In October, senior executives at JPMorgan Chase wrote in an op-ed for Fortune that the “clock is ticking” on the climate crisis and that JPMorgan has plans to be part of the solution. The bank, they said, would align its huge financing portfolio to meet Paris climate targets in the oil and gas, electric power and automotive sectors. “We are optimistic that industry and governments will harness the momentum and rise to the challenge,” they wrote. “Our bank intends to do this, and our common future depends on it.”
Environmental observers had doubts about JPMorgan’s commitment – not least because the then bank had ex-ExxonMobil CEO Lee Raymond on its board, a longtime skeptical who ran the society when it aggressively fought government action to fight against climate change. Recently, in a report on fossil fuel financing by the Rainforest Action Network climate group, JPMorgan Chase deserved the distinction as the ‘worst fossil fuel banker’ between 2016 and 2020, funding nearly $ 317 billion for the fossil fuel industry during that time, including Arctic oil and gas drilling and sand mining bituminous in Canada.
The bank is undermining its climate promises in important ways that are less visible to the public. Environmental group Friends of the Earth obtained emails last April between JPMorgan Chase and senior Treasury Department officials in connection with an access to information request and lawsuit. The batch of emails shows that JPMorgan is calling for changes to government loan programs intended to help small and medium-sized businesses weather the economic fallout from the pandemic. They also capture an unusual snapshot of Wall Street’s interdependence on the future of fossil fuels.
In March 2020, Congress passed the CARES (Coronavirus Aid, Relief, and Economic Security) law, giving the Federal Reserve $ 454 billion to support businesses. The move also gave then-Treasury Secretary Steven Mnuchin broad powers to adjust loan terms as he saw fit. Three weeks after the law was passed, a senior JPMorgan executive forwarded an email to then-Assistant Treasury Secretary Justin Muzinich, which described two items under the subject line “MSL Industry Review and Oil. and Gas Banking Commentary ”. Part of the email referred to the Main Street Lending Program, called by the shortcut MSLP, targeting small and medium-sized businesses that have been excluded from other COVID relief programs.
The same email includes a candid discussion of how the government could directly support oil and gas bailouts and protect banks exposed to large losses when oil prices plummeted. JPMorgan employee Travis Machen, responsible for banking services to corporate clients of financial institutions, wrote: “Many banks, widely dispersed in the South, have significant direct exposure to oil and gas (typically ranging from ~ 3 to 11% of total loans) ”. with less than 50 banks having “measurable direct exposure to the oil and gas sector”.
Machen lists a menu of ideas for the federal government to step in on behalf of the banks, including “additional direct government support to the energy sector (similar to programs for the airline industry).” He suggests adapting programs like the Main Street Lending Program, as well as a government bailout. The e-mail contains suggestions which were ultimately not taken up by the administration. For example, leaders proposed a program modeled on the TARP distressed asset program to give the banking sector an injection of government-guaranteed capital when faced with large losses.
Lukas Ross, director of the Friends of the Earth program, said the exchange provides “a glimpse of the depths the industry was willing to go to protect investments in fossil fuels when the whole future of the economy goes.” is at stake. “This exchange of e-mails is a surprisingly candid picture of the risk Big Oil poses to the stability of our financial system. “
JPMorgan has characterized emails differently. “We have engaged with the government to provide commentary on the Main Street Loan Program at large and in all sectors,” a spokesperson for JPMorgan Chase said in a statement. She said the part of the email that Mother Jones reviewed was actually sent to the Assistant Secretary of the Treasury in error. The section that was intended for the assistant secretary, she said, was an attachment that Mother Jones could not review it because it was redacted to protect commercial confidentiality. In this attachment, “at no time did we advocate a specific industry,” the spokesperson said.
From the documents, it is not clear how the Trump administration picked up specific elements of the email. But there is plenty of evidence that Wall Street and the fossil fuel industry ultimately shaped the terms of government business loans. A March report from Public citizen found that the fossil fuel sector ‘was partly responsible for the failure of the program to meet its targets’, weakening language on employer retention, easing financial need requirements and increasing loan amounts even to businesses employing less than 10 workers. The result was that 46 fossil fuel companies received $ 828 million in MSLP loans at the end of November. Twelve of these companies each received loans of $ 35 million or more:
After the release of the first version of the MSLP condition sheet, the fossil fuel industry and its political allies lobbied to ease the constraints on borrowers, hoping to make MSLP loans available to gas companies and oil. This lobbying included letters sent by the Independent Petroleum Association of America (IPAA) and Senator Ted Cruz (R-Texas), in which they argued that the relaxation of criteria for eligible borrowers and the weakening of restrictions on the use of loans would be essential to support people in difficulty. energy sector. As a result of these lobbying efforts, the Fed implemented several changes to the MSLP’s condition sheet, many of which reflected the demands of the IPAA and Cruz.
Banks are not a direct arm of the fossil fuel industry, according to the financial responsibility group Little sister, but they are essential to provide loans and financial services to support the industry so that it can continue to exist and develop. This relationship can seriously backfire on the volatile oil price market. JPMorgan’s emails to the Treasury cite a precedent for government intervention for the financial sector and other industries when the economy is in crisis, but the precedent of the 2008 recession also shows how Wall Street relied on bailouts for taxpayers when his bets fail. Last year’s pandemic was a first lesson in the aftermath of a carbon bubble, where banks like JPMorgan have shown how vulnerable the entire financial system is to a crash amid overvalued oil prices. in a world grappling with climate crises.
JPMorgan has taken a few small steps to restore its reputation in the face of climate change: The bank has promised to phase out funding for oil exploration in the Arctic. Its funding of the fossil fuel industry fell significantly in 2020, although this reflects the pandemic or sustainability commitments are unclear. Last December, after a year of constant pressure to oust Lee Raymond, a 33-year JPMorgan board member, the former Exxon chief resigned. No specific reason was given for his resignation.
Banks, including JPMorgan, have voluntarily exceeded expected government control of the sector’s investment in fossil fuels: Treasury Secretary Janet Yellen has repeatedly linked climate impacts to economic instability, and President Joe Biden is expected to soon lead the Securities and Exchange Commission and the Federal Reserve to strengthen requirements that companies disclose about the impacts of global warming on investments to shareholders. But banks and their regulators have a lot more work to do. Eventually, Ross predicts, “The price of oil is heading toward zero again, and it will stay there forever.” The question is whether or not we are going to make a reasonable and safe phase-out of this industry or not, or whether it will be a hard landing. Here’s a look at what could happen when the carbon bubble finally bursts. “