The J.P. Morgan Chase Watch Archive - from Inner City Press & Fair Finance Watch

The J.P. Morgan Chase Watch Archive

Click here for current ICP JP Morgan Chase Watch Click here for Inner City Press' front page.

ICP has published a (double) book about the JPMChase-relevant topics of subprime lending, and corporate fraud - click here for sample chapters, here for an interactive map (including regarding Chase), here for fast ordering and delivery, and here for other ordering information. The Pittsburgh City Paper of Dec. 11, 2003, says that the "novel Predatory Bender: A Story of Subprime Finance may, in fact, be the first great American lending malfeasance novel." Click here for that review; click here to Search This Site For or with more information, contact us.

[Update of January 14-15, 2004: late on Wednesday afternoon, after the news started leaking, JP Morgan Chase confirmed it has a proposal to buy Bank One, for $58 billion. In late 2003, Chase did a "corporate trust" deal with Bank One, while Chase was (and still is) trying to put its nationwide consumer finance lending, including subprime mortgages and auto loans, into a federal thrift to preempt all states' anti-predatory lending laws. J.P. Morgan Chase's normal interest rate lending is disparate, particularly to Latinos and African Americans, while Chase targets these groups with high-cost subprime loans, for which it seeks to escape state anti-predatory lending laws by shifting its subprime business into a federally-chartered savings bank. ICP/Fair Finance Watch will be challenging Morgan Chase's proposal, raising the issues Chase has been ducking for months (see below & this page). This will be frequently updated, here. For or with more information, contact us.]

Background: J.P. Morgan + Chase

On November 6, 2000, Inner City Press / Community on the Move filed detailed comments opposing Chase Manhattan's applications to acquire J.P. Morgan & Co. and its subsidiaries, with the New York State Banking Department and the Federal Reserve Board. Portions of ICP's protest appear at the bottom of this page. Beyond arguing, with Home Mortgage Disclosure Act data, that Chase's normal interest rate lenders disproportionately deny and exclude credit applications from people of color, while Chase Home Funding (subprime) and the other subprime lenders Chase supports target these communities, ICP's comments demonstrate, from the "branch counts" in regulatory decisions in the past years, that the decrease in Chase's branches in low- and moderate-income census tracts has been more pronounced than its overall branch decreases. It's also an attempt at a comprehensive brief on Chase's and Morgan's impacts on communities, the environment, and even human rights.

See also, e.g., Bank to Keep Area Branches, Jobs; Name May Change Following Chase, J.P. Morgan Merger, by Bob Schober, Arlington (Tx) Morning News, January 4, 2001, Pg. 1C; N.Y. Judge Declines to Stop Chase - J.P. Morgan Merger, by Joseph A. Giannone, Bridge News, January 3, 2001; Protester asks N.Y. Supreme Court to Annul Chase - J.P. Morgan Merger; Court Ordered Say on Chase-Morgan Merger Friday, by Joseph A. Giannone, Bridge News, January 2, 2001; Chase-J.P. Morgan Deal Receives Fed's Approval, Wall Street Journal, December 12, 2000; Chase - J.P. Morgan Merger Approved by Fed, Bureau of National Affairs Banking Daily, December 12, 2000; Fed Approves Chase Manhattan-JP Morgan Merger, by Jonathan Nicholson, Dow Jones Newswires, December 11, 2000; Federal Reserve Board Approves Chase-JP Morgan Merger, by Eileen Canning, Bridge News, December 11, 2000; N.Y. Regulator Asks J.P. Morgan, Chase About Subprime Activities, by Rob Garver, American Banker, November 27, 2000, Pg. 1; Chase-Morgan Merger Opposed, Crain's New York Business, November 13-19, 2000; Group Protests Chase-Morgan Deal, by Rob Garver, American Banker, November 8, 2000; Consumer Group Seeks to Block Chase Purchase of J.P. Morgan, Reuters, November 6, 2000; Skeptics question purported benefit of Morgan Chase, By Dunstun Prial, Associated Press, September 16, 2000

For or with more information, contact us. In this space, we will be running short weekly updates on Morgan-Chase:

Update of January 5, 2004: ICP raised in its Dec. 22 Report (see below) issues reflected in document provided to ICP by the Oregon Department of Justice (ORDOJ) -- CMMC and false social security numbers (SSNs). Now ICP has received, and is submitted to the FRB, some of the underlying documents, including a handwritten statement by Jose Gabriel Quirino, inter alia that he was told that false SSN -- which he himself disclosed -- would not be a problem; the credit reports upon which CMMC relied, CMMC's "Loan Memorandum" -- which characterizes this process as "Full Doc" -- further investigative documents and correspondence of the ORDOJ, including one stating:

"the suggestion to a consumer that using a bad social security number will not be prejudicial... is a violation of our Unlawful Trade Practices Act... You mentioned the OCC; I could be corrected but I was told by someone and have been led to believe the [OCC] would not be in the picture here. I submit Oregon has a right to protect its consumers... we want an Assurance of Voluntary Compliance with Chase that this sort of alleged conduct will cease... I am concerned that if there are three possible instances of fraud there may be more. Part of any resolution would have to including a monetary effort to make things right with any consumers who have lost their property and their money."

ICP has also received copies of other complaints from Oregon (violation by Chase of telemarketing rules / "No Call" List asserted by ORDOJ); from the New York Banking Department (against Chase Manhattan Mortgage Corp., from October 1, 2000 to June 25, 2003, over 500 consumer complaints were filed; small sampling --

6/25/03 Mortgages - Privacy Issues - Valid - 03 M 1573

6/19/03 Mortgages - Escrow account, non-payment of taxes from - Valid - 03 M 1533

6/16/03 Mortgages - Release of satisfaction - Valid - 03 M 1502

6/13/03 Mortgages - Release of satisfaction - Valid - 03 M 1491

6/12/03 Mortgages - Release of satisfaction - Valid - 03 M 1485

6/09/03 Mortgages - Payment not posted to account - Valid - 03 M 1453

--other complaints acknowledged as "valid," even by the New York Banking Department, were for "Foreclosure" (Valid, o3 M 236); "Loan Terms Changed" (Valid, 03 M 133); "Closing Delays" (Valid, 03 M 676); "Foreclosure" (Valid, 03 M 843); "Insurance Funds - Difference FDIC and Other" (Valid, 03 M 869); etc.--

from Wisconsin, Texas and elsewhere, other complaints are annexed hereto, and timely made part of the record in this proceeding. Again, the above, including Chase's attempt to put ORDOJ off the trail by claiming that CMMC was OCC regulated, casts the other complaints annexed hereto -- all of which would fall under the OTS' dubious enforcement regime -- in a different light. Also:

In 2002 in the Portland, Oregon Metropolitan Statistical Area ("MSA"), for conventional home purchase loans, Chase Manhattan Mortgage Corp. ("CMMC") denied loan applications from Latinos 4.48 times more frequently than applications from whites, and denied African Americans a whopping 11.9 times more frequently than whites (while disproportionately excluding African Americans from its outreach and lending).

In the Seattle, Washington MSA in 2002 for conventional home purchase loans, CMMC denied loan applications from Latinos 2.61 times more frequently than applications from whites. In the Jackson, Mississippi MSA in 2002 for conventional home purchase loans, CMMC denied loan applications from African Americans 2.35 times more frequently than applications from whites. In the Denver, Colorado MSA in 2002 for conventional home purchase loans, CMMC denied loan applications from African Americans 3.64 times more frequently than applications from whites. These disparities are systemic...

Update of December 29, 2003: in this holiday week, and still awaiting Morgan Chase's response on the Oregon / SSN issues (see last week's Report, below), for now we'll note, along with the Budapest stock exchange daily Magyar Tokepiac, that Morgan Chase has increased its stake from 9.82% to 10.1% in Hungarian oil and gas company Mol. Perhaps as custodian -- similar to Chase's dubious work with/in the Russian stock market. Another topic for 2004...Happy holidays. Until next time, for or with more information, contact us.

Update of December 22, 2003: In this cold season, Inner City Press has just received hot documents on Chase Manhattan Mortgage from the Oregon Department of Justice (OR-DOJ). Among the documents in the ORDOJ's first FOIA response to ICP is correspondence concerning Chase Manhattan Mortgage Corp. ("CMMC") and false social security numbers -- an issue that the state regulator received complaints about, and then, for whatever reason, allowed Chase itself to investigate. According to Chase Associate General Counsel Laura O'Hara's June 5, 2003, letter to ORDOJ:

"Chase conducted an investigation with respect to the allegations set forth in your Letter. We related the results of that investigation upon your agreement that it would not constitute a waiver of the attorney client privilege. As part of that investigation, Mr. Hernandez was asked to come to our New Jersey headquarters and was interviewed by two attorneys and a senior investigator from our Fraud Prevention and Investigation Department ('FP&I'). After a thorough and intensive questioning, we found no evidence that Mr. Hernandez had 'condoned the use of bad social security numbers'... When Chase was notified by HUD that there were possible invalid SSNs on the Cortez and Alejandro Sierra loans in 2001, these files were immediately referred to our Quality Assurance Department. That department determined that the SSNs were invalid and determined that the borrowers had supplied falsified documents to Chase... If he were applying for a loan today... we would have found material misrepresentation in connection with the SSN submitted and would have declined the loan. This would be reported as a borrower misrepresentation in the Suspicious Activity Report ('SAR') that we file with FINCEN."

Even the ORDOJ, in responding to the above, noted that

"It appears there were Social Security number problems in all three consumer files including Gonzalez which apparently you had not yet discovered... we have persons claiming different things... Chase is very quick or possibly too quick to act once a person in possession is shown to have a bad social security number... You indicate Mr. Hernandez himself investigated after an alert and found two numbers incorrect; but while he found the third one correct it looks like that is now called into question as well... Whether Mr. Hernandez ever in fact winked at the use of a bad number we'll never know though I know you believe the evidence is he did not. Still, three transactions is a lot."

And it's more than three -- we hear this not only from ORDOJ, but also with regard to Chase's mass-purchase of loans in the Poconos with inflated appraisals. Something's wrong at Chase Manhattan, and putting it under an agency that's just desperate for assessment fees is sure not the answer....

Update of December 15, 2003: When we first heard -- not from the Office of Thrift Supervision -- that the OTS had approved JPMorgan Chase's application to form a savings bank, Chase FSB, to preempt state anti-predatory lending laws, we thought that the OTS must have at least considered the evidence of Chase's practices we'd submitted. But under a Dec. 9 cover letter, ICP has received the OTS' approval order, which states that ICP "filed comment letters, all of which were received after the close of the public comment period. OTS concludes that the comment letters do not meet the standard for consideration of late-filed comments, set forth in 12 CFR §516.140(b)."

It must be said: that's both pathetic and an outrage. ICP requested the Chase FSB application during the comment period, and commented on it less than a day after receiving it from the OTS. ICP was assured, by an OTS staffer, that its comments would be considered. The OTS has hit a new low -- ICP has filed a FOIA appeal and letter to this effect, results to be reported on this site -- but it also renders false any claim by Chase that adverse issues were considered by the OTS prior to its approval. A brand-new fight begins; the OTS, we'll deal with as well. It's also attributable to Chase, which argued from its first response that the comments should not even be considered. We'll say it again: pathetic.

Update of December 8, 2003: Bogus agency, bogus bank: last week a reporter (the American Banker's Liz Moyer) noticed on the OTS web site that the OTS had apparently approved Chase FSB, despite protests and outstanding FOIA requests, on November 28 -- the day after Thanksgiving. The OTS hasn't provided notice of approval; Chase hardly wanted to. Why? Because Chase must now begin another application process, at the Federal Reserve -- where hopefully the troubling predatory lending / preemption questions raised can actually be looked into. That the OTS is a joke (and that's why Chase wants to move its subprime lending there) is reflected by a response ICP received last week from the Kentucky Department of Financial Institutions:

"We have received numerous complaints against Washington Mutual, most concerning their failure to properly credit customers' accounts but, unfortunately, the Department does not have copies of those complaints. The lady who handles consumer complaints was under the mistaken impression that anything having to do with Washington Mutual was not to be handled by our Department but was to be forwarded to the Office of Thrift Supervision. She thought, since the banking business of Washington Mutual was federally regulated, that the consumer loan business of Washington Mutual was also federally regulated. She has no record of the number or content of such complaints registered over the past three years old than a knowledge that many of the complaints concerned a failure to credit customers' accounts resulting in complaints of unauthorized threat of foreclosure. We will attempt to work with you in this matter. We appreciate your concern and invite further correspondence."

For now, Inner City Press has submitted a Freedom of Information Act request to the Office of Thrift Supervision, for documents including this mis-forwarded complaints against WaMu Finance -- but note that the OTS never informed the Kentucky DFI it was sending complaints against a subprimer into the void... This is the type of void / loophole Chase is looking for...

Update of December 1, 2003: anything for a buck: the day before Christmas, JPMorgan Chase announced a proposal to buy the Citicorp Electronic Financial Services unit which provides government-issued benefit payments -- including public assistance a/k/a/ welfare. Readers of this site will remember that Citigroup fell under criticism for winning these contracts without having many or any branches in low income neighborhoods. Well, the same issues of worse will exist as to Morgan Chase...

Update of November 24, 2003: The Office of Thrift Supervision last week unilaterally extended its time to respond to Inner City Press' request under the Freedom of Information Act for records reflecting the OTS' consideration of Chase's proposal to put 302 Chase Manhattan Mortgage Corp. offices into a federal savings bank, evading all states' consumer protection laws. Meanwhile, here's a sample message that came in:

Date: 11/18/03 6:29:13 PM Eastern Standard Time

From:[ ]

To: ChaseWatch [at] innercitypress.org

I e-mailed you last week about the ordeal we went through with CMMC from April till Oct. Well, we received a letter stating they had sent electronic notification to all major credit agencies to have the delinquent payments off our credit report. We do not believe them. The letter also say " I apologize that we do not meet your expectations." My thought is "when donkeys fly will they ever meet my expectations"...

Yep... Until next time, for or with more information, contact us.

Update of November 17, 2003: The campaign against JP Morgan Chase's attempt to evade consumer protection laws for over 300 (subprime) lending offices in forty-something states continues. It's effect of various states is reviewed in this new ICP map, click here to view and use. On November 17, the following went in, to the OTS, FDIC, and other agencies:

Dear Director Gilleran, Regional Director Albanese, others:

On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a supplemental comment opposing a pending application by J.P. Morgan Chase to form a new savings bank, Chase FSB, and to place its nationwide lending, including subprime lending, into Chase FSB, which would among other things have the effect of exempting Chase's subprime lending from state consumer protection laws.

ICP has continued receiving numerous complaints about the Chase entities -- Chase Manhattan Mortgage Corp. ("CMMC"), Chase Automotive Finance, etc. -- that it now proposes to exempt from state consumer protection laws. Some of these are discussed below and/or annexed hereto. First, however, ICP wishes to formally make part of the record its questions (and its October 27, 2003, Freedom of Information Act request) concerning whether the OTS is already anticipating "assessment revenue" from the applicant here, as it is from, for example, Hudson City. An October 22, 2003, American Banker newspaper article ("N.J.'s Hudson City Seeks Switch to OTS") about another institution trying to shift to the OTS quoted "Kevin Petrasic, an OTS spokesman" that the OTS "had been talking with Hudson City Bancorp about making the switch for some time and had factored the assessment revenue it would likely generate into the agency's budget for the second half of next year. The conversion to a federal charter would immediately make Hudson City the 10th-largest thrift regulated by the OTS." (Emphasis added).

ICP, which since August 25 has requested records related to Chase's proposal from the OTS under FOIA, find the above-quoted to be troubling. Hudson City's application to become a thrift is pending, as is Chase's: the inclusion already of projected assessment revenue in the OTS' budget reflects, we contend, inappropriate prejudgment of applications subject to public comment and to the CRA. As relates to this request, we are specifically requesting all records reflecting the inclusion (or non-inclusion) of projected Chase / Chase FSB assessment revenue in future OTS budget(s) -- in fact, we are requesting the above-referenced OTS budget, projected or not, for future years, in order to determine the inclusion or non-inclusion of institutions that are or are not yet OTS-regulated thrifts.

On October 27, 2003, ICP formally requested record related to the above, on which it desires to comment in this proceeding. ICP continues to await response and the records. In light of the material above, and the other facts of record, we demand the responsive documents forthwith, on an expedited (and incremental - as available) basis.

ICP has continued receiving numerous complaints about Chase Manhattan Mortgage Corp. ("CMMC"), Chase Automotive Finance, etc.. From the New York Banking Department, we received Freedom of Information response indicating , against Chase Manhattan Mortgage Corp., from October 1, 2000 to June 25, 2003, over 500 consumer complaints were filed...

At the end of last week, ICP received 114 pages, with approximately 12 consumer complaints on each page, against Morgan Chase from 1998 through earlier this year -- ICP is reviewing this, and will be commenting thereon. From Wisconsin, other complaints are annexed hereto.

In the Milwaukee, Wisconsin MSA in 2002, for conventional home purchase loans, CMMC denied the applications of African Americans three times more frequently than those of whites, and denied those of Latinos 2.18 times more frequently than whites. For refinance loans, CMMC denied the applications of African Americans 2.89 times more frequently than those of whites, and denied those of Latinos a whopping 4.72 times more frequently than whites.

It remains imperative, given the inaccuracy throughout the comment period of the list of CMMC offices which Chase is proposing to make branches of a thrift (and thereby preempt state consumer protection law) that new notice be published, the comment period officially be reopened, and the requested public meeting be held.

Update of November 10, 2003: this week, two tales of woe -- and new Inner City Press book. In order:

Subj: Chase Manhattan Mortgage

Date: 11/3/03 6:34:15 PM Eastern Standard Time

From: [ ]

To: ChaseWatch [at] innercitypress.org

...We refinanced our home in November 2002 at which time we paid off our loan with Chase Manhattan. In March 2003 CMMC falsely reported our loan as "foreclosed" to three major credit bureaus. (I noticed on your website another customer with the same experience.) As directed by Chase on 7/25/03 I faxed a copy of our credit reports. I was told they'd investigate and that would take up to 30 days. On 9/5/03 I was told it was still in investigation and would take 57 days! Upon my persistent phone calls I called again on 10/15/03 I was told their investigation into our loan showed it was not foreclosure and they'd notify the credit bureau's and send us a letter indicating to this fact. I've contacted them 14 times since 9/5/03 and they still have not sent us the letter nor will they return my calls as they always promise. Chase has not amended our credit reports as they indicated either. All totaled I have notes since 7/25/03 documenting 24 phone calls I've made in an attempt to get this fixed....

* * *

Subj: Class action suit against Chase?

Date: 11/4/03 3:36:11 PM Eastern Standard Time

From: []

To: ChaseWatch [at] innercitypress.org

...In April we changed from a Home Equity Loan to a Chase Mortgage Loan our bank was paid off on April 9th. Our first payment was on June the 1st. I was told to call the 800# Chase customer service if we did not receive a coupon booklet. I started around the end of April, computer did not recognize our loan #, was transferred to customer service, do not have a loan, must be problem between you and your bank. Called again the next week same as above. Mailed in a payment on May 21,2003. did not receive any confirmation on the payment , called again same as above. Around the first of July received a letter from ****** with a check from Chase exactly the amount I sent in. She wrote there was no loan # match. I called again, went through the whole ordeal including reading the letter from ******* to Chase customer rep. Sorry can not help. Decide to deposit Chase check, turned around and mailed three checks ,one for June, July, and Aug. Called again I think the customer rep. put me on line with a supervisor. She said that maybe the lady who helped in closing did not send the papers. Called the lady, apologized to her and told her what I was told, she already knew that we were having problems, had called her several times to talk about this problem, she said she would call someone. She called back said the problem would be straighten out . Around the first of August was sent a letter from Chase our first payment due the first of September and about the same time received a statement from Chase with one payment credited. Called again , this time was a nice young man, told him from the whole beginning and he assured me we would be credited the two other payments. One week later received a new statement all three checks credited, and due date for next payment 12/01/03. Called again to make sure, do not make any more payments until due date. Received statement in Sept. no transactions, did not call very tired of this. The statement for Oct. received it on the 14th. All three checks had been reversed, and we owed $651.15, payments are only $217.05. Called this time the computer said " do you want to keep your property". Customer service rep. said the same thing, by that time I was really upset. Tried to explain the whole ordeal, was told I had a problem with my bank. I told her I had all three cancel checks in my lap, I read the letter from ********, I told her I would go to my bank and talk to the President, was told " that want help you" She gave me an address to send copies of the cancel checks. Decide to go to the bank any way, the President called Chase talked to two reps. before a supervisor came on. He told her that I have never had an overdraft, and I had called him over the many months telling him the ordeal I was going through since May. Fax cancel checks and sent the paper about first payment due in Sept. Received a letter from *******was being researched. Decide to try and call the lady that was named on the paper stating first payment in Sept. again, although when called the times before "sorry you must have the wrong number" recording from telephone company. Decide to call bank and have them to check their computer for correct number. Letter had the lady in Orlando Fla. and she was in Montgomery. The last two numbers was wrong that was typed on the letter besides the city and state. Called her, she said our papers were lost and the problem was suppose to have been corrected. Told her about the customer service rep. saying the problem was our bank and us. She said our checks had been reversed back to the bank, by this time I was beside myself. She said "I'm sure if you sent in the $651.15 everything would be alright." I told her "that no one had the decency to call or write to let me know what was going on". She gave me a number for a lady that represents Chase and another number... The lady called Tuesday said she wanted me to go to the office of the lady that gave me her phone # to explain about payments, I could not for it was a two hour drive, she suggested mailing the papers, I suggested having them faxed to our bank. This was on Monday October 27th, no fax, nothing. On October 30th, I called the lady in Montgomery asked if she had talked to the lady from Chase, one thing different she put us on a speaker phone. Knew then she wanted someone to listen to our conversation, told her thank you for the phone # she gave, and wished her an early Happy Thanksgiving, all the time chocking from my thoughts. Lady from Chase called Thursday evening, had been calling me "sweetie" not" sweetie" any more but Mrs.**** asked if I had spoken to the lady in Montgomery I said yes, was inquiring about the papers that was suppose to have been sent...The lady said that she had asked the lady in Montgomery if she had explained to me about the reversal of checks, and she said she did, she LIED. The lady from Chase did not comment on my answer but went into explaining, called amenities, our papers went to Fla. took three months for them to go into the Chase system, and our bank had to pay for those three months and this is why are checks were reversed back to our bank She said to mail in a payment of $434.10 the next morning Express Mail. She said no late fees , nor reported to the Credit Bureau. I told her I felt we were in the hands of the Devil's Advocate. I mailed a Cashiers check, Express Mail. I am to wait five days and call Chase to see what our balance is, name, address, and the phone # and then the bank will handle it. We are AFRAID of what Chase could do to us before the deal is completed. I have names of Customer Service reps. some are only first names, and some with last names, all the supervisors, the statements, and letters. We want to be out from under Chase! .... If anything I want to help, maybe what I have will help others and for them to not have to go through the ordeals we and others have gone through. Hate to say this but I am having a hard time trusting, we are going to withdraw our checking account out of our bank. I do not trust them either!

Jump-cut, though not a big leap -- we try not to be self-serving, much less crassly commercial -- but if we didn't use this space to announce the availability of Inner City Press' new book, "Predatory Bender," it'd mean we didn't believe in the book, right? And we do. So click here for more information, including sample chapters. It is also available for direct credit card order here (this is the fastest way), through Amazon.com, Powells.com, Barnes and Noble.com, etc.. Freedom of the press...

Update of November 3, 2003: From the New York Banking Department, at least a Freedom of Information response. Against Chase Manhattan Mortgage Corp., from October 1, 2000 to June 25, 2003, over 500 consumer complaints were filed. A small sampling:

6/25/03 Mortgages - Privacy Issues - Valid - 03 M 1573

6/19/03 Mortgages - Escrow account, non-payment of taxes from - Valid - 03 M 1533

6/16/03 Mortgages - Release of satisfaction - Valid - 03 M 1502

6/13/03 Mortgages - Release of satisfaction - Valid - 03 M 1491

6/12/03 Mortgages - Release of satisfaction - Valid - 03 M 1485

6/09/03 Mortgages - Payment not posted to account - Valid - 03 M 1453

Other complaints acknowledged as "valid," even by the New York Banking Department, were for "Foreclosure" (Valid, o3 M 236); "Loan Terms Changed" (Valid, 03 M 133); "Closing Delays" (Valid, 03 M 676); "Foreclosure" (Valid, 03 M 843); "Insurance Funds - Difference FDIC and Other" (Valid, 03 M 869); etc. And so what's up (and will be up) with Morgan Chase's applications to the OTS, FDIC and Delaware to convert to a federal savings bank and evade all state consumer protection laws and agencies?

The Federal Reserve's Bank One - Chase order was weak, for example claiming that, "in light of... the small size of the transaction relative to JPMCB's total deposits and assets," Morgan Chase's Enron-enabling is not inconsistent "with approval of the proposal." As to Enron, as least the Fed can claim to have done something, outside of the applications context. But on Chase's standardless loans in the Poconos, the Fed says that due to "the number of loans involved" and "confidential supervisory information," that requires no Fed action. Apparently once a bank is big enough -- say, over $800 billion in assets, as Morgan Chase and Citigroup are, and as Bank of America wants to be, every scandal looks small to the Fed. Sounds like "too big to fail" to us...

Update of October 27, 2003: Preemption and regulatory capitulation -- these are abstract concepts, but they impact on consumers and communities. Since late summer, when it stumbled on notice of Morgan Chase's application to the Office of Thrift Supervision to open a savings bank and make over 300 offices of Chase Manhattan Mortgage Corp. into federal thrift branches, exempt from state consumer laws, ICP has been opposing the proposal. Two weeks ago, ICP noted that OTS Director Gilleran had pointed, as evidence of the OTS' continuing viability, to Chase's application; ICP wrote, and the American Banker published, a letter to the editor questioning whether the OTS Director was improperly prejudging a pending, protested application.

Well, it's actually worse than that. An October 22 American Banker article about another institution trying to shift to the OTS quoted "Kevin Petrasic, an OTS spokesman" that the OTS "had been talking with Hudson City Bancorp about making the switch for some time and had factored the assessment revenue it would likely generate into the agency's budget for the second half of next year. The conversion to a federal charter would immediately make Hudson City the 10th-largest thrift regulated by the OTS." (Emphasis added).

This means that the OTS starts counting "assessment revenue" with regards to institutions which apply for thrift charters even before they apply, while the comment periods are open, and while protests and hearing requests are pending. Beyond the obvious (and inappropriate) prejudgment at issue here, it is plain sad that Congress has left thrift regulation in the hands of an agency so hard-up for money it must engage in accounting tricks like counting projected future income or "assessment revenue." This is no way to regulate savings banks, much less to protect consumers. Inner City Press has now filed a Freedom of Information Act request with the OTS, for all record showing any consideration of the proposed Chase FSB (or other institutions) in future OTS budgets, in the "second half of next year" or before or after. Even pending the response -- which ICP has asked for on an expedited basis -- this make it even more clear that the OTS should hold public hearings on Chase's stealth applications, at a minimum to clear the air... Also last week, we received a copy of the OCC's letter to JPMorgan Chase, stating the applications for the Morgan Chase - Bank One corporate trust proposal were "removed from expedited processing to allow for sufficient time to review CRA-related public comments received for this filing. Please do not proceed with your proposal until you have been notified by the [OCC] that the application has been decided."

Update of October 20, 2003: JPMorgan Chase's October 15 submission to the Federal Reserve, purporting to respond to ICP's September 29 comments, argues among other things that the Fed should ignore evidence of the (at least) 50 complaints CMMC customers made to the Georgia Department of Banking and Finance in less than two years, and that the Fed should reject ICP's position that "the higher number of complaints for this period than for CMMC's competitors militates for a public hearing." Morgan Chase alludes vaguely to "the relative size of the servicing portfolios of those institutions" -- but CMMC was being compared to a similarly-sized (or larger) lender and servicer.

Last week, ICP received a response from North Carolina Commissioner of Banks, stating that while CMMC "has claimed the status of 'exempt person' under the Act... such a person remains subject to the prohibition against engaging in the activities listed in N.C. Gen. Stat. §53-243.11. Between September 18, 2001 and September 18, 2003, the Commissioner received 26 consumer complaints against CMMC and two against its affiliate...".

ICP also received a response last week form the Michigan Office of Financial and Insurance Services (OFIS), reporting against CMMC in Michigan 16 complaints in 2002, and 25 complaints in 2003. Among the summaries:

-Company overpaid property taxes & forced placed insurance consumer already had

-Payments not properly credited, foreclosure

-Company forced placed insurance & disputing escrow account balance

-Consumer alleges company misrepresented interest rate

-Alleges harassing phone calls, disputes loan's high interest rate and large monthly payment

In Michigan, as in Georgia, substantially more complaints have been filed against Chase Manhattan Mortgage Corp. than its peers. For now, the Texas Attorney General's Office has mailed ICP a sampling of complaints against Chase; an enumeration of complaints, against Chase and peers, remains pending. But from the sample complaints:

a consumer in San Antonio began complaining to Chase Manhattan Mortgage Corp. in 2002 about a derogatory report Chase had put on the consumers' credit report, without justifications. After numerous letters from Chase stating that nothing could be done (but containing the phrase, "I apologize that we did not meet your expectation"), six months after first complaining to Chase, the consumer wrote to the Texas AG's office, cc-ing Chase. Very quickly, Chase "sent an electronic notification to all major credit reporting agencies... requesting that they remove all references to a Chase Manhattan mortgage loan from your credit report." Again the stock phrase, "I apologize that we did not meet your expectations." But here's an expectation: that clearly meritorious complaints shouldn't take nearly a year to resolve...

Also, a sample complaint regarding a loan that CMMC bought, from Community Home Loan of San Antonio: "The first statement we received from Chase Manhattan filed to reflect a payment we had made to Community Home Loan... This check had cleared our bank on Dec. 20, 2002... We have made repeated attempts to get Chase Manhattan to credit our account with this payment but [CMMC] has not complied with our request... I suspect that this is more than a simple oversight and that my case is an example of an ongoing and widespread scam conducted by Chase Manhattan."

In Texas, it's worth noting that in the Dallas MSA in 2002, CMMC denied conventional home purchase loan applications from African Americans 2.4 times more frequently than those from whites.

In North Carolina, in the Raleigh-Durham MSA in 2002, for conventional home purchase loans, CMMC's denial rate disparity between African Americans and whites was 4.72; between Latinos and whites it was 7.09.

And (for now) in Michigan, in the Detroit MSA in 2002 CMMC denied the refinance applications of African Americans 2.58 times more frequently than whites; in the Benton Harbor MSA, CMMC denied the refinance applications of African Americans 2.36 times more frequently than whites.

ICP has filed these comments with various regulators. If the past is any guide, it will take Morgan Chase three weeks to respond, if they ever do...

Update of October 13, 2003: This week we focus on JPMorgan Chase's pending applications to acquire Bank One's corporate trust business. While Morgan Chase is claiming that it will take off this Bank One business by the end of October (see, for example, the American Banker newspaper of September 30, 2003), the deal has not yet been approved. In fact, on October 6 Morgan Chase purported to significantly alter the deal and its structure. ICP has commented to the Fed and OCC that such a modification triggers a need for new public notice, and a new comment period. ICP has also put before these agencies (and three others consider Chase's preemption proposal, including to OTS) samples of complaints against Chase that have been flowing in:

"She bought a new house... Within the first month, the mortgage was to Chase. They immediately increased her payment, due to an escrow shortage..."

"Her husband died... For the past two months she has attempted unsuccessfully to pet a pay-off statement from Chase Manhattan Mortgage Corp. on a mortgage for her house in San Antonio. The loan has a life insurance policy and will be paid in full upon receipt of certain documents, including a payoff statement... The only number that they give to contact someone is a general customer service number (800-848-9136), it takes about 30 minutes to get through to someone to put her through to other numbers for help and then there is no answer or the number is busy."

"He has a mortgage loan with Chase Manhattan and he has credit life insurance. When he turned 60, three months ago," etc..

"Consumer states that his loan was not credited appropriately and now ha has a lot of late fees. States that this is not fair. He has been overcharged for the last time when it is their error" [Chase Automotive Finance]

"He received a call from an employee of Chase Automotive Finance tell[ing] him he was overdue on a loan... he asked someone named Cynthia for a copy of the history of the payments for the lease, she got rude and told him he was changing the story about his payment history. He says his credit is impeccable. He just wants proof the bill is due. He did not appreciate in the manner he has been treated during this whole ordeal."

There are also a number of adverse managerial issues concerning Chase which have arisen: J.P. Morgan settles SEC IPO probe for $25 million (Oct. 1); ING sues J.P. Morgan, Deloitte in "Ponzi" case (Sept. 22):

The case comes one month after a former executive of Dublin, Ohio-based National Century pleaded guilty to securities-fraud charges involving the scheme, which cost investors more than $1 billion. The company's collapse also helped drive hundreds of health-care providers into bankruptcy. Federal authorities have said National Century, once one of the nation's largest health-care financing companies, bilked investors by moving hundreds of millions of dollars among subsidiaries to hide account deficits. The company filed for bankruptcy last November, shortly after federal and Ohio state law enforcement agents searched its offices, seizing computer files and documents. They said the company hid massive shortfalls by providing false offering documents, monthly reports and accounting records. Federal authorities have said National Century took these steps to mislead investors, trustees and auditors.

In fact, Morgan Chase and its senior executives have a greater role in National Century than as trustee. The Columbus Dispatch of May 30, 2003, "Founders Try to Gain Control of Dublin, Ohio-Based Health-Care Financing Firm," reported on those who "question the motives of Poulsen and Ayers, who both resigned from the National Century board in November as the Dublin-based health-care-financing company was collapsing. 'It's like letting the foxes back in the henhouse,' said one attorney involved in the case who asked not to be identified... Lance and Barbara Poulsen and Ayers resumed their previous roles as directors, along with two existing directors, Hal Pote and Thomas Mendell. Pote and Mendell are executives with J.P. Morgan Chase, a banking company that served as trustee for one of National Century's bond funds. Pote, Mendell and J.P. Morgan have been named in several lawsuits involving National Century." Emphasis added.

ICP continues to directly receive troubling complaints about Chase's practices, relevant to these Chase applications. Here's are sample complaints [omitted in this format]. ICP is asking the agencies to take action on Chase's inappropriate gun-jumping on this contested proposal. The American Banker of September 30, 2003, quotes JMPC's Michael K. Clark that "J.P. Morgan Chase would begin transferring major trades and transactions from Bank One customers to its own system on Nov. 1... In the meantime, bankers in the group are busy talking to clients about the changes, he said." This is inappropriate: the applications have not been approved (and, under the Bank Merger Act, would have at least a 15 day waiting period). Chase's gun-jumping is made worse by the fact that it is also trying to change the proposal. On October 8, Morgan Chase's outside counsel faxed ICP a copy of Morgan Chase's October 6 letter to the FRBNY, which purports to change Chase's application, without the required new public notice and new comment period. Morgan Chase's letter stated that "upon further review of the CTS business, JPMorgan Chase had determined that it would be more appropriate, as a business matter, for JPMCB, instead of JPMTC, to acquire certain of the CTS' lines of business, specifically, that portion of CTS conducted in the United Kingdom, the structured finance business, and that portion of CTS that involves Housing and Urban Development sponsored issues." ICP formally contends that these proposed modifications of the applications require new public notice, and a new comment period.

Update of October 6, 2003: at Morgan Chase, along week, another fine for fraud -- this time, $25 million for IPO scams. Meanwhile, on the stealth preemption proposal we're opposing, the OTS' director last week proclaimed his agency's ongoing relevancy by pointing to Chase's application to charter a thrift. Certainly shows objectivity and dispassion, and that the agency head's mind is not made up. [And see, "OTS' Embrace of Chase Illustrates Regulatory Laxity," American Banker, October 10, 2003, Pg. 18 - beyond what's said there, the OTS claiming that the comment period could close while the list of CMMC offices proposed to become thrift branches was incomplete and inaccurate, and ignoring its own hearing / meeting regulations, are what we're complaining of.] Until next time, for or with more information, contact us.

Update of September 29, 2003: On September 22 through 25, Chase submitted "responses" to ICP's comments to various regulatory agencies. The responses were primarily legalistic, arguing for example that ICP was supposed to somehow comment on the proposal before receiving and reviewing the timely-requested copy of the application, and that ICP has allegedly not complied with regulations in the hearing request it made within 24 hours of receiving the application. Regarding its subprime lending, Chase remains evasive, for example chiding ICP for naming the wrong Chase subprime auto lender, without explaining the auto lending, including subprime, that it is proposing to put into a new federal savings bank, to preempt the anti-predatory lending and consumer protection laws of at least 32 states. On that front, ICP wrote to numerous states' regulators and attorneys general, and responses have started trickling in. A sampling:

The State of Washington Department of Financial Institutions' legal counsel, Joe Vincent, explains his understanding that Chase Manhattan Mortgage Corp. (CMMC) is a subsidiary of Chase Manhattan Bank USA N.A. (actually, it isn't) -- and then says, "I wish to express on behalf of our Director, Helen Howell, appreciation for your concerns... It is not, however, within the purview of the DFI to speculate on or officially comment on the application of CMMC to become a federal savings bank, a matter solely within the jurisdiction of the OTS and FDIC." We disagree -- state officials can and should officially comment, when the consumer protection laws they administer are being preempted -- but appreciate the detail of the response.

The Georgia Department of Banking and Finance lists a volume of complaints against CMMC significantly higher than for its peers. The Kansas Bank Commissioner's Office offers to tell us the number of complaints, while withholding the specifics. We've pointed out that the Kansas Insurance Department gave us detailed complaint information, regarding Household / HSBC; we'll see. An ongoing problem in search of a solution: the Pennsylvania Department of Banking, relying on an archaic statute that restricts requests under the PA Right to Know Law to state residents, refused to provide any information. This is a legal nut (and we mean nuts, crazy, insanely unaccountable) that we aim to crack, and soon.

So far neither Chase nor the OTS have explained how it's legitimate that the list of CMMC offices that would, through this proposal, escape state law was incomplete and inaccurate throughout the initial comment period. The OTS has now unilaterally extended its time to respond to ICP's FOIA request; the comment period, then, must be similarly extended. We've requested a nationwide public hearing, by video conference (as was granted in WaMu-Dime and Citi-Golden State). Chase's written responses are dry, evasive and non-substantive: out of the mainstream, frankly, when compared to Chase's peers.

We've commented both against Chase's applications to charter and insure a new (preempting) savings bank, and its proposal to acquire corporate trust business from Bank One. For the latter, Bank One proposes to charter three new banks -- which would require Federal Reserve approval. So we commented there too, and were told by the Federal Reserve Bank of Chicago that "[a]t this time, no formal proposal for the aforementioned transaction has been received by the Federal Reserve System." That turns out not to be true: ICP has since received from Chase a copy of a "Response by Bank One Corporation to the Allegations Raised by the Inner City Press," which makes reference to a "Letter, dated September 8, 2003, from Richard K. Kim to Mr. Philip G. Jackson, Federal Reserve Bank of Chicago," which asked "that Bank One not be required to submit an application under the [BHC Act] for approval to form the interim banks." So we've opposed that as well. Meanwhile, complaints against Chase continue to roll in, and will be reported in this space going forward.

Update of September 22, 2003: On September 18, ICP/Fair Finance Watch wrote to dozens of state attorneys general and banking regulators, most of whom have spoken against preemption, and asked them for all documents about, and to take action on, Chase Manhattan Mortgage Corporation. Meanwhile, ICP noticed that Chase's list of CMMC offices that would become branches of Chase FSB was incomplete. ICP asked the Office of Thrift Supervision about this, by telephone, e-mail, then in writing, submitting (late on September 19) the following supplemental comment:

...ICP requested a copy of this application on August 24, received its copy on September 8 and submitted a comment that day. On September 11, having had three days to review Chase application, ICP noticed and asked OTS FOIA staff about an inaccuracy in the application, one the goes directly to the preemption of anti-predatory lending laws which ICP has raised.

Specifically, Exhibit 2 to Chase's Application to the OTS, purporting to be a complete list of the Chase Manhattan Mortgage Corp. ("CMMC") offices which would, under the proposal, become branches of a Chase FSB, was incomplete. As filed with the OTS by Chase, and as received by ICP on September 8, the top listing on the first page of Exhibit 2 was 1875 Century Park East, Los Angeles. Since the list is alphabetical, this would imply that no offices in any state beginning with "A," and none in California communities beginning with any letter before "L," are proposed to become branches of Chase FSB, exempt from state consumer protection laws.

ICP telephoned and then e-mailed OTS FOIA staff about this on September 11, asking if a first page of Exhibit 2 was omitted. Four days later on September 15, the OTS faxed ICP with a new list -- new in the sense that the CMMC office at 1875 Century Park East, Los Angeles is not at the top of any page -- rather, it's the third branch down on the second page. ICP infers that Chase filed with the OTS an inaccurate Exhibit 2, and that after ICP inquired, a new -- at a minimum, newly formatted -- list was submitted, including 29 CMMC offices that were not mentioned in what Chase first filed (and what was of public record throughout the OTS' comment period). ICP asked OTS FOIA and OTS-NE staff members about this in a September 11 e-mail, to which it has not received a response. That the incomplete list that ICP received on September 8 was due to Chase's inaccurate submission is reflected by a copy of the Application ICP has now received from the FDIC, still velobound, with the same problem with Exhibit 2.

Among the CMMC offices omitted from the application as Chase filed it are multiple offices in AR, AZ and CA. In Little Rock, Arkansas (where Chase's application omitted its office at 11300 North Rodney Parhan Road), CMMC in 2002, for conventional home purchase loans, denied loan applications from African Americans 3.06 times more frequently than applications from whites.

In Tucson, Arizona (where Chase's application omitted its office at 5151 East Broadway Boulevard), CMMC in 2002, for conventional home purchase loans, denied loan applications from Latinos 3.64 times more frequently than applications from whites.

And (for now), in the San Francisco MSA (where Chase's application omitted its office at 2001 Junipero Serra Boulevard, Daly City -- close to home, so to speak, for the OTS and the Western Regional Office) CMMC in 2002, for conventional home purchase loans, denied loan applications from African Americans 4.48 times more frequently than applications from whites. If Chase's defense for this high denial rate disparity is the low level of its lending to African Americans, that raises other issues -- note also for refinance loans (at a greater volume), CMMC denied loan applications from African Americans 3.06 times more frequently than applications from whites. Chase's disparities are systemic.

Given the significant policy issues raised by the proposed exemption from state law of CMMC lending, including subprime lending, offices, the omission of 29 offices from what was available to the public militates for new public notice, and for an extension / re-beginning of the comment period from the date at which the actual list of offices proposed for preemption is made fully available to the public.

...We reiterate, including in light of the significant incompleteness and/or inaccuracy of the application which Chase filed, our request that the OTS' comment period be formally extended, that ICP's hearing request be deemed timely and that the requested informal or formal meeting be scheduled forthwith. The meeting should be nationwide, by video-conference (as was done on Citi-Golden State, and WaMu-Dime before that)...

Morgan Chase has yet to submit any response to the issues raised in ICP's September 8-9 submission; when Morgan Chase does, ICP will reply. For now, we supplement our initial presentation of Chase's subprime (and we contend, for example in the Poconos case, predatory) lending by raising that Chase Manhattan Bank USA, N.A., lending of which would be put in the proposed Chase FSB, has been classified as a subprime lender by HUD. [We are informed that Chase has objected to HUD's classification of Chase Manhattan Bank USA, N.A. as a subprime lender: see ICP's first comment on the topic of Chase's lack of transparency (and vituperative defensiveness) about its subprime lending.] We further note, on the Poconos issues, the Chicago Tribune of September 14, 2003, following up on the Poconos "scandal [which] has also produced a federal class-action suit... [Chase] is also a defendant in the racketeering suit;" it has been reported that the Monroe County District Attorney's office plans to file criminal charges this coming week against as-yet unspecified defendants, in connection with the same scandal. As relates to applicable banking law, Chase's standards, of appraisal and whom it does (subprime) business with, are entirely called into question, militating for the evidentiary hearing ICP has timely requested.

In the day following ICP's submission to state AGs and bank regulators, responses were received from regulators in Arizona and California. As these build up, we'll report the substance (or absence) of the various states' responses.

Update of September 15, 2003: last week, Inner City Press /Fair Finance Watch learned that J.P. Morgan Chase is attempting to place its nationwide consumer lending, which includes a top-ten subprime lending operation, into a new federal savings bank, in order to preempt (and evade) all state anti-predatory lending laws. So, on September 9, ICP commented to the OTS (a staffer of which has confirmed that ICP's comments will be considered, and that Chase has been asked to respond to them), and re-requested the complete list of the offices of Chase Manhattan Mortgage Corporation (CMMC) which, under the proposal, would become branches of a federal savings bank, not subject to state or local laws. On September 15, ICP received the (apparently revised) list. The offices are in 32 states, as follows:

Alabama 1; Arkansas 3; Arizona 9; California 54; Colorado 10; Delaware 3; Florida 34; Georgia 12; Illinois 18; Indiana 5; Kansas 3; Louisiana 11; Massachusetts 8; Maryland 11; Michigan 11; Minnesota 6; Missouri 8; North Carolina 11; New Hampshire 2; Nevada 2; Ohio 9; Oklahoma 4; Oregon 12; Pennsylvania 7; Rhode Island 1; South Carolina 3; Tennessee 3; Texas 14; Utah 2; Virginia 12; Washington 10; Wisconsin 3

September 9, 2003

Chase has applied to the Office of Thrift Supervision to fold all of its consumer business into a federal savings bank, which would preempt all state consumer protection and anti-predatory lending laws. ICP comments analyze Chase's 2002 mortgage lending data and point to Chase's questionable lending that has been characterized as predatory and fraudulent. A summary of some of the points in the protest follows.

The 2002 Home Mortgage Disclosure Act (HMDA) data reported by Chase Manhattan Mortgage Corp. (CMMC), 300 offices of which Chase would fold into the propose Chase FSB, show that Chase disproportionately excludes African Americans and Latinos from its lending. In 2002 in the Washington DC Metropolitan Statistical Area (MSA), for conventional home purchase loans, Chase's CMMC denied loan applications from African Americans 4.94 times more frequently than applications from whites, and denied Latinos 2.51 times more frequently than whites. This is worse than other lenders in this MSA: the denial rate disparities for the industry as a whole in 2002 were 3.04 for African Americans, and 2.38 for Latinos.

Chase's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos. In 2002 in this MSA, CMMC made 1475 conventional home purchase loans to whites, only 127 to African Americans, and only 79 to Latinos. For the record, the aggregate industry in this MSA in 2002 made 11,902 such loans to African Americans, 6894 to Latinos, and 64,826 to whites. For these three groups, the aggregate made 14.2% of its loans to African Americans, and 8.2% to Latinos. For CMMC, the figures were much lower: 7.6% of loans to African Americans, and 4.7% to Latinos.

In the Raleigh-Durham NC MSA in 2002 for conventional home purchase loans, CMMC denied loan applications from African Americans 4.93 times more frequently than applications from whites, and denied Latinos 7.40 times more frequently than whites. This is much worse than other lenders in this MSA: the comparable denial rate disparities for the industry as a whole in 2002 were 3.41 for African Americans, and 3.28 for Latinos. Exclusion is again part-and-parcel with Chase's notably higher denial rate disparities between whites, African Americans and Latinos: among these three groups, only 3.1% of CMMC's conventional home purchase loans in this MSA in 2002 were to African Americans (versus 11.2% for the aggregate); only 0.5% of CMMC's loans were to Latinos (versus 2.4% for the aggregate).

In the Boston MSA in 2002 for conventional home purchase loans, CMMC denied loan applications from African Americans 8.89 times more frequently than applications from whites, and denied Latinos 6.38 times more frequently than whites. Chase high denial rate disparities for African Americans are pervasive, coast-to-coast: in 2002 in the San Francisco MSA, CMMC denied the conventional home purchase loan applications from African Americans 4.48 times more frequently than applications from whites; in St. Louis, 3.62 times higher; in Richmond VA, 4.65 times higher; in Memphis, 4.19 times higher. These disparities are systemic. They are also directly relevant to this Chase application to place its nationwide lending business into the proposed Chase FSB.

The National Mortgage News of March 11, 2002, listed Chase, through its Chase Home Finance unit, as a top-ten subprime mortgage lender in the United States. Chase does not separately report HMDA data for its subprime lending unit(s), so it is far from transparent in this way. But, as simply one example -- one widely described as predatory and even fraudulent -- consider Chase's lending outside its CRA assessment areas, in the Poconos region of Pennsylvania. Consumer Reports of November 2002 reports that:

"Starting in the mid-1990s, TV advertisements in New York City asking "Why Rent?" touted several large housing subdivisions in the Pocono Mountains of Pennsylvania... Chase Manhattan Mortgage Corporation acquired many of the mortgages. When homeowners like Hugh Robinson tried to sell or refinance their properties a few years later, they received some unwelcome news. Their houses were worth only 55 percent to 65 percent of what they paid, according to a complaint some homeowners filed. Others, unable to keep up with payments, were foreclosed."

More specifically, on this nexus of foreclosures and Chase's lack of standards in choosing its partners, resulting in the enabling of predatory lending, the Daily News of July 6, 2001, reported that

"While the county's overall population jumped by 44% since 1990, home foreclosures skyrocketed to 569 in 1999 from 120 in 1990 - a 374% jump. Public meetings in early June drew more than 600 irate homeowners, all claiming they'd been ripped off by a handful of local developers working in collusion with appraisers and mortgage companies. Last week, a group of residents filed a federal civil racketeering suit against the nation's biggest mortgage lender, the Chase Manhattan Mortgage Corp.... 'We vigorously deny the allegations put forth in this complaint,' said JPMorgan Chase Vice President Charlotte Gilbert-Biro."

One might expect Chase to respond that, following its spokeswoman's "vigorous[] den[ial]," it subsequently "agreed to reduce the amount owed on hundreds of residential mortgages in the Poconos, acknowledging that some of its loans were approved on homes sold at inflated prices. Chase Manhattan Mortgage Corp. sent a letter to nearly 300 homeowners this week offering to reduce the mortgages to reflect the current estimated market value of the property. Homebuyers could see their mortgages reduced by as much as $50,000. The offer comes as state and federal authorities investigate allegations of real-estate fraud in the Poconos." (See, Bergen (N.J.) Record, April 6, 2002, "Mortgages Cut for Bilked Buyers"). But that did not resolve the question of Chase's lack of standards, particularly but not only outside of its current CRA assessment areas, leading to predatory lending and foreclosures and the threat of foreclosure. Note that the National Mortgage News of July 30, 2001, reported that "Chase Manhattan Mortgage Corp. has been named as a defendant in two separate class-action complaints alleging mortgage fraud - one in the Pocono Mountains area of Pennsylvania and the other in Suffolk County of New York" -- that is, these issues go beyond the Poconos: they are nationwide.

Chase's lending includes, for two years now, the subprime lending operations previously owned by Advanta. On February 6, 2003, Fitch on Business Wire stated that Advanta Mortgage Corp.'s subprime operation was acquired by JP Morgan Chase... The loans in the Advanta Mortgage Loan Trust transactions are currently serviced by Chase Manhattan Mortgage Corp.". Also for the record, Chase's subprime lending (which it proposes to fold into a thrift, preempting state consumer protection laws) is not limited to mortgages. See, e.g., Automotive News of June 23, 2003, Fitch Ratings Downgrades Mitsubishi Credit's Debt, reporting that "Mitsubishi has tightened its consumer lending standards and enlisted Systems & Servicing Technologies, a subsidiary of J.P. Morgan Chase, to oversee approximately 85,000 outstanding subprime loans." Chase has been growing this subprime auto loan business: for example, the Assets Securitization Report of March 24, 2003, reported that "[t]he servicing rights of bankrupt Union Acceptance Corp. may officially be transferred to System & Servicer Technologies (SST), a unit of J.P. Morgan Chase, during a bankruptcy hearing scheduled for Tuesday, March 25. Although the transfer has gone through numerous postponements, if finalized, it is scheduled to close April 1, according to court records." These businesses would be folded into the proposed Chase FSB -- this application merits full (and strict) scrutiny, including the hearings ICP is requesting.

Chase's application to the OTS states that over 300 lending offices would become branches of Chase FSB. On preemption of state laws, Chase casually states that "the federal savings bank charter also will enable Chase FSB to operate under a uniform Federal system of regulation." Substantial controversy has surrounded the OTS' recent rulings to preempt anti-predatory lending laws. See, e.g., "Second OTS Preemption: Predator Law in N.Y.," American Banker, January 31, 2003.

Perhaps the best way to demonstrate what this Chase application is about (and/or what its effect would be), and why hearings should be held, is to point out that after Georgia passed an anti-predatory lending law, Chase stated that its nationwide mortgage company would curtail lending in Georgia. See, e.g., National Mortgage News of October 7, 2002, quoting from a Chase press release that "This legislation, though well intended, presents very serious issues. It goes far beyond attacking predatory practices which is a goal we share. Instead it puts institutions meeting important credit needs in Georgia in responsible ways at very serious risk." Later, the OTS ruled that federal thrifts are not subject to anti-predatory lending provisions of Georgia's (and other states') laws.

Then last month Chase quietly applied to a savings bank charter -- when, in late August, ICP stumbled on a notice of the application, there was no way to know what the application was for. ICP requested a copy, which, two weeks later, was provided. Then and only then -- September 8 -- did ICP learn that Chase proposes to fold over 300 lending offices, whose offerings include subprime loans, into a federal thrift and preempt all state consumer protection laws. ICP immediately prepared and submitted this comment and hearing request. The hearing request should be granted; the comment period should be further extended and more meaningful notice should be provided to the public given the issues raised by this (stealth) proposal.

ICP's comment to the OTS states, on procedural matters: we requested a copy of this application 14 days ago. On the tenth day after our request, we received from Chase a copy of a letter opposing our request for an extension of the comment period. Chase sent its letter to us via Federal Express -- for some reason without enclosing even the portions of its application for which confidential treatment is not being sought. Late on Friday, September 5, we received by fax a letter from OTS FOIA officer Martin Jefferson Davis: the letter stated that portions of the application were being sent, Not until September 8 did ICP know what Chase's application (that is, what the proposed Chase FSB) is for. While ICP is continuing to review the over-500 pages of Chase's application which it only received on September 8, the application appears to address very little, if at all, Chase's subprime lending. Reference appears to be made to Chase's CRA ratings -- but these do not cover the "nationwide lending," outside of the Tri-state area, which Chase now proposes to fold into Chase FSB.

Beyond mortgage lending disparities, lack of standards and predatory lending, J.P. Morgan Chase has been embroiled in corporate scandals for at least the past two years -- issues that should be considered, under the statute, in connection with this application by Chase to become a thrift holding company. While Chase settled certain governmental charges with respect to its activities with Enron, for example, significant litigation continues to swirl around Chase. For the record, the American Banker of September 2, 2003, reported that "In addition to paying a bigger fine ($135 million) than Citi did, J.P. Morgan Chase alone was stuck with an injunction that could trigger a criminal prosecution if it engages in Enron-type transactions with any company in the future. And it still faces significant civil exposure, up to $1 billion by its own estimate." The Daily Deal of August 4, 2003, recounts that " The bank holding the bag is J.P. Morgan, which made itself look defensive. Morgan played up the "no admission" boilerplate, which most sentient beings view as an admission of guilt. More damning was the memory of an op-ed penned by chairman William Harrison for the Wall Street Journal at the height of the controversy. Harrison argued that not only did J.P. Morgan do nothing wrong, but that it had no responsibility to know what its clients were up to. That seemed unrealistic then and completely absurd in a post-Sarbanes-Oxley now. " Emphasis added.

Chase's CEO's argument that due diligence is not required is troubling -- and is not unrelated to, for example, Chase's involvement in predatory lending / fraud in the Poconos, issues relevant to these Chase applications, which ICP is opposing and on which it is requesting public hearings. This will be updated. Until next time, for or with more information, contact us.

* * *

Background: J.P. Morgan + Chase

For or with more information, contact us. For ICP JP Morgan Chase Watch Archives, click here.

Here's just a few of the greatest (or funniest) hits, as examples of what you'll find in Archives

Update of August 18, 2003: after a brief hiatus caused by Orwellian anti-whistleblowing efforts within Morgan Chase, our favorite inside-the-Beast correspondent is back. Other than to note the August 11 announcement of Morgan Chase's proposal to acquire Pinnacle Foods, maker of Vlasic pickles and Swanson frozen dinners among others, for $485 million, we devote this week's Report to the following:

Subj: I am a mole and I live in a hole....or should I say cesspit?
Date: 8/13/03 12:59:46 PM Eastern Daylight Time
From: [Our favorite correspondent]
To: MorganChaseWatch [at] innercitypress.org

I have decided to surface my little velveteen snout again.

Remember I mentioned that JPM seemed to be recruiting again? Sure enough, I now hear that they have been filling quite a number of junior (supporting) research analyst positions recently. These were the positions, if you remember, which were not considered necessary in October 2002, and which were going to be replaced by the Mumbai Sweat Shop.

The workload never went away, of course, and the sackings were a little premature: the Sweat Shop has yet to get going, despite the virtually full-time focus of demoted ex-director of research Peter Houghton and two deputy director sidekicks. ( On reflection, perhaps I mean "because of" rather than "despite". ) Therefore, on top of the previous redundancy settlements it is necessary to give some more of shareholders' money to recruitment consultants to recruit the people to do the work that never went away. Just like I analyzed for you a couple of weeks back. If JPM research analysts had any understanding of financial statements, they would know that accounting manipulation of the timing of higher expenditure doesn't make any difference to the ultimate increase in cost....alas, very few of them have any financial qualifications so they don't usually pick up on that very simple concept.

One word of caution for the junior analysts being offered positions at JPM: let's hope Mumbai never does get going, because you're a disposable stopgap. Still, at least you can spend three or four months ringing clients up and telling them that you love them before you become "redundant". Won't that be fun?

Let the fun continue! With TV dinners and pickles and an entirely unworkable business strategy and plummeting employee moral -- forward!

Update of July 21, 2003: Below, our favorite correspondent's analysis of Morgan Chase's earnings announcement / spin. But we'd be remiss not to note Wild Bill Harrison, adopting the Office of the Chairman approach. This he explained thusly on the July 16 conference call: "I wanted to reflect the significant jobs that David Coulter and Don Layton have. They're running most of the businesses in the firm. I also wanted to sharpen some of the business discipline in terms of financials and review." On the question of mergers, here was his double-speak: "We think we have a broad-based position globally in terms of leadership.. Our primary focus is on recognizing and maximizing the potential of the firm." Here now an insider's view [of which we invite more]:

I note that there has been much trumpeting from JPM about how second quarter revenues of over $1.8 bn were 78% up on Q2 2002 and in fact were more than the earnings for the whole of 2002. Whoop-de-doo.

Could it perhaps have anything to do with the "E" word? In the last quarter of 2002, JPM made a $1.2 billion provision against potential costs associated with Enron, the well-known energy trader for whom JPM acted as accomplice in defrauding so many retail and corporate investors. It also decided that since it was going to have a really shitty 2002 anyway, it might as well get all the profit hits cleared out of the way so that it could look as though it was doing less of a dire job in 2003. So it cut swathes through its staff, removing 40% of some departments, just so that all the bad news could be pushed into 2002. Not that they didn't try to minimize the cost hit as well - at least one business area had a policy of really screwing over its staff financially as well as morally, when it gave the downsized ones a zero bonus for 10 months' hard work - and a bland "so sue me" stare.

As for the Q2-on-Q2 comparison, the most instructive fact is that investment banking revenues were flat but profits were up more than 100%. Now, let me see, how did we achieve this? Maybe it was because there wasn't the enormous provision for redundancy costs this year that there was last year. (Oh, didn't I mention? They laid off a batch in Q2 2002 as well).

I keep seeing news articles about JPM hiring again. Now, just carry out this simple mental exercise.(a) Sack someone in October 2002. Pay them essentially for 4-12 months (depending on staff grade) to do nothing. Overwork the other staff. When you decide the markets are looking better, say nine months later, start rehiring. Pay the new staff a signing-on bonus or a guarantee. Pay six months' salary to the recruitment consultant. Total average cost per employee position between October 2002 and December 2003 - 16-24 months' salary plus any signing-on bonus or guarantee. (b) Don't sack them in October 2002. Total cost 15 months' salary. Q. Leaving aside which accounting period is hit with the costs, what is better for actual profitability? Answers on a postcard, please, to Bill Harrison....

From tabloid-land, there's this report of Chase-conflicted judicial rulings. Unreported (or unconnected) there is this judge's recent recusal from a case regarding NYC's anti-predatory lending ordinance. Now it makes sense (to some), given Morgan Chase's involvement in subprime, through Advanta and otherwise...

Update of June 2, 2003: a swirling rumor was fixed in virtual hot lead type by e-financial news of May 25: a "rumour, which seems to have started in New York, that JP Morgan Chase would make a bid for Banc One. Before you say: 'But isn't Banc One actually a better bank than JP Morgan Chase?', that had occurred to me as well, but let's not split hairs. The carrot for buying Banc One would be to secure the services of Jamie Dimon, its chief executive. The JP Morgan board has been looking for a replacement for Harrison for 18 months and Dimon fits the bill. What changes would the uncompromising, no-nonsense Dimon make? Even if you close your eyes lightly, don't you see rivers of blood? JP Morgan Chase employees have every reason to be apprehensive."

On this, our favorite Morgan Chase correspondent comments: "sort of ties in with your May 19th speculation [see below on this page]. They bought the Beacon group for $500m just to get hold of Boisi. Boisi left after an argument with Harrison - one hell of an expensive spat. Will they never learn? Wouldn't it be a lot cheaper just to hire a chief executive, for God's sake?" Good question...

On the subprime (servicing) front, the American Banker of May 27 reports Fairbanks' syndicated loan from a group led by J.P. Morgan Chase & Co. includes a provision that a drop in its servicer rating would trigger default. J.P. Morgan Chase has granted Fairbanks a 30-day waiver on the default event, Mr. Costello said, and he is "presuming something is being worked out between the two parties." Fairbanks is widely accused of predatory practices; Morgan Chase, given its lack of standards, is enacting and protecting Fairbanks...

Update of October 7, 2002 -- Morgan Chase and subprime: the American Banker of Oct. 1 reports that " Chase Manhattan Mortgage Corp. [has] decided not to make "high-cost" loans in [Georgia] because the law's penalties are severe... 'This legislation, though well intended, presents very serious issues,' said Chase spokeswoman Charlotte Gilbert-Biro. 'It goes far beyond attacking predatory practices, which is a goal we share. Instead it puts institutions meeting important credit needs in Georgia in responsible ways at very serious risk.'"

Update of September 8, 2003: The sleaze of Morgan Chase knows (virtually) no bounds. Last month, having stumbled on notice of a Chase application to the Office of Thrift Supervision, ICP requested from the OTS a copy of Chase's application, and that the comment period run until three days after ICP received its copy of the application. The OTS has yet to provide ICP with a copy of the application -- but it apparently gave Chase a copy of the request, because Chase last week wrote to the OTS, cc-ing ICP, opposing ICP's request for any extension of the comment period. Chase sent ICP the letter by Federal Express -- without enclosing any portion of its application. Screw the law, and screw the public, appear to be Chase's approach. Or was it, "Living, [something], Leading"? A squib: in handing the U.S. Open women's tennis trophy out on September 6, Wild Bill Harrison said, "Christine" instead of "Justine." Oops...

Squib of September 1, 2003: from Enron to Iraq (with last week's Trade Bank announcement), Morgan Chase is there! Until next time, for or with more information, contact us.

Update of August 25, 2003: from the department of You-Heard-It-Here-First (thanks to our favorite correspondent), the following is from the FT of August 20:

US investment banks are moving analysts' jobs to India as they review equity research departments in response to Wall Street scandals and the bear market. Banks including JP Morgan Chase.. say they are not replacing existing jobs but are shifting tasks normally done by junior analysts, such as number crunching and financial modeling, to allow senior analysts the opportunity to publish reports and interact with clients. JP Morgan Chase said: "Our objectives are to provide support for our existing sector teams, improve productivity, and continue to differentiate the quality of our research." It added that the outsourcing started in May.

Chase was also in the news for declaring a live man dead, then refusing to correct its error. The WSJ reported this last week -- but the Houston Chronicle had it before that, click here to view. As summarized on CNNfn, "a Houston, Texas, businessman has been trying to prove for two years that he's not dead even while his bank, J.P. Morgan Chase, kept saying he was... He was told in effect that it was his responsibility to get the problem fixed. But as hard as he tried, it still reappeared affecting his ability to get a home mortgage, auto loan, and other credit related actions... He finally had to resort to appearing before his J.P. Morgan Chase branch with a local television news crew and virtually shaming the bank manager into agreeing to solve the problem." How responsive...

Update of August 18, 2003: after a brief hiatus caused by Orwellian anti-whistleblowing efforts within Morgan Chase, our favorite correspondent is back. Other than to note the August 11 announcement of Morgan Chase's proposal to acquire Pinnacle Foods, maker of Vlasic pickles and Swanson frozen dinners among others, for $485 million, we devote this week's Report to the following:

Subj: I am a mole and I live in a hole....or should I say cesspit?
Date: 8/13/03 12:59:46 PM Eastern Daylight Time
From: [Our favorite correspondent]
To: MorganChaseWatch [at] innercitypress.org

I have decided to surface my little velveteen snout again.

Remember I mentioned that JPM seemed to be recruiting again? Sure enough, I now hear that they have been filling quite a number of junior (supporting) research analyst positions recently. These were the positions, if you remember, which were not considered necessary in October 2002, and which were going to be replaced by the Mumbai Sweat Shop.

The workload never went away, of course, and the sackings were a little premature: the Sweat Shop has yet to get going, despite the virtually full-time focus of demoted ex-director of research Peter Houghton and two deputy director sidekicks. ( On reflection, perhaps I mean "because of" rather than "despite". ) Therefore, on top of the previous redundancy settlements it is necessary to give some more of shareholders' money to

recruitment consultants to recruit the people to do the work that never went away. Just like I analyzed for you a couple of weeks back. If JPM research analysts had any understanding of financial statements, they would know that accounting manipulation of the timing of higher expenditure doesn't make any difference to the ultimate increase in cost....alas, very few of them have any financial qualifications so they don't usually pick up on that very simple concept.

One word of caution for the junior analysts being offered positions at JPM: let's hope Mumbai never does get going, because you're a disposable stopgap. Still, at least you can spend three or four months ringing clients up and telling them that you love them before you become "redundant". Won't that be fun?

Let the fun continue! With TV dinners and pickles and an entirely unworkable business strategy and plummeting employee moral -- forward!

Update of August 11, 2003: from the Daily Deal of August 4, re Chase's and Citigroup's surprisingly quiet settlement of (governmental) Enron charges: "The bank holding the bag is J.P. Morgan, which made itself look defensive. Morgan played up the "no admission" boilerplate, which most sentient beings view as an admission of guilt. More damning was the memory of an op-ed penned by chairman William Harrison for the Wall Street Journal at the height of the controversy. Harrison argued that not only did J.P. Morgan do nothing wrong, but that it had no responsibility to know what its clients were up to. That seemed unrealistic then and completely absurd" now. Yep...

Update of August 4, 2003: a new addition to Wild Bill Harrison's greatest hits, at last week's Enron (partial) settlement: "We still have various Enron-related civil suits pending, and we intend to pursue our rights and defenses in those cases vigorously." And those defenses would be? It's said that Morgan Chase general counsel McDavid antagonized regulators and prosecutors so much during their inquiry into the Enron matter(s) that he alone explains the size of Morgan Chase's fine...

Ah, it's summer -- and so, why not a banking-related Page Six-like blind item? This one has New York written all over it (its placement here should also be a clue) -- which recently-confirmed bank's Number Two has sewn oats cooing with a passed-over candidate for the Federal Reserve Board (hint! hint!) -- we'll stop right there.

Update of July 28, 2003: Revolving door hits a new high-level low: Morgan Chase last week proudly announced its hiring / capture of Andrew Crockett former General Manager of the Bank for International Settlements, saying he'll report to Wild Bill Harrison and Vice Chairman David Coulter. "Andrew's relationships within the international finance community and his experience in setting risk standards for the industry will be enormous assets for us," Coulter said-in-a-statement. Reuters opined that it's " to spearhead effort to snare more government banking clients." Question: since most government's have anti-revolving door rules, does the BIS?

Also last week, Morgan Chase announced a proposal to buy Bank One Corp.'s corporate trust unit for $720 million. It's described as Morgan Chase's largest proposed acquisition since the (ill-fated) merger in Dec. 2000. Under Wild Bill, this (corporate trust) is the only part of Morgan Chase that is growing. We will have more on this, by summer's end...

Update of July 14, 2003: our favorite Morgan Chase insider alerted us to this, from e-financial news: "Staff at JP Morgan Chase have been pouring out their hearts to clients and colleagues, and developing their skills in 'followership' at the request of Jimmy Lee, vice-chairman. The outpouring of love and hope was encouraged in a memo to staff outlining Lee's thoughts on leadership and - more importantly - followership, relating to the bank's second global leadership day. He asked staff to help someone out at work 'who is having a tough time figuring out their job, or their life, or both. They won't forget that you did that.'" Word is that Wild Bill Harrison was bombarded with offers to help him figure out his job, his life, both....

Update of July 7, 2003: Laughable fluff from the Financial News (Daily) of June 29, 2003: "At JP Morgan, the Leadership Morgan Chase programme is aimed at the top 2,000 managing directors. It was set up by Bill Harrison, chief executive, who takes two days every month to run it. JP Morgan says it is a 'values-driven' programme aimed at senior people, which is not just about profit and loss, but about partnership, communication, integrity and leading from the front. Tom Smith, New York-based managing director in charge of recruitment and development in investment banking in the US and Europe, the Middle East and Africa, says: 'When people discuss leadership issues with the chief executive, and hear about his own experiences, they undergo a transformation. We have modelled our programme on what Jack Welch did at GE and it really works.'" So that's what Morgan Chase is (over-) paying Jack Welch for.... Regarding the June 25 five kilometer run in Central Park, it's reported that Harrison came in a suit, and didn't run (despite "heavily encouraging" his underlings to both attend and run). Rat race...

Update of June 30, 2003: this week, a voice we know and love, and something new:

Subj:   JPM and their spin
Date:   6/25/03 6:35:58 AM Eastern Daylight Time
From:   [Our favorite inside-Morgan-Chase correspondent]
To: ChaseWatch [at] innercitypress.org

   Recently in JPM's Research department, there has been a reshuffle among the top management. The phrase "rearranging the deckchairs on the Titanic" sprang to mind when your correspondent heard this.

Peter Houghton, the existing head of EMEA Equity Research, has presided over a steady exodus of the bank's top-rated analysts. In the last four months, he has lost three out of the four remaining ranked analysts. (Funnily enough, we never hear mention these days of the phrase "top five in three years, top three in five years", first touted as an objective, oh, three years ago......)

Houghton has been shuffled sideways and downwards into a job as Global COO of Equity Research, a role which was already occupied by someone who (unusually for JPM) was doing the job really rather well already. The current incumbent is not leaving, however, but is now reporting into Houghton. They will be working on the "Mumbai cost optimisation initiative"(see previous articles)....but that job was already being done by one of the deputy directors of research, who doesn't have anything else to do since the last round of redundancies and so will still work on it as well.

Let's see now. Houghton laid off nearly 40% of his department in October last year, including people who were ranked in the top quintile of research analysts, on the grounds that the firm needed to make cost savings. Houghton himself has done an appallingly bad job and was mistrusted and roundly despised by his entire department even before the layoffs. Nevertheless, Nick O'Donohoe, the Global Head of Research, invited everyone to congratulate Houghton on his "promotion".

So we have two senior and highly-paid people doing a job that was previously done perfectly adequately by one; we have another senior and highly-paid person who really has nothing to do but work on Mumbai but now there are two other people working on it. I don't know why the word "redundancy" keeps popping into my head: after all, we all know that this concept does not apply to heritage JPM management.

Nick O'D tells us that Houghton and his sidekicks will be trying to identify cost efficiencies......hmmmm...is this a trick question?

Also from the mail bag:

Subj: Re: Chase Manhattan

Date: 6/24/03 12:53:06 PM Eastern Daylight Time

To: ChaseWatch [at] innercitypress.org

I read your article on the purchase of the Providian portfolio purchased by Chase. Would it surprise you to know that included in that portfolio were accounts that had been charged off, or were in current litigation? According to the Press release issued by Chase, they told their stockholders, shareholders and investors, who were a little worried about this purchase that they purchased no "bad debt". I beg to differ. They have my account which has been in litigation for about four and a half years. They have refused to give me any information, including my account number with them. They have refused to give me balance information or information concerning what they paid for the account. They are now stating, two and a half years later that they're going to resell the account to Providian. Interesting, as SEC information shows they transferred their interest in these accounts to a company called Card Acquisition Funding Services, LLD on 2/5/2002, the same day they received them. Have any comments on why this company won't give me any information regarding my account? An attorney in Texas states many people with bad debts with Providian only found out that Chase had them when they pulled their credit bureaus. Is Chase hiding something? Or did Providian pull a quick one on them?

Update of June 23, 2003: according to SNL Securities' report issued June 19, Wild Bill Harrison is the U.S.'s second highest-paid bank CEO by total compensation, at $11,455,414... On the subprime / predatory front, on June 17 Fairbanks, just after being further downgraded by Fitch, bragged in a statement that it "finalized with a lending group led by J.P. Morgan Chase a deal that offers financing for Fairbanks through Sept. 2004." Some great standards, that Morgan Chase has..

Update of June 16, 2003: Chase and the paper cups -- on June 9, J.P. Morgan Partners-controlled Tableware Holding International, a polystyrene cupmaker, announced it acquired Grupo Convermex from the company's founding family as it moves to "expand in the disposable tableware market. Convermex, based in Puebla, Mexico, makes cups and other containers for Mexican wholesale and retail customers in three plants located in Puebla, Monterrey and Guadalajara. It employs more than 1,000 people [for now]. Ol' J.P. Morgan Partners intoned that it plans to expand Convermex's "leadership position" in the disposable food container market, which it said has grown 9 percent over the last six years with more fast food shop penetration into Mexico...

Also last week, the Ohio Public Employees Retirement System (OPERS) announced that Morgan Chase will no longer manage $269 million in international stocks for the pension fund. "The currently watchlisted J.P. Morgan EAFE Core portfolio was terminated on May 20th because of weak performance," said Chris Federer, spokesman for OPERS, which invests roughly $50 billion and ranks as America's 10th largest pension fund. In December, Massachusetts' pension fund said J.P. Morgan Fleming would no longer run $385 million in active domestic large-cap core equities. The pension fund said personnel turnover and weak performance contributed to the move. Connecticut Retirement Plans & Trust Funds also terminated J.P. Morgan which had managed $1.35 billion in passive enhanced domestic equities and $680 million in core-plus domestic fixed income...

Update of June 9, 2003: In last week's WSJ report that a small group within Morgan Chase has earned the company $100 million this year with risky bets on currency and interest rate moves, less than credible was Dina "the Double D" Dublon's quote that "the returns are not indicative of larger risk taking." Mark those words... In the interim, inordinate sway over the legislative process. on June 5 a shameless press release went out from Chase Manhattan Automotive Finance Corporation announcing that it "will stay in the auto leasing business in Connecticut due to the State Legislature's passage yesterday of a new bill limiting liability for long term auto leasing companies. Chase had previously announced its plans to exit the auto leasing business in Connecticut and New York on July 1, 2003 if the outdated law, known as 'vicarious liability,' holding leasing companies responsible for accidents involving their leasing customers, was not changed. "'We commend the Connecticut Legislature for its swift action to save auto leasing for Connecticut's consumers,' said Jeffrey Levine, general counsel for Chase Manhattan Automotive Finance Corporation. 'We are now committed to staying in the leasing business in Connecticut assuming that Governor Rowland signs the new bill,' Mr. Levine said." Morgan Chase played this "we'll go home" card in Georgia against anti-predatory lending legislation, too....

Update of May 26, 2003: at Morgan Chase's annual meeting on May 20, Wild Bill H. said he "regrets" the events that created Wall Street's many scandals and takes responsibility for his firm's role in the misdeeds. "Over the past couple of years, we have seen far more than the usual number of serious accidents at the intersection of Wall Street and Main. And our financial institutions, including J.P. Morgan Chase, must take their share of responsibility for that... We cannot undo what has been done, but we can express genuine regret and learn from the past," Harrison said. But will they learn?

Update of May 19, 2003: on May 13, Wild Bill Harrison said, "One day when we see fair value in our stock price, we will look at options, and if it makes sense, we would consider it." The "it" in question? Another merger -- since, of course, Chase - J.P. Morgan's been working out so well. Shares are only down 32% since the merger. To Reuters, analyst Richard Bove opined, "No CEO spends that much time talking about mergers and acquisition strategy unless they are really thinking about it and looking at it," adding his view that Wells Fargo would make a nice target for Morgan Chase. Or would it be vice versa?

Update of May 12, 2003: With other lines of its business imploding, Morgan Chase wants to expand "private banking." In an interview published in the FT of May 9, JP Morgan Private Bank CEO Maria Elena Lagomasino crowed that "because of bank secrecy, there is the unintended implication that money is more sleepy and less active (in Switzerland) than it would be in places like New York, London or Hong Kong... Clients are finding it more important, particularly after the last three years, to stay on top of their money. They cannot come once a year to Switzerland and find they have lost 30 per cent. That is unacceptable." But how much is Morgan Chase's stock down in the past year?

Reuters of May 8 make much of Fed chairman Greenspan's reference to J.P. Morgan Chase's derivatives portfolio. Reuters quoted experts that " JP Morgan's $28 trillion share of the more than $100 trillion derivatives market makes the bank almost too big to fail." Greenspan said, "When concentration reaches these kinds of levels, market participants need to consider the implications of exit by one or more leading dealers."

Update of May 5, 2003: On the road again, with Morgan Chase -- the Telegraph of India reports on Chase's "plans to open an offshore research department in Mumbai, where Indian professionals will chew on numbers, prepare reports and, if things go right, track shares on New York Stock Exchange and Nasdaq. More than 1,000 jobs could come to Mumbai." On this, we've received the following commentary, from our favorite in-house correspondent:

Subj: JPM takes a trip to Mumbai

Date: 5/1/03 7:18:40 AM Eastern Daylight Time

From: [ ]

To: ChaseWatch [at] innercitypress.org

In the wake of the recent $1.4 billion settlement from various investment banks, including good ol' JPM, what messages would you expect these institutions to take away with them? Would you expect them to carry on with the "star system" whereby a big-name analyst is expected to be a "rainmaker", whose job is to be on the phone all day promoting stocks to clients and to provide soundbites for the media - not burdened with such tedious inconsequentialities as a realistic, working financial model and a deep hands-on knowledge of industry statistics? (this was the existing system that brought us Blodget and Grubman)

Or would you expect them to provide insightful, informed comment based on a close understanding of the industry coupled with an ability to understand, analyze and accurately interpret financial statements? Well, I know what a reasonable person might expect, but unfortunately we are talking about JPM here. They have recently announced that they are setting up a unit in Mumbai, India, which could probably best be described as the financial industry's version of a sweatshop. Here they believe they can get MBAs and chartered accountants, at a quarter of the price they would

normally pay, to sit and gather data and produce generic models. They envisage a headcount of 40 out of a total 400 across research globally. (This after having recently cut their European headcount alone by 60 people). I quote from a recent memo from the global head of research:

"Hiring top grade MBA candidates to work in specific sectors. These analysts would do industry specific research and analysis - both regional and global work - offering support to analysts in that sector in all locations. Work could include maintenance of proprietary data, data collation and analysis for client requests, special projects, presentation preparation and periodical production. Initially we to start with 6 - 8

sectors and assign two headcount to each sector. Financial Modeling - Hiring MBAs or Chartered Accountants with strong Excel skills to build new models or maintain models and newsflow relating to covered companies. Having a team of financial modelers could decrease the time required to initiate coverage, as they could build

the model based on a standard cross-sector JPMorgan model and provide an option to analysts who would prefer to use their existing time and resources for other activities.."

Come again? "WHO WOULD PREFER TO USE THEIR EXISTING TIME AND RESOURCES FOR OTHER ACTIVITIES"?

I am intrigued as to what could be more important for an analyst than being able to build a meaningful financial model from which to base an opinion. Does "a standard cross-sector JPMorgan model" - where a telecoms stock would be bolted into the same framework as a drinks retailer - sound to you like something on which you would want to base your 401K investing? Especially since it has the phrase "JPMorgan" in it? We will leave aside the question of whether a truly "top grade" MBA is going to want to stay in Mumbai earning 25% of MBAs elsewhere. We will leave aside the question of how it will be humanly possible to understand US and

European industries at such a remove (assuming industry understanding is on the agenda at all).

Star analysts tend to leave after a few years and get replaced by the junior analysts, who have been learning from them by listening to them, building and maintaining the models, attending client meetings, writing some of their analysis etc. The question bubbling up is this: Where, in three years' time, are they going to find the analysts who have better things to do with their time than analysis? Will they perhaps ship them in from Mumbai....or will they have to spend fabulous amounts of shareholders' money to recruit them from another less moronic organization? (By the way, I used to sit next to a "star analyst" at JPM. A week after she was promoted to senior analyst, she had to ask me what ex-dividend meant..........)

Also on the Global Beat, Morgan Chase on April 29 announced a plan to buy a 33 percent stake in a fund management joint venture in China for $5.98 million. Shanghai International Trust and Investment Corp would own the remainder of the 150 million yuan venture, JP Morgan said in a statement, adding it intended to raise its stake to 49 percent when regulations allowed.

Update of April 28, 2003: We'll go self-referential this week. This Morgan Chase Watch showed up in New York Newsday of April 21, quoting one of our correspondents regarding the farming-out of thousands of employees to IBM:

... "letter that appeared on the Web site of the Inner City Press, a regional Web site, one employee said the transition has left 'plenty of [affected employees] pretty disgruntled. I know for a fact in Asia there is serious discontent, as the bottom line is sign with IBM or leave ... with nothing.' Octavio Morenzi, founder and managing partner at Cambridge, Mass.-based consulting firm Celent, said he could understand employees being miffed about the way the deal was announced - via newspaper reports on the last day of the year. A cynic, he said, could say the deal was structured to please Wall Street, noting that banks like JP Morgan are valued by multiples of their income while tech companies like IBM are valued relative to revenue. The $5 billion deal is expected to provide a sizable boost to IBM revenues while JP Morgan avoids the expenses of severance issues."

Typical Morgan Chase... Those with question might want to catch ol' David Coulter on April 29 (2:15 .m.) at UBS Warburg's 2003 Global Financial Services Conference... Just as it threatened to pull out of Georgia in the face of that state's anti-predatory lending law, last week Morgan Chase, attempting to pressure lawmakers in New York and Connecticut into repealing "vicarious liability" statutes, said it would stop providing auto leases there after July 1. Great diplomacy... Until next time, for or with more information, contact us.

Update of April 21, 2003: In announcing earnings last week, Wild Bill Harrison said-in-a-statement, "we continue to be cautious in our outlook for the remainder of the year.'' Vice chairman Marc Shapiro told reporters he believes there will be an economic recovery over the next couple of years. Right now, he said, "it's certainly not an economy that's operating on all cylinders.'' Reuters noted that the SEC has delivered a Wells notice to J.P. Morgan Chase, indicating it may take legal action on allegations the bank helped the now-bankrupt Enron Corp. conceal debt from investors...

Update of April 14, 2003: Those interested in Chase's ongoing subprime lending may want to check out Chase Funding Asset-Backed 2003-2, $890 million in asset-backed securities supported by subprime home equity loans Chase has made.

Update of April 7, 2003: From the mail bag (and one of our favorite sources), regarding last week's Report:

"I note that you question whether Mr Harrison is overpaid. Don't be too hard on him, the poor love: his bonus was down 50% on last year. Those of us who were recently rightsized with zero bonuses are thinking of taking up a collection. After all, an inspiring, charismatic and effective leader deserves to be adequately compensated....ah. Yes. That's where it all falls down, of course.
"Incidentally, if you look at the figures, last year's compensation included a special $10 million merger bonus. So effectively Mr. Harrison got a 42.5% increase on his 'normal' bonus, from $5.4 to $7.7 million. Given the destruction of shareholder value he achieved last year, wouldn't it be a better use of Mr. H's time for him just to sit in the executive washroom all day, flushing away dollar bills one at a time? We would lose less money that way."

She's baaack: former Chemical-Chase CRA officer Carol Parry (Fox) reappeared on the (CRA) scene last week, with an op-ed piece in the American Banker urging that branchless banks be treated as "wholesale or limited purpose" banks -- that is, that they not be judged on how their lending benefits low- and moderate-income consumers, but on indirect community development activities. We disagree -- why, for example, should E*Trade Bank be allowed to exclude LMI consumers? -- but note that the purpose of the article appears to be to drum up business for Ms. Parry Fox's "Corporate Social Responsibility Associates." Interesting name... Ms. Parry is a director of R H. Donnelley, which sells advertisements in various Yellow Page phone books; she is a trustee of Equitable Premier mutual funds. If one wanted to find out more about Corporate Social Responsibility Associates, and tried, for example, csra.org, you'd find the Connecticut Street Road Association, defending America's automative legacy. Other variants? Nothing. It is reported that Ms. Parry Fox defended WesBanco, a West Virginia-based bank with (at least temporarily) a rare Needs to Improve CRA rating. We remain interested, open-minded, all of that.

Update of March 31, 2003: Reuters of March 28 quoted a Morgan Chase insider that "I think it's appalling... You can look at the market capitalization from the day the merger happened until now and see complete market cap destruction. The bottom line is Harrison is overpaid."

Question from the mail bag: "Chase Manhattan Mortgage Corp. -- I continue to get told different things of how to have my PMI payments discontinued. I was told by their rep. that if I paid my loan down to 78%, it would be discontinued. After paying my mortgage to less than 78%, I find that there are other requirements and I've about had enough of it. I need to know who the CEO is as well as if there is someone I can copy my letter of complaint who regulates the banking industry."

Answers: CMMC's chief executive is one Stephen J. Rotella; the regulator is the OCC...

Update of March 24, 2003: Board of directors madness -- Morgan Chase on March 18 announced that Lloyd Ward, who resigned as chief executive of the U.S. Olympic committee earlier this month amid an ethics controversy, had stepped down as a Chase director Ward, embroiled in a controversy over an effort to help his brother's company win a contract for this year's Pan Am Games, resigned after just 16 months in his post as the head of the body in charge of coordinating all Olympic-related activity in the United States. Has he been the problem at Chase? No, these problems run much deeper...

Update of March 17, 2003: From one scandal to the next: last week found Morgan Chase in Asia defending credit derivatives and Chase's market-making position in them. Chase set off on a regional road show, to Hong Kong, Singapore, South Korea and China, according to spokeswoman Dorothy Lee. Bertrand Des Pallieres, a London-based managing director of JP Morgan Securities, said: "It is hard to get out of being a supplier or being a market maker the same way it would be hard for General Motors to get out of the car industry." Ouch...

Update of March 10, 2003: Chase's Boom-Boom room: faced with reports last week that the company had fired two of its investment bankers, Palden Namgyal and Norman Gretzinger, following charges that they sexually had harassed a female colleague, Namgyal and Gretzinger could not be reached for comment. A Morgan Chase spokeswoman declined to confirm the dismissals or whether the bankers received severance packages. That's leadership. And now, this report, from Hong Kong:

Subj: "One Firm One Team" at JP Morgan
Date: 3/4/03 4