SEC Comment Letter for JPMORGAN CHASE & CO (JPM, AMJB, VYLD, JPM-PC, JPM-PD, JPM-PJ, JPM-PK, JPM-PL, JPM-PM) (CIK 0000019617) (JPM) — Jun 8, 2009
JPMORGAN CHASE & CO (JPM, AMJB, VYLD, JPM-PC, JPM-PD, JPM-PJ, JPM-PK, JPM-PL, JPM-PM) (CIK 0000019617)
Date: June 8, 2009 · CIK: 0000019617 · Accession: 0000000000-09-030249
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-05805
Referenced dates: April 9, 2009
Letter
DIVISION OF CORPORATION FINANCE UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 June 9, 2009 By U.S. Mail and Facsimile to: (212) 270-1604 Mr. Michael J. Cavanagh Chief Financial Officer JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017
Re: JPMorgan Chase & Co. Form 10-K for the Fiscal Year Ended December 31, 2008 Form 10-Q for the Quarterly Period Ended March 31, 2009 File No. 001-05805
Dear Mr. Cavanagh:
We have reviewed your letter filed on Ma y 5, 2009 and have the following comments.
Form 10-K for the Fiscal Year Ended December 31, 2008
Item 8 – Financial Statements and Supplementary Data Notes to consolidated financial statements Note 16 – Loan securitizations, page 168
1. In future filings, beginning with your June 30, 2009 Form 10-Q, please provide significantly enhanced disclosures similar to those included in response to bullets one and two of comment 3 of our letter dated April 9, 2009. Your disclosures should include a comprehensive discussion of the transaction specifically addr essing your decision to vo luntarily perform the transfer of higher quality loans with loss rates of 5 to 6% in return for lesser quality loans with loss rates of 12 to 13% despite the appare nt economic consequences of the transaction. In addition, your disclosure should address any po tential ramifications had the transaction not taken place. In this regard, we note your response that there was no imminent event – such as “early amortization” – that would have occu rred had these actions not been taken. Please address any other potential ramifications, includ ing but not limited to ratings issues, liquidity guarantees, reputational risk associ ated with the Trust, etc.
Mr. Michael J. Cavanagh JPMorgan Chase & Co. June 9, 2009 Page 2 2. We note your response to comment 3 of our lett er dated April 9, 2009 in which you state that you carried over the allowance fo r loan losses from WMB and subsequently applied your methodology for calculating the allo wance for loan losses to the acquired seller’s interest resulting in an increase to the allowance for loan losses, which was recorded as an accounting conformity adjustment. We also note your resp onse to comment 4 in which you state that the amount of the Firm’s recorded allowance related to the seller’s interest prior to the removal of receivables from the Trust was approximately 1.0 billion. Please tell us the amount of the allowance prior to the accounting conform ity adjustment, the amount of the accounting conformity adjustment, whether the $1.0 billion referred to above includes the adjustment and confirm, if true, that th is accounting conformity adjustment is included in $1.5 billion charge to conform WMBs loan loss reserv e to your methodology as disclosed in the December 31, 2008 Form 10-K.
3. Your response to comment 4 of our letter date d April 9, 2009 appears to indicate that the $400 million provision in the corporate segment re lates only to the impact of the 700 bps increase on the seller’s interest resulting fr om the transfer of $5.5 billion of par amount receivables transferred in to the Trust. In this regard, we remain unclear how you determined it was appropriate to record a $400 million pr ovision for a net decrease of $500 million in seller’s interest resulting from the transaction, particularly considering the overall credit quality of the assets in the tr ust improved as a result of the tr ansaction. In order for us to better understand your accounting in this regar d, please provide us w ith a significantly enhanced discussion addressing our concern, and pr ovide similarly enhanced disclosure in all future filings beginning with your June 30, 2009 Form 10-Q. In preparing your response and enhanced disclosures, please address the following:
• As it relates to the $6.2 billion in credit card receivables re moved from the Trust, please quantify and describe any adjustments aside from the carryover of the allowance in connection with the acquisition of seller’s in terest and subsequent accounting conformity adjustment (e.g., adjustment for recharacterizat ion of seller’s interest to wholly owned loans) and tell us the segment in whic h these adjustments were recorded; and
• As it relates to the $5.8 billion of higher credit quality loan s transferred to the Trust, please tell us the amount of allowance record ed prior to the transfer and quantify and describe any adjustments to th is historical allowance (e.g., re characterization of loans to seller’s interest) and the segmen t in which they were recorded.
Closing Comments
Please respond to these comments within ten business days or tell us when you will provide us with a response. Your response le tter should key your resp onses to our comments, indicate your intent to include the requested revision in future filings, provide a draft of your proposed disclosure and provide any requested information. We may have additional comments after reviewing your response.
Mr. Michael J. Cavanagh JPMorgan Chase & Co. June 9, 2009 Page 3 You may contact Benjamin Phi ppen, Staff Accountant, at (202) 551-3697 or me at (202) 551-3423 if you have questions. Sincerely,
Amit Pande Accounting Branch Chief
Show Raw Text
DIVISION OF CORPORATION FINANCE UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 June 9, 2009 By U.S. Mail and Facsimile to: (212) 270-1604 Mr. Michael J. Cavanagh Chief Financial Officer JPMorgan Chase & Co. 270 Park Avenue New York, NY 10017 Re: JPMorgan Chase & Co. Form 10-K for the Fiscal Year Ended December 31, 2008 Form 10-Q for the Quarterly Period Ended March 31, 2009 File No. 001-05805 Dear Mr. Cavanagh: We have reviewed your letter filed on Ma y 5, 2009 and have the following comments. Form 10-K for the Fiscal Year Ended December 31, 2008 Item 8 – Financial Statements and Supplementary Data Notes to consolidated financial statements Note 16 – Loan securitizations, page 168 1. In future filings, beginning with your June 30, 2009 Form 10-Q, please provide significantly enhanced disclosures similar to those included in response to bullets one and two of comment 3 of our letter dated April 9, 2009. Your disclosures should include a comprehensive discussion of the transaction specifically addr essing your decision to vo luntarily perform the transfer of higher quality loans with loss rates of 5 to 6% in return for lesser quality loans with loss rates of 12 to 13% despite the appare nt economic consequences of the transaction. In addition, your disclosure should address any po tential ramifications had the transaction not taken place. In this regard, we note your response that there was no imminent event – such as “early amortization” – that would have occu rred had these actions not been taken. Please address any other potential ramifications, includ ing but not limited to ratings issues, liquidity guarantees, reputational risk associ ated with the Trust, etc. Mr. Michael J. Cavanagh JPMorgan Chase & Co. June 9, 2009 Page 2 2. We note your response to comment 3 of our lett er dated April 9, 2009 in which you state that you carried over the allowance fo r loan losses from WMB and subsequently applied your methodology for calculating the allo wance for loan losses to the acquired seller’s interest resulting in an increase to the allowance for loan losses, which was recorded as an accounting conformity adjustment. We also note your resp onse to comment 4 in which you state that the amount of the Firm’s recorded allowance related to the seller’s interest prior to the removal of receivables from the Trust was approximately 1.0 billion. Please tell us the amount of the allowance prior to the accounting conform ity adjustment, the amount of the accounting conformity adjustment, whether the $1.0 billion referred to above includes the adjustment and confirm, if true, that th is accounting conformity adjustment is included in $1.5 billion charge to conform WMBs loan loss reserv e to your methodology as disclosed in the December 31, 2008 Form 10-K. 3. Your response to comment 4 of our letter date d April 9, 2009 appears to indicate that the $400 million provision in the corporate segment re lates only to the impact of the 700 bps increase on the seller’s interest resulting fr om the transfer of $5.5 billion of par amount receivables transferred in to the Trust. In this regard, we remain unclear how you determined it was appropriate to record a $400 million pr ovision for a net decrease of $500 million in seller’s interest resulting from the transaction, particularly considering the overall credit quality of the assets in the tr ust improved as a result of the tr ansaction. In order for us to better understand your accounting in this regar d, please provide us w ith a significantly enhanced discussion addressing our concern, and pr ovide similarly enhanced disclosure in all future filings beginning with your June 30, 2009 Form 10-Q. In preparing your response and enhanced disclosures, please address the following: • As it relates to the $6.2 billion in credit card receivables re moved from the Trust, please quantify and describe any adjustments aside from the carryover of the allowance in connection with the acquisition of seller’s in terest and subsequent accounting conformity adjustment (e.g., adjustment for recharacterizat ion of seller’s interest to wholly owned loans) and tell us the segment in whic h these adjustments were recorded; and • As it relates to the $5.8 billion of higher credit quality loan s transferred to the Trust, please tell us the amount of allowance record ed prior to the transfer and quantify and describe any adjustments to th is historical allowance (e.g., re characterization of loans to seller’s interest) and the segmen t in which they were recorded. Closing Comments Please respond to these comments within ten business days or tell us when you will provide us with a response. Your response le tter should key your resp onses to our comments, indicate your intent to include the requested revision in future filings, provide a draft of your proposed disclosure and provide any requested information. We may have additional comments after reviewing your response. Mr. Michael J. Cavanagh JPMorgan Chase & Co. June 9, 2009 Page 3 You may contact Benjamin Phi ppen, Staff Accountant, at (202) 551-3697 or me at (202) 551-3423 if you have questions. Sincerely, Amit Pande Accounting Branch Chief