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Estimating JP Morgan Chase's Profits From the Madoff Deposits
Author(s) -
Davis Louis R.,
Wilson Linus
Publication year - 2011
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/j.1540-6296.2011.01196.x
Subject(s) - chase , net interest margin , margin (machine learning) , economics , profit margin , profit (economics) , point (geometry) , monetary economics , business , actuarial science , economic history , finance , microeconomics , mathematics , geometry , database , machine learning , computer science , capital adequacy ratio
JP Morgan Chase had deposits from Bernard L. Madoff's investors totaling $5.5 billion at one point in 2008. The Chase account was supposedly where most of the funds in his Ponzi scheme were deposited. Any large deposit can be a considerable source of profit to a bank. Assuming that the deposits returned the bank's net interest margin and grew at a random geometric rate, this article estimates that JP Morgan Chase generated $435 million in after‐tax profits from this very large account over the course of 16 years. With JP Morgan Chase the target of pending lawsuits relating to the Madoff fraud, this article's methodology and results may be of interest to litigants, prosecutors, journalists, and academics.