Law and Economics


This research paper shades some light into a recent development of a legal issue the corporate world. It highlights the events that led to it and attempts to solve the issue. Early in January this year, the Securities and Exchange Commission in United States sued a renowned banking group JP Morgan chase for allegedly obtaining money amounting to millions of hundreds of dollars fraudulently. The complainant claimed that a security division that has links with to the bank. Morgan manipulated the bond market between 1997 to 2005. They further alleged in Washington post that the bank used information that it obtained secretly to fix winners of the bidding process. Washington post further claimed that the bank aided bidders by either presenting losing bids or getting biding agents to collect losing bids from competitors (D’Apice, Hannah 12).

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This was both illegal and equally immoral; municipal bonds are generally low-risk ventures whose profits are invested in municipal projects. These projects are for the people they are meant to improve the conditions of the taxpayers. Competitive bidding process applied in this case is meant to attain far market value to meet the demands of the regulator. They are also exempted from certain tax demands.

The newspaper further reported that the bank, JP Morgan Chase fraudulently rigged at least 93 municipal bond transactions in 93 states countrywide. The Securities and Exchange. Commission resoundingly maintained that the practice of JP Morgan Chase was illegal and against the United States rules of fair trade. The case has been going on for some time but came July 11 2011. The court decided that JP Morgan chase should pay a total of $211.2 immediately. The banking group agreed to pay without further ado. Under the terms of payment, the bank will settle the payment as follows. A total of $50 million to United States internal revenue unit, among other aggrieved authorities until the total comes to $211.2 million.

The well-established bank however, was apologetic and insisted through their chief executive that neither he nor his business empire tolerates noncompetitive behavior and deliberate violations of the law. The bank alleged that it had carried out its own internal investigation and that those who were found culpable were punished accordingly. The bank continued to state that the actions are regrettable and that it will do whatever it takes to restore the good image that it enjoyed from the public. The article, on the other hand, seemed to cast aspersions on the issue stating that it was the policy of the bank. The Washington post even went on record to say that senior management encouraged the practice and that such an action need to have attracted a stiffer penalty (D’Apice, Hannah 14).

Analysis of the economics behind the case

This case touches on many financial aspects; the first one involves the issue of the municipal loose money through Morgan Chase fraudulent deals. The second issue involves the banks penalty that amounts to $211.2, which the bank comfortably agreed to pay. The first case meant the people who lost their investments; in the real sense, people that were conned in the practice. The bond was an avenue for the municipal to invest in their money and later take the proceeds and use them in the construction of people’s projects. It was extremely immoral for a bank of Morgan Chase stature to engage in such fraudulent schemes.

This further implies that, at one point, the citizens could not have their infrastructure put up because the municipal could not have money. Instead, the money was conned through Morgan Chase Fraudulent activity. The decision that the court arrived at about this case was satisfactory in my opinion. The bank owes the citizens their money and they should pay back. In fact, I think the court could have ordered the bank to pay more than what was awarded to serve as an example to any investor who would want to engage in similar dishonest practices. The bank denied many people out their right to have schools or hospitals because the money went to somebody’s family business; I think this is just an acceptable. According to D’Apice, Hannah (23) more action needs to be taken against the ban to prevent any possible repetition in the future.

On the part of Morgan Chase bank, the decision to pay $211.2 cannot harm the banks business in my view. Morgan Chase bank is among the strongest banks in the United States the bank rakes in high profits year in year out. The decision to order it pays that much could not tilt the banks business in any way. The court however did a correct thing when it decided in collaboration with securities commission that the bank would never be allowed to transact in securities again. In general, Morgan Chase remains a strong bank with a global outlook. In spite of the court action, the bank has still maintained good profits.  


The justice system should be able to hold accountable to how to commit crimes and other heinous acts. Courts exist to ensure that justice prevails in the society and more so to protect the weak. In life, we have people or parties having disagreements. There should be a good way to ensure that those who commit crimes are accountable before the law.

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