JPMorgan Chase & Company, the global financial services firm which received a $25 billion federal bailout and is now reaping huge profits, has made tens of millions of dollars floating California bonds.
But you won't find that figure in the full-page ads that have appeared in California newspapers in recent months singing JPMorgan Chase's praises – ads placed by JPMorgan Chase itself.
One such ad, which appeared last week in the San Francisco Chronicle, was headlined "Our Commitment to the Golden State is Stronger Than Ever." The ad declared that JPMorgan Chase has "committed or helped raise more than $38 billion for educational institutions, municipalities, and healthcare providers in California."
The ad also said the company has "participated in the sale of $8.1 billion of bonds over the past decade for the Bay Area Toll Authority to keep its essential network of bridges safe." These projects have "created local job opportunities, and will ensure a safer and smoother commute for years to come."
"We will continue to support our communities responsibly and move America forward," the ad read.
Similar ads, tied to Chase's The Way Forward campaign, have appeared in other communities – like an ad in the New York Times that appeared on the same day as the one in the Chronicle touting the bank's support for revitalizing Coney Island. It said its financial support is "bringing back the fun, the visitors, and over 200 jobs to Coney Island."
But the ads avoid any mention of how much money the company has made from its activities in various states.
"The point of our ad is to show how we help raise capital for governments and for companies, and that does help them function," said Tom Kelly, a spokesman for JPMorgan Chase. He said that how much JPMorgan Chase made from its bond business in California is proprietary information, and I would have to contact every jurisdiction in California to find out.
So I put in a call to state Treasurer Bill Lockyer's office. Tom Dresslar, Lockyer's spokesman, said that since 2007, California taxpayers have paid JPMorgan Chase $32 million in fees, and, dating back to 1999, a total of $63.1 million in fees on underwriting state general obligation bonds. That does not include fees the company made from transactions with the other institutions mentioned in its ad.
"They (JPMorgan Chase) are not doing it out of the goodness of their heart," Dresslar said. "They are doing it because California pays them a lot of money to market our bonds."
Dresslar says there have been pluses and minuses regarding the state's relationship with Chase. On the plus side, he noted, the company went beyond the call of duty last year when it provided an interim revenue anticipation note [PDF] to California to help it get through its cash crunch last year. "That was out of the ordinary," he said.
On the downside, Dresslar said, Chase refused to take IOUs issued to vendors by the State Controller John Chiang last summer, as he may have to do shortly again.
"The treasurer was urging all the banks to accepts these IOUs to minimize the hardship on their customers," Dresslar said. Chase, he said, "took the hardest line of all the major banks" by refusing to accept them.
Lockyer's office has an uneasy relationship with JPMorgan Chase and the nation's other largest banks. Earlier this year, Lockyer sent a letter to JP Morgan Chase CEO Jaime Dimon and several others to find out how much their companies may have earned by betting that the bonds they had help float would fail. (For Chase's response, check out this letter [PDF] to Lockyer from Jes Staley, Chase's Investment Bank CEO).
As for the Bay Area Toll Authority, Brian Mayhew, BATA's chief financial officer, said that JPMorgan Chase has been in "on every deal we have had in the last 11 years." But he couldn't tell me how much specifically went to Chase, because in general four to six bankers are involved in any bond deal. BATA "cuts a check to the lead central banker who will then distribute it to others who participate,'' he said. He said JPMorgan Chase was the lead banker in only one deal in recent years.
He said that fees run between 1 and 2 percent, and that BATA generally has been able to negotiate fees closer to 1 percent. That would put the earnings to financial firms at $80 million at the low end – with Chase getting a piece of it.
"It is not an act of charity, because it certainly isn't," Mayhew told me. At the same time, he said, "They are making a contribution, they are trying to help, but they are a for-profit company. They do want to get paid someday."
Nothing wrong with that – except that Chase's "The Way Forward" ad campaign makes it seem as if the company is more of a philanthropic enterprise than one of the world's largest financial companies which has earned billions of dollars in profits during the worst economic crisis to afflict California and the nation in nearly a century.
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