President Warren’s Admin Announces Net Worth Sweep of JPMorgan (Relies on Lamberth as Precedent)
- The financial crisis of 2023 has been really bad.
- As a result, JPMorgan’s $100T derivatives book suffered massive accounting losses. Treasury injected $300B to help support the company and restore market confidence.
- In order to protect the investment of the taxpayers, President Elizabeth Warren’s administration, through Treasury and the FDIC, announced a Net Worth Sweep of all of JPMorgan’s profits in perpetuity in the form of a dividend.
- The dividend will not reduce the liquidation preference associated with Treasury’s JPMorgan senior preferred securities.
- Press Secretary Rachel Maddow thanked the WSJ’s John Carney and Joe Light and Bloomberg’s Jody Shenn for making it clear to the public that the decision was free from “outside second-guessing” due to Judge Royce Lamberth’s ruling in Perry Capital, a decision they enthusiastically lauded in 2014 and 2015.
- Press Secretary Maddow stated: “As it is now settled law, Lamberth concluded that neither the conservator nor Treasury had exceeded its statutory authority, and all claims for equitable relief concerning the conservator’s exercise of its authority were barred.”
- She continued with: “Lamberth also determined that any derivative claims by shareholders concerning the Conservator-Treasury PSPAs were barred and that no ‘conflict of interest’ exception applied.”
- And she added: “Lamberth further held that the shareholders’ claims for liquidation preferences were not ripe, and that any claims for the value of expected dividends failed to state a claim.”
- Responding to angry JPMorgan shareholders, including hedge funds that had purchased depressed JPMorgan securities, the Wall Street Journal reiterated that the conservator of JPMorgan holds powers of “extraordinary breadth.”
- Maddow continued with: “According to Lamberth, to determine whether the Court has jurisdiction to adjudicate claims for equitable relief against a conservator, the Court must look at what has happened, not why it happened. . . . FHFA’s underlying motives or opinions – i.e., whether the net worth sweep would arrest a downward spiral of dividend payments, increase payments to Treasury, or keep the GSEs in a holding pattern – do not matter.”
- Maddow reiterated “according to the Lamberth decision, motives do not matter. I repeat, directly from his decision, motives do not matter.”
- Jamie Dimon could not be reached for comment.
This scenario is representative of the capital markets we’ll face if Lamberth’s decision in Perry Capital becomes settled law and our government is not held to account for its motives.