Will J.P. Morgan Chase Default on Public Pensions and Produce More Foreclosures?

JP Morgan Chase (JPMC) has had its share of problems. Chief Executive Jamie Dimon faced Congress last week and said he was “sorry” for the bank’s $2 billion (or more) in trading losses last month, saying it happened due to errant strategy.

On June 18, 2012, the head of global equity proprietary trading, Deepak Gulati held talks with investors as he and a team of traders consider leaving the JPMC to start a hedge fund.

Last Friday, June 15, Chase was sued by a Louisiana police pension fund for alleged securities fraud tied to trading losses of at least $2 billion. (Louisiana Municipal Employees Retirement versus JPMorgan Chase & Co, Case #12CV4729, U.S. District Court, Southern District of New York).

A “strictly confidential” report by JPMC last year detailed how underfunded pensions are a huge ticking time bomb for many of the nation’s big cities and states. JPMC kept this report under raps except to a few large clients (mostly hedge funds and large institutional investors) who got the tip on which states and cities were most likely to default on their debt as their pension liabilities intensify.

March 2012, JPMC settled with the AFTRA Retirement Fund, the Investment Committee of the Manhattan and Bronx Surface Transit Operating System and the Imperial County Employees’ Retirement System for $150 million. Claims accused JPMC of violating the Employee Retirement Income Security Act.

Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900 plus billion that officials admit to.

Experts agree it’s likely we’re headed for a major municipal bond default or hyper- inflation or near hyper-inflation.

JPMC is no stranger to Denver’s pension funds. In 2008, the Denver public school system needed to plug a $400 million hole in its pension fund. JPMC offered the school system ‘a deal’ saying the school system could raise $750 million, eliminate the pension gap, and save tens of millions of dollars – money that would be put back into the Denver school system.

The transaction went way off course due to stress in the credit markets, problems with the bond insurer, falling interest rates. The Denver school system has paid $115 million in interest and other fees – more than $25 million more than it should have. To terminate the deal, Denver would have to pay another $81 million in termination fees.

If defaults by JPMC occur, how would they affect the millions of retirees’ lives? These retirees are dependent upon these pensions to pay their mortgages. JPMC, along with Bank of America and Wells Fargo are the nation’s biggest mortgage servicers and account for more than 60% of the first mortgages in the country.

Are we looking at another 6 to 8 years of massive amount of foreclosures?

Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.

This article is not intended as legal advice. The opinions of this article are solely the opinion of the author.

About theglawfirm1

Gantenbein Law Firm is a Denver, Colorado Tax Law Firm, servicing all of Colorado. Gantenbein Law Firm also specializes in Colorado Real Estate Law, Colorado Foreclosure Defense, Wills & Trusts, and Business Law.
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3 Responses to Will J.P. Morgan Chase Default on Public Pensions and Produce More Foreclosures?

    • theglawfirm1 says:

      Yes, we posted that news on The Ganntenbein Law Firm facebook page! Sad news- and I predict it wont slow down for another 2 years or so. Major reforms are needed in the industry.

  1. rule120 says:

    Omg Kevin say it isn’t soi!

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