JPMorgan Chase admitted it is under investigation by the Justice Department over its hiring practices in Hong Kong, the latest in a string of federal probes and lawsuits against the bank that some believe is motivated by political payback.
Reuters reports that JPMorgan — the largest U.S. bank by assets — disclosed the investigation Friday as part of a routine filing with the Securities and Exchange Commission (SEC), which is also looking into alleged cronyism in the bank’s hiring process in China.
It’s the latest in bad news for JPMorgan, which agreed to pay a record-breaking $5.1 billion to the Federal Housing Finance Authority (FHFA) last week over toxic mortgage securities sold before the financial crisis. An additional $9 billion settlement over the same securities is in the works with the Department of Justice, putting the bank on the hook for an astounding $14.1 billion in penalties.
But although JPMorgan has been relentlessly targeted by federal investigators, its behavior isn’t much different from other American megabanks — including Goldman Sachs, which was largely spared by regulators.
According to critics, JPMorgan is being deliberately targeted due to CEO Jamie Dimon’s critique of the Obama administration’s economic policies before the 2012 election.
Once called President Obama’s “favorite banker” in 2009, Dimon had a falling-out with the president after blaming the stagnant American economy on the government’s failure to follow the Simpson-Bowles debt-reduction plan and accusing the Obama administration of a “constant attack on business.”
“I would call myself a ‘barely Democrat’ at this point,” he said in May 2012, just days before federal agents began looking into his bank.
In the most recent probe, investigators claim that JPMorgan routinely hires young, well-connected Chinese people in order to grease the wheels of important business deals in the country. The bank hired the son of the chairman of China Everbright Group, a massive state-owned financial conglomerate, earning a series of lucrative contracts soon afterward.
But the practice of foreign companies hiring Chinese “princelings” in return for business deals is not unusual. “For those familiar with the financial industry in China or Hong Kong, there really is no revelation here,” James Parker, a former Beijing-based financial analyst, told the Global Post. “The hiring of well-connected people is extremely common, and indeed considered necessary, and not just in the financial industry.”
Merrill Lynch and Morgan Stanley both put the children of high-ranking Communist Party officials on their payroll, while Goldman Sachs hired Hong Ning, the son-in-law of China’s anti-corruption chief.