly in this tale were the three beneficiaries of two trusts worth less than $2 million. They were hardly worth noticing. JPMorganChase didn't. It assigned them to a trust officer who, among other things, did not return phone calls, used the assets of one trust to pay the bills of the other, put money belonging to one trust into the other, failed to make required distributions and issued no reports. When asked to resign, the bank said it would if all beneficiaries joined in the request. They did. Then a sad thing happened. The bank changed its mind. (That may have been because its fortunes were declining. Less than two months after changing its mind it received a bailout of $25 billion dollars.) The bank said the beneficiaries would have to go to court if they wanted to compel it to resign. So the beneficiaries hired lawyers and the bank hired lawyers. After many months and thousands of dollars in legal fees, the bank corrected the errors it had made and agreed to resign. As part of its agreement to resign, however, it required the beneficiaries to agree that their trusts would pay the more than $12,000 in legal fees it had incurred after reneging on its agreement to resign.

JPMorgan Chase is a Big Bank. It is too bad that the writer and Ms. Kaptur don't have a better understanding of the problems Big Banks face. If we did, this column would never have been written.