JPMorgan seeks $1.4 billion tax break

A sign on the outside of a Chase bank branch in New York City.

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Kai Ryssdal: To explain the big bank tax refund story today, we need to back up a little bit. The stimulus package that was signed last year had a lot of things mixed in with that $787 billion. About a third of them was tax cuts. Some of those tax cuts were set aside for companies that lost money and desperately needed stimulus. Those companies would be allowed to make up for some of the money they'd lost by not having to pay as much to Uncle Sam -- clearly aimed at companies that took a beating during the financial crisis.

Marketplace's Jeremy Hobson explains what's actually happening.


JEREMY HOBSON: JPMorgan Chase managed to escape the worst of the financial crisis relatively unscathed. But in those dark days, the bank snapped up rival Washington Mutual. JPMorgan had to write down billions of dollars in losses because of the deal, and now it's trying to use its WaMu purchase to collect a tax refund worth about $1.4 billion.

BART NARTER: JPMorgan is a fool not to pick up this refund if it's being offered to all comers.

Bart Narter is a banking analyst with Celent. He says you can't fault JPMorgan for taking advantage of a tax break that hundreds of other companies are getting, including other banks. But he says the tax break had absolutely no impact on JPMorgan's decision to buy WaMu.

NARTER: They got all sorts of other government support when they picked up Washington Mutual including guarantees from the FDIC. This just makes the deal all the much sweeter for JPMorgan.

Now an extra $1.4 billion at JPMorgan might eventually seep out into the economy and stimulate something.

But Steve Ellis of Taxpayers for Common Sense says who can be sure they'll lend the money out?

STEVE ELLIS: It's a pretty poor return on investment because there's no guarantee that they're going to do anything that is economically stimulative. They can pay down debt, they can hoard cash. It really doesn't have any strings attached to it whatsoever. And so it's really turned out to be an economic loser as far as stimulus.

The tax breaks may be more useful for some of the other recipients. U.S. Airways will get a break. Same with Borders, Zales Jewelry and several homebuilders.

In New York, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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