JPMorgan's practices bring scrutiny - FT.com Three times a pallbearer, never a corpse - that is JPMorgan Chase's experience of the brutal financial markets of the past few years. At the demise of Bear Stearns, Lehman Brothers and, most recently, MF Global, the bank has been deeply involved: in a rescue bid for Bear and in a complex network of relationships with Lehman and MF Global. Its unrivalled reach raises inevitable questions about its role. The Commodity Futures Trading Commission yesterday fined JPMorgan $20m to settle allegations that the bank mishandled Lehman's customer funds. The futures regulator alleged the bank overextended credit to Lehman by treating customer funds as if they belonged to Lehman and using the inflated calculation to determine its credit limit. The CFTC also claimed that after the 2008 bankruptcy it initially refused to release customer funds. JPMorgan said that the amount of extra credit Lehman obtained by it "mistakenly" including the customer funds was "small relative to the overall relationship" between the banks. But the real fight over JPMorgan's role in Lehman's final days is set to come later this year when a lawsuit brought by the collapsed bank is due for trial. The $8.6bn lawsuit accuses JPMorgan of using its "life and death power as the brokerage firm's primary clearing bank" to put a "financial gun" to its head and demand excess collateral. It claims JPMorgan abused its access to US government officials and then "accelerated Lehman's free fall into bankruptcy," hoovering up collateral to protect itself to the detriment of the firm and other eventual creditors. Arguing for the case to be dismissed, JPMorgan's lawyers said the bank "did not cut and run" when it had the chance but stood by Lehman "while other financial players were running for the exits." "Far from being inequitable or harming other creditors, JPMorgan's continued extensions of credit allowed [Lehman] to survive until it could be sold to Barclays, softening the blow for [Lehman's] customers but leaving JPMorgan with tens of billions of dollars in claims," the bank said. In a separate but related action, Anton Valukas, Lehman's bankruptcy examiner, found that most of JPMorgan's actions in its role as lender to Lehman would not pose credible claims against the bank. He said there was a possible claim "but not a strong claim ... that JPMorgan breached the implied covenant of good faith and fair dealing by making excessive collateral requests to Lehman." A New York judge must now decide whether to allow the Lehman case against JPMorgan to come to a trial. Before Lehman, JPMorgan was even more deeply involved in a dying investment bank. It was on hand to scoop up the remains of Bear Stearns, saving it from bankruptcy, with financing sweetened by the Federal Reserve, which was desperate to avoid a collapse. Most recently, MF Global's failure has raised familiar questions about JPMorgan's role. JPMorgan acted as custodian and clearing bank for MF Global. It also administered a $1.2bn line of credit for the broker-dealer. MF Global employees including Jon Corzine, chief executive, and Henri Steenkamp, global chief financial officer "expressed frustration" with JPMorgan's alleged delays in sending the broker-dealer money due from selling assets, according to congressional investigators. The bank's decision to parachute its bankers into the New York offices of MF Global in its final week has also raised eyebrows in the industry. JPMorgan says the personnel were there to help MF Global unwind some of the broker-dealer's repo transactions. "We took what we believed were appropriate and prudent steps, as part of maintaining safe and sound banking operations, to ensure that we did not wind up in a position where we had extended credit to MF Global without proper collateral and security protections," Diane Genova, JPMorgan's deputy general counsel has said. JPMorgan also notes that it fully funded requests for credit on the $1.2bn credit line to MF Global shortly before it collapsed even as "other financial institutions who were members of the bank group either delayed their funding or did not provide funding at all." Some senior bankers from other banks, who declined to speak publicly about a rival, point to conflicts at JPMorgan arguing that an investment bank such as Lehman Brothers, or Morgan Stanley for that matter, should not have assets sitting with a competitor. Other rivals say JPMorgan appears to manage its conflicts properly. Some JPMorgan bankers believe a lot of this is sour grapes from lesser competitors. The bank has built a formidable presence in global finance, with unique reach. Along with Bank of New York Mellon, it is one of only two clearing banks that are agents in the vast tri-party repurchase, or repo, market that is a crucial source of short-term funding for investment banks. BNY Mellon, though, does not have the same Wall Street presence, confining itself to the relatively anodyne world of custody. JPMorgan is a colossal full-service investment and retail bank, directly competing with the likes of Lehman, MF Global and Bear Stearns until those competitors went away.