JPMorgan Chase & Co (NYSE:JPM)’s internal control problems appear to be pervasive and reminiscent of Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA), notes GrahamFisher.


In their report focusing on risk management and internal control environment at JPMorgan Chase & Co (NYSE:JPM), GrahamFisher notes the bank’s shareholders are continuing to be called upon to pay for the firm’s inability to ensure an acceptable control environment.

JPMorgan is reminiscent of another too-big-to-fail institution

Drawing a parallel to JPMorgan Chase & Co (NYSE:JPM)’s ability to maintain its reputation, political power and support of investors in the face of financials that lack details necessary for a proper analysis, the report claims JPMorgan is reminiscent of another too-big-to-fail institution: Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA). However, the report doesn’t foresee JPMorgan Chase & Co (NYSE:JPM) meeting the same fate as Fannie Mae.

Not a single large bank meets OCC requirements

The GrahamFisher report claims that even the primary regulator to the largest banks recognizes that operational, compliance, strategic and reputation risk are more critical than credit, liquidity, interest rate and price risk. However, not a single one of the 19 largest banks in the U.S. met the OCC’s requirements for internal auditing, risk management and succession planning.

JPM’s task force report “a white wash”

Terming the JPMorgan Chase & Co (NYSE:JPM)’s Task Force Report on ‘London Whale’ a ‘white wash’, the GrahamFisher report dwelled deep into the foot notes of the Task Force Report for more information. The GrahamFisher report observes the problems in risk management of the CIO’s office existed, and were known to the firm’s most senior management possibly for several years prior to the 2012 trading losses. The report notes this reality calls into question the accuracy of the firm’s filings and compliance with Title III of the Sarbanes-Oxley Act.

String of regulatory issues

JPMorgan Chase & Co (NYSE:JPM) has been facing probes from the U.S. Department of Justice, the Securities and Exchange Commission and other government agencies that are looking into subjects including energy trading, possible bribery in hiring practices in China and possibly fraudulent sales of mortgage securities.

JPMorgan Chase & Co (NYSE:JPM)’s internal control problems appear to be pervasive; the GrahamFisher report points out many of the regulatory violations are for repeated violations of specific control failures, which the company has previously agreed to remedy.

The report also points out that JPMorgan Chase & Co (NYSE:JPM)’s weak internal controls and failure to remedy those control violations is not isolated to its U.S. business. The report claims JP Morgan’s acquisition of Washington Mutual is a story of opacity and impunity, as the bank tried to shift losses of over $190 billion of Washington Mutual-related mortgage securities onto the FDIC.

GF&Co: JPM – Out of Control by david_dayen3823