While the Justice Department should be commended for coming down hard on JPMorgan Chase & Co. for mortgage lending abuses during the housing crisis, the agency should also ensure that JPMorgan not be allowed to deduct the settlement from its taxes.
The tentative deal’s $13 billion settlement, the largest such deal in US history, would certainly send a strong message to all corporate wrongdoers, but contrary to your Oct. 29 editorial, “JPMorgan deal should be model for future settlements,” this settlement model must be amended to protect the American taxpayer.
As currently written, taxpayers could end up underwriting as much as $4.5 billion of the settlement. That’s because JPMorgan is likely to deduct the cost of the settlement from its taxes as a business expense.
The Justice Department has the power to deny the deduction, and that should be part of the model. Last year, after a public outcry, the department made one of BP’s Gulf oil spill settlements nondeductible, saving taxpayers $1.7 billion.
The financial crisis caused by banks’ irresponsible practices landed us in a recession that we’re still struggling to escape. Taxpayers shouldn’t have to pay any more for JPMorgan’s bad actions.