Putting JPMorgan's $13 Billion Settlement Into Context

JPMorgan Chase (NYSE: JPM  ) and the Justice Department have finally agreed to settle their five-year skirmish. CEO Jamie Dimon's megabank will pay $13 billion for its role in the 2008 financial meltdown. Of that final tally, $6 billion will go to investors who were hurt by the mortgage-based collapse, while $4 billion will help pay for writedowns of unpaid consumer mortgages and lower rates for JPMorgan's current mortgage customers. The final $3 billion portion is a penalty, paid to the Federal Reserve.

That $13 billion is a fairly nice, round number. But how much money are we really talking about here? Let me put the settlement into some context.

JPMorgan
JPMorgan reported $26 billion of operating cash flows in the third quarter. The settlement amounts to about half a quarter's worth of cash earnings for the company.

JPM Cash from Operations (TTM) Chart

JPM Cash from Operations (TTM) data by YCharts

The bank has spent $10.6 billion on dividend checks over the last three years. In the same period, $12.5 billion went toward buying back JPMorgan's own shares. So the settlement works out to about half of JPMorgan's cash returns to shareholders since 2010.

Financial events
Apple (NASDAQ: AAPL  ) recently announced that iOS app sales have totaled $13 billion in developer payments. But Cupertino wasn't always this huge. Just 10 years ago, Apple's market cap broke the $13 billion mark. If you bought Apple shares in 2003, you've multiplied your investment by at least 36 times now.

Under the quantitative easing program, the Fed spends $85 billion a month on buying financial assets from American banks. That's $2.8 billion every day. JPMorgan's total $13 billion settlement only covers roughly one working week of QE3 investments. The $3 billion earmarked for federal coffers is barely more than one day's worth.

The 30 tickers on the Dow Jones (DJINDICES: ^DJI  ) index add up to a total market value of $4.8 trillion these days. The Dow grows or shrinks by $13 billion when the index makes a 0.3% move in either direction. Today, the Dow companies are growing by about $9 billion in total.

Other expensive projects
When the Civil War ended, the North had spent $678 million on wartime supplies (and another $370 million on feeding the troops). That amount of money in that era works out to $13 billion in 2013 dollars. Jamie Dimon could grab a time machine and finance the Yankees with this stash.

The LHC's majestic circles. JPMorgan's settlement could have built one of these with plenty of cash to spare. Image source: Wikimedia Commons.

The Large Hadron Collider that CERN used to demonstrate the existence of the Higgs Boson is one of the largest and most expensive science projects in human history. Building and running the 17-mile circle of particle accelerator machinery cost a total of $9 billion. JPMorgan would have plenty of spare change left over after building the collider.

In terms even closer to home, $13 billion can buy you 2 billion Big Macs. That's about six lunch sandwiches for every American man, woman, and child.

With the median American home price sitting at $200,000, you could buy 65,000 average dwellings outright with $13 billion.

That amount could pay Jamie Dimon's $18.7 million salary for the next 700 years. It would cover 457 million annual salaries for a family with two minimum-wage breadwinners.

So, was the JPMorgan settlement big or small in the grand scheme of things? It all depends on your perspective.

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  • Report this Comment On November 19, 2013, at 9:38 PM, eddabraham wrote:

    The last great settlement gave the foreclosure victims $500 from the independent foreclosure review idiots. This one will get everybody to that great $1000 threshold. That is progress.

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