JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, D.C., on Dec. 6, 2023.
Evelyn Hockstein | Reuters
Buried in a roughly 200-page quarterly filing from JPMorgan Chase last month were eight words that underscore how contentious the bank’s relationship with the government has become.
The lender disclosed that the Consumer Financial Protection Bureau could punish JPMorgan for its role in Zelle, the giant peer-to-peer digital payments network. The bank is accused of failing to kick criminal accounts off its platform and failing to compensate some scam victims, according to people who declined to be identified speaking about an ongoing investigation.
In response, JPMorgan issued a thinly veiled threat: “The firm is evaluating next steps, including litigation.”
The prospect of a bank suing its regulator would’ve been unheard of in an earlier era, according to policy experts, mostly because corporations used to fear provoking their overseers. That was especially the case for the American banking industry, which needed hundreds of billions of dollars in taxpayer bailouts to survive after irresponsible lending and trading activities caused the 2008 financial crisis, those experts say.
But a combination of factors in the intervening years has created an environment where banks and their regulators have never been farther apart.
Trade groups say that in the aftermath of the financial crisis, banks became easy targets for populist attacks from Democrat-led regulatory agencies. Those on the side of regulators point out that banks and their lobbyists increasingly lean on courts in Republican-dominated districts to fend off reform and protect billions of dollars in fees at the expense of consumers.
“If you go back 15 or 20 years, the view was it’s not particularly smart to antagonize your regulator, that litigating all this stuff is just kicking the hornet’s nest,” said Tobin Marcus, head of U.S. policy at Wolfe Research.
“The disparity between how ambitious [President Joe] Biden’s regulators have been and how conservative the courts are, at least a subset of the courts, is historically wide,” Marcus said. “That’s created so many opportunities for successful industry litigation against regulatory proposals.”
Assault on fees
Those forces collided this year, which started out as one of the most consequential for bank regulation since the post-2008 reforms that curbed Wall Street risk-taking, introduced annual stress tests and created the industry’s lead antagonist, the CFPB.
In the final months of the Biden administration, efforts from a half-dozen government agencies were meant to slash fees on credit card late payments, debit transactions and overdrafts. The industry’s biggest threat was the Basel Endgame, a sweeping proposal to force big banks to hold tens of billions of dollars more in capital for activities like trading and lending.
“The industry is facing an onslaught of regulatory and potential legislative change,” Marianne Lake, head of JPMorgan’s consumer bank, warned investors in May.
JPMorgan’s disclosure about the CFPB probe into Zelle comes after years of grilling by Democrat lawmakers over financial crimes on the platform. Zelle was launched in 2017 by a bank-owned firm called Early Warning Services in response to the threat from peer-to-peer networks including PayPal.
The vast majority of Zelle activity is uneventful; of the $806 billion that flowed across the network last year, only $166 million in transactions was disputed as fraud by customers of JPMorgan, Bank of America and Wells Fargo, the three biggest players on the platform.
But the three banks collectively reimbursed just 38% of those claims, according to a July Senate report that looked at disputed unauthorized transactions.
Banks are typically on the hook to reimburse fraudulent Zelle payments that the customer didn’t give permission for, but usually don’t refund losses if the customer is duped into authorizing the payment by a scammer, according to the Electronic Fund Transfer Act.
A JPMorgan payments executive told lawmakers in July that the bank actually reimburses 100% of unauthorized transactions; the discrepancy in the Senate report’s findings is because bank personnel often determine that customers have authorized the transactions.
Amid the scrutiny, the bank began warning Zelle users on the Chase app to “Stay safe from scams” and added disclosures that customers won’t likely be refunded for bogus transactions.
JPMorgan declined to comment for this article.
Dimon in front
The company, which has grown to become the largest and most profitable American bank in history under CEO Jamie Dimon, is at the fore of several other skirmishes with regulators.
Thanks to his reputation guiding JPMorgan through the 2008 crisis and last year’s regional banking upheaval, Dimon may be one of few CEOs with the standing to openly criticize regulators. That was highlighted this year when Dimon led a campaign, both public and behind closed doors, to weaken the Basel proposal.
In May, at JPMorgan’s investor day, Dimon’s deputies made the case that Basel and other regulations would end up harming consumers instead of protecting them.
The cumulative effect of pending regulation would boost the cost of mortgages by at least $500 a year and credit card rates by 2%; it would also force banks to charge two-thirds of consumers for checking accounts, according to JPMorgan.
The message: banks won’t just eat the extra costs from regulation, but instead pass them on to consumers.
While all of these battles are ongoing, the financial industry has racked up several victories so far.
Some contend the threat of litigation helped convince the Federal Reserve to offer a new Basel Endgame proposal this month that roughly cuts in half the extra capital that the largest institutions would be forced to hold, among other industry-friendly changes.
It’s not even clear if the watered-down version of the proposal, a long-in-the-making response to the 2008 crisis, will ever be implemented because it won’t be finalized until well after U.S. elections.
If Republican candidate Donald Trump wins, the rules might be further weakened or killed outright, and even under a Kamala Harris administration, the industry could fight the regulation in court.
That’s been banks’ approach to the CFPB credit card rule, which aimed to cap late fees at $8 per incident and was set to go into effect in May.
A last-ditch effort from the U.S. Chamber of Commerce and bank trade groups successfully delayed its implementation when Judge Mark Pittman of the Northern District of Texas sided with the industry, granting a freeze of the rule.
‘Venue shopping’
A key playbook for banks has been to file cases in conservative jurisdictions where they are likely to prevail, according to Lori Yue, a Columbia Business School associate professor who has studied the interplay between corporations and the judicial system.
The Northern District of Texas feeds into the 5th Circuit Court of Appeals, which is “well-known for its friendliness to industry lawsuits against regulators,” Yue said.
“Venue-shopping like this has become well-established corporate strategy,” Yue said. “The financial industry has been particularly active this year in suing regulators.”
Since 2017, nearly two-thirds of the lawsuits filed by the U.S. Chamber of Commerce challenging federal regulations have been in courts under the 5th Circuit, according to an analysis by Accountable US.
Industries dominated by a few large players — from banks to airlines, pharmaceutical companies and energy firms — tend to have well-funded trade organizations that are more likely to resist regulators, Yue added.
The polarized environment, where weakened federal agencies are undermined by conservative courts, ultimately preserves the advantages of the largest corporations, according to Brian Graham, co-founder of bank consulting firm Klaros.
“It’s really bad in the long run, because it locks in place whatever the regulations have been, while the reality is that the world is changing,” Graham said. “It’s what happens when you can’t adopt new regulations because you’re terrified that you’ll get sued.”
— With data visualizations by CNBC’s Gabriel Cortes.
Cliff Asness, co-founder of AQR Capital Management, believes bitcoin is in a speculative bubble after the cryptocurrency’s swift rally carried it above $100,000 following the November presidential election.
“I’m on the bubble side, on net,” Asness said on CNBC’s “Money Movers” on Monday. “To move me off that, you really need not a price change, but a use case. That’s what could convince me to become maybe more of a crypto person when I find any use for it, aside from speculation and criminality.”
Asness said there are three uses for crypto that he has identified: speculation, use in war-torn countries and paying cyber ransom.
Bitcoin rallied 120% in 2024 after a huge year-end pop on the back of President-elect Donald Trump’s election. Investors hoped Trump would usher in a golden age of crypto, including supportive deregulation of the industry and a national strategic bitcoin reserve. The digital coin has dipped 3% in the new year, last trading near $90,000.
“There’s no fundamental trend for crypto because I don’t know what the fundamentals are, but there is a price trend,” Asness said. “So I would guess most trend followers who have it in their universe are actually long.”
Bitcoin over the past year.
Although Asness is bearish on crypto, he noted that he would not bet against it due to its volatility.
“I wouldn’t short crypto only because shorting things with 100% annual volatility can be a little scary. I think we’ve all discovered what concentrated shorts can do to a portfolio,” he added.
Asness co-founded AQR in 1998 after a stint at Goldman Sachs. He and his partners established the quant-driven firm’s investment philosophy at the University of Chicago’s Ph.D. program, focusing on value and momentum strategies.
Check out the companies making headlines in midday trading. Quantum stocks — Quantum computing stocks dropped after Meta Platforms CEO Mark Zuckerberg became the latest high-profile executive to ease expectations for the technology. Rigetti Computing dropped 27%, while D-Wave Quantum shed 32%. The Defiance Quantum & AI ETF lost 2.5%. Nvidia , chip stocks — Popular semiconductor stocks declined after the Biden administration revealed new AI chip export caps. Nvidia lost more than 2%, while the VanEck Semiconductor ETF dropped 1.4%. Micron Technology shed nearly 5%. Moderna — Shares shed more than 20% after the vaccine maker cut its 2025 sales guidance by about $1 billion to range between $1.5 billion and $2.5 billion. The company anticipates the majority of its revenue will come in the second half of the year. Crypto stocks — Stocks tied to cryptocurrencies fell as bitcoin slumped more than 3% and briefly dropped below the $90,000 mark. Coinbase fell nearly 5%, while Mara Holdings slipped nearly 7% and MicroStrategy fell 4%. Pinterest —Shares of the visual sharing platform fell 4% on the heels of Jefferies’ downgrade to hold. The bank described Pinterest’s growth as “underwhelming” and pulled down its forecasts for revenue and EBITDA in the 2025 fiscal year. Edison International — Shares dropped 13% as wildfires continued to ripple through Los Angeles. Officials are investigating whether infrastructure sites from its Southern California Edison subsidiary ignited a brush fire. E.l.f. Beauty — The cosmetics producer popped 4% on the back of Morgan Stanley’s upgrade to overweight from equal weight. The bank said e.l.f.’s valuation is more enticing after its pullback in the second half of 2024. Howard Hughes Holdings — The real estate developer’s shares jumped 9% after Bill Ackman proposed a merger deal that offers current holders $85 a share. Ackman proposed forming a new subsidiary of Pershing, which currently owns about 38% of Howard Hughes, that would merge with the real estate developer based in The Woodlands, Texas. Managed care stocks — Managed care names rose on Monday, following the U.S. government’s Friday proposal to increase its 2026 reimbursement rates for Medicare Advantage plans by an average total of 4.3%. Humana gained 8%, followed by a 6% rise in CVS Health and 4% gain in UnitedHealth . U.S. Steel — Shares popped 8% after CNBC reported that Cleveland Cliffs and Nucor are partnering for a potential takeover big after its deal after the White House blocked its deal to be acquired by Japan’s Nippon Steel. Both stocks rose about 4% each.’ Megacap technology — Megacap technology stocks dropped as U.S. Treasury yields pushed higher. Nvidia lost 2%, along with Apple and Meta Platforms . Microsoft and Alphabet fell about 1%. Intra-Cellular Therapies — The stock jumped 34% following the announcement that Johnson & Johnson will buy the drugmaker for $132 per share. That suggests a 39% premium to Friday’s closing price and values Intra-Cellular Therapies at $14.6 billion. Shares of Johnson & Johnson were flat. Abercrombie & Fitch – The stock plunged about 18% after the clothing retailer’s updated fourth-quarter forecast disappointed investors. The company now anticipates net sales for the period to grow between 7% and 8%, up from its prior guidance of growth between 5% and 7%. With those holiday expectations being lower than the numbers the company posted for the prior-year period, that could signal a slowdown in growth. Macy’s — The retail stock fell more than 7% after the company said it expected net sales for the fiscal fourth quarter to be near the low end of its previous guidance range. Macy’s said its comparable sales were “roughly flat” quarter to date, including a drag from locations that aren’t part of the company’s future plans. — CNBC’s Yun Li, Alex Harring, Sean Conlon, Lisa Han, Michelle Fox and Jesse Pound contributed reporting
Check out the companies making headlines before the bell. Quantum stocks — Quantum stocks tumbled on Monday morning, following comments from Mark Zuckerberg echoing Nvidia CEO Jensen Huang that quantum is at least a decade away from being a “useful paradigm.” Zuckerberg made the comments on a Friday episode of the “Joe Rogan Experience.” Shares of Rigetti Computing fell 25% and D-Wave Quantum tumbled around 16%, followed by an 8% decline in IonQ and a 9% slide in Quantum Computing . Managed care stocks — Managed care stocks rose after the U.S. government proposed on Friday an average total increase of 4.3% to its 2026 reimbursement rates for Medicare Advantage plans. Shares of Humana rose almost 6%, while UnitedHealth and CVS Health each added 3%. Boot Barn — The boot retailer popped about 4% after Boot Barn guided for third-quarter earnings per share of around $2.43 on Friday afternoon, higher than the $2.05 analysts polled by FactSet had previous expected. The company’s expected revenue of $608.2 million also came above the prior consensus of $593.4 million. Pinterest — Shares of the visual sharing platform slid 3% in the wake of Jefferies’ downgrade to hold. Jefferies also called the company’s growth “underwhelming” and lowered its forecasts for revenue and EBITDA in the 2025 fiscal year. Crypto stocks — Stocks tied to the price of bitcoin were lower as the cryptocurrency slid to about $90,000. Coinbase and MicroStrategy fell 4% each, in premarket trading. The bitcoin miner Mara Holdings lost 4% and Core Scientific retreated by 3%. Lululemon — Shares of the apparel company rose more than 3% after a holiday sales update showed strong demand . Lululemon raised its guidance for sales and earnings per share for the fourth quarter. The company also said it expects gross margin to expand year over year, while previous guidance called for the margin to narrow. Macy’s — Shares fell 2% after Macy’s issued a lackluster update to its fourth-quarter guidance . Revenue is expected to come in slightly below or at the lower end of previous guidance of $7.8 billion to $8.0 billion. Comparable sales are expected to be roughly flat quarter to date, compared with the consensus estimate of a 0.4% rise, according to FactSet. Abercrombie & Fitch — Shares of the clothing retailer plunged 11% in premarket trading even after Abercrombie raised its outlook for the fourth quarter on strong holiday sales expectations. The company now expects fourth-quarter net sales to grow between 7% and 8%, compared with previous guidance of 5% to 7% growth. Those holiday expectations are still lower than the year-ago period, however, suggesting a slowdown in growth. Howard Hughes Holdings — Shares of the real estate developer jumped 9% after Bill Ackman’s Pershing Square proposed a deal to form a new entity to merge with the real estate company, offering current holders $85 a share. Megacap tech stocks — Megacap tech stocks tumbled on Monday morning as U.S. Treasury yields rose, adding upon their losses from last week. Nvidia , Tesla and Palantir Technologies each lost around 3%, while Broadcom and Micron Technology shed approximately 2%. Moderna — The biotech firm plunged 20% after lowering its 2025 sales guidance by about $1 billion, citing potential headwinds in 2025. Moderna now expects this year’s revenue to fall between $1.5 billion and $2.5 billion, with the majority coming in the second half of the year. Intra-Cellular Therapies — The stock soared nearly 34% after Johnson & Johnson announced it will take over the neurological treatment company for $132 per share. That values Intra-Cellular Therapies at $14.6 billion. Shares of Johnson & Johnson were flat. — CNBC’s Michelle Fox, Alex Harring, Yun Li, Tanaya Macheel, Sarah Min, Jesse Pound and Pia Singh contributed reporting.
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