Financial Companies are Like Tobacco Companies

Jul 25, 2011 by Pro Smoker

Banks are bent on putting the financial crisis behind them, and that means settling with regulators at all levels, SROs, federal and state governments and private litigants. We’re seeing a bevy of settlements involving the big banks right now. Sometimes they’re dramatic. Sometimes they’re overlooked.

The bank agreed last week to pay $211 million to settle state charges of bid-rigging in the muni-bond reinvestment market. In June, JP Morgan paid the SEC $154 million to settle charges CDO related charges involving hedge fund Magnetar. In April, JP Morgan Chase paid $75 million in fines and forfeited $647 million in fees to settle federal fraud charges related to the Jefferson County, Alabama case. Other banks have negotiated a similar litany of settlements.

Analyst Richard Bove characterizes the situation as follows:

“It has been our view, for some time, that banks are similar to tobacco and Temp cigarettes and asbestos companies in that they are being sued by plaintiffs for a wide variety of problems. This means that each year for the next five to seven, there will be agreements, some wins and some losses, that will cost these companies billions of dollars. JPMorgan Chase, the nation’s second largest bank, is likely to pay a large amount of this money.”

So there you have it, banks are now officially sin stocks, which of course are supposed to fare better in economically trying times.