Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

JP Morgan’s Five P’s and Bernie Madoff

Posted by Larry Doyle on June 27, 2012 7:59 AM |

Have you ever had an experience while reading something when you stop and think, “They didn’t just say that, did they?” I had just such an experience yesterday while reading a Bloomberg commentary on JP Morgan.

Under the heading of “You cannot make this stuff up,” I virtually gagged when I read of why JP Morgan had chosen not to  allocate credit to Chesapeake Energy. Given current issues with Chesapeake, it would appear that JP Morgan’s decision not to engage Chesapeake was prudent. Then why the gag? 

Put your coffee down as Bloomberg writes:

In one meeting of JPMorgan executives in 2008, it was decided that Chesapeake didn’t meet at least portions of the bank’s so-called five P’s of lending: people, payment, protection, purpose and perspective, the people said. Those five P’s, which other banks often call the five C’s — character, capacity, collateral, capital, conditions — are used to examine whether a borrower is creditworthy.

I gagged as I envisioned how credit officers at JP Morgan may have applied those P’s to their own brethren on Wall Street (AIG especially), to a vast swath of individuals applying for mortgages, and ultimately internally upon themselves. While these points could be open to vigorous debate without gaining real clarity, let’s zero in on one situation in which JP Morgan had significant engagement and exposure.

What happened to the five P’s at JP Morgan in the midst of their longstanding dealings with one Bernie Madoff?

I guess in situations such as that, there are a sixth and seventh P. What might those be?

PURE PROFIT.

If we were to utilize the 5 C’s approach, then the 6th and 7th C’s applied to Mr. Madoff’s enterprise for Wall Street banks would be CASH COW.

No, you really cannot make this stuff up.

Funny how this works? Not very funny for those entangled in the Madoff fiasco who continue to suffer.

Larry Doyle

ISN’T IT TIME to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook?

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Peter S.

    It’s not as if the JP Morgan’s general counsel didn’t know about Madoff. Hells Bells.

    http://www.sec.gov/news/studies/2009/oig-509/exhibit-0526.pdf

  • Tim

    I think it has to do with hair. McLendon and Madoff both feature the 19th century hand-on-bust coif.

    After Madoff JPM may have added a 6th P: phollicle.

  • Jack Itin

    J.P. Morgan did the most cursory of background checks on Mr.Madoff. Had they done a more thorough check they would have found that Mr.Madoffs Auditors were three people working out of a Broom Cupboard in a Slum.

    What J.P.Morgan were interested in and somewhat in awe of was the Vast amounts of Cash going through Mr. Madoffs Accounts. In fact J.P.Morgan attempted to reverse engineer the Business model used by Mr.Madoff with the intention of starting a similar fund to the one operated by Mr.Madoff. J.P. Morgan is undoubtedly a Criminal enterprise hiding behind the Facade of a Respectable Bank!!






Recent Posts


ECONOMIC ALL-STARS


Archives