For almost six years, Washington secretly shackled JPMorgan Chase & Co., the nation’s biggest bank.
Now the chains are off, thanks to bank-friendly regulators in the Trump administration.
In actions never before made public, Obama administration regulators prevented the bank from opening branches in new states as punishment for violating banking rules, according to people familiar with the matter. JPMorgan’s ambitious plan to expand nationally, announced earlier this year, was made possible by the Trump administration’s rollback of those restraints, which date from 2012, said the people, who asked not to be identified discussing regulators’ impact on the bank’s plans.
JPMorgan has racked up more than $30 billion in penalties, legal costs and related obligations since the 2008 financial crisis, some of which stemmed from its acquisitions of Bear Stearns Cos. and Washington Mutual Inc. Missteps include excessive risk taken by the London Whale trader and failing to flag transactions related to Bernard Madoff’s Ponzi scheme. Privately, the U.S. Office of the Comptroller of the Currency stopped JPMorgan from expanding into additional states while resolving compliance breakdowns as part of an unwritten regulatory policy, the people said.
Expansion Ban
While banks often have private conversations with regulators and even gauge their reactions to potential plans, the people with knowledge of the matter described the ban as one of the more extreme ways they exerted their control behind the scenes.
Regulators went to even harsher lengths earlier this year to punish Wells Fargo & Co., placing a cap on its assets after a pattern of lapses and abuses. Janet Yellen, who served as Federal Reserve chair under President Barack Obama, announced the unprecedented punishment on her final workday in office.
JPMorgan, the biggest U.S. bank by assets, operated 5,130 branches in 23 states at the end of last year. With fresh assurances from regulators under President Donald Trump, the people said, it’s planning to open 400 branches in as many as 20 new markets in the next five years, including plans to build in Boston, Philadelphia and Washington, D.C. This is the first time the bank is opening branches in a new state in more than a decade. The moves could translate into an additional $1.5 billion of revenue a year by 2022, according to Morgan Stanley.
‘Extremely Excited’
“We are extremely excited to be expanding again, as smart regulatory policy and a competitive corporate tax system help us to deliver on our commitment to invest in our customers and communities,” Chief Executive Officer Jamie Dimon said Oct. 12.
JPMorgan has resolved many of its compliance issues, but the OCC still has open enforcement actions against the bank, according to agency data.
Andrew Gray, a JPMorgan spokesman, said the bank wouldn’t comment on supervisory issues.