Sunday, in the post, Big Numbers, Little Impact, I noted a settlement between JPMorgan Chase and the State of California that was far less substantial than meets the eye.
While it certainly looks like a large figure, in truth, it is miniscule when compared to JPMorgan Chase's total assets held. As of 2012, that figure is $2.509 trillion. The so-called big settlement amounts to 0.00000164 of this company's total assets.
To put these numbers in perspective, let's say you have total assets of $100,000. You've been hauled into court for some reason. The judge or jury has found you guilty and is set to announce the amount you will be fined. If your fine is equal to the percentage paid by JPMorgan Chase in the aforementioned settlement, you would be forced to pay...drum roll please...16 cents. If instead of a measly $100,000, you had $1 million in total assets, your fine would be $1.64.
As I have mentioned before, my wife and I are financially poor. When this calendar year comes to a close, our gross income will be less than $15,000. Consequently, it should be unsurprising, that we struggle to make ends meet.
Still, despite our poverty, 16 cents or $1.64 is not so substantial that we would consider it a major ding for our monthly budget. If we had to pay either amount as a sanction against some activity undertaken, we probably wouldn't give it a second thought. (Heck, it's less than the cost of a gallon of milk!)
If the greater amount of $1.64 wouldn't trouble a family of our means, $410 million is not going to deter JPMorgan Chase! In fact, the next time they decide to manipulate a market, they will simply list the potential fine on their budget sheet as a minimal routine expense. Since manipulating markets stands to enrich JPMorgan Chase and other Wall Street titans to the tune of tens of billions of dollars or more, spending $410 million on a settlement or fine is worth the cost.
Therein lies the problem of these much ballyhooed "settlements".