Every time an American signs up for food stamps in one of 23 states, JPMorgan Chase & Co. (NYSE: JPM) adds to its revenue stream.
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That because JPMorgan Chase contracts to operate as the processor of the Electronic Benefits Transfer (EBT) cards in those states. JPMorgan earns a fee for each recipient, ranging from 31 cents to $2.30, depending on the state, every month for the term of the contract.
JPMorgan’s seven-year Supplemental Nutrition Assistance Program (SNAP, the official name for the federal food stamp program) contract with New York state, for example, brought in more than $126 million of revenue to the big bank.
Florida has paid JPMorgan more than $90 million since 2007. Pennsylvania’s seven-year contract exceeded $112 million.
It brings a whole new meaning to “corporate welfare.”
A Rising Source of Revenue for JPMorgan
A decade ago, servicing SNAP recipients wasn’t nearly so big a business as it has become in recent years.
The number of Americans receiving SNAP benefits has more than doubled since 2000, to an astounding 46.6 million people as of 2012, according to government data. That’s nearly 15% of the U.S. population.
So it’s no surprise that U.S. government spending on food stamp benefits has grown from $18 billion in 2000 to $85 billion in 2012 – a steep increase that has given JPMorgan a nice boost.
“This business is a very important business to JPMorgan,” Christopher Paton, managing director of JPMorgan’s public-sector payments business, told Bloomberg News in 2010. “It’s an important business in terms of its size and scale… Right now, volumes have gone through the roof in the past couple of years. The good news, from JPMorgan’s perspective, is the infrastructure that we built has been able to cope with that increase in volume.”
A study released last fall by the Government Accountability Institute (GAI), a government watchdog group, estimated that since 2004 JPMorgan had collected more than $560 million in fees from just 18 of the states with which it has EBT contracts.
And the bank has taken steps to make sure the SNAP program remains a growing source of revenue. JPMorgan’s political donations to the members of House and Senate agricultural committees, the ones with legislative responsibility for the program, soared from just over $82,000 in 2002 to nearly $333,000 as of 2010.
JPMorgan: Taking From the Poor to Give to the Rich
As if profiting from a program designed to help the poor were not bad enough, JPMorgan also makes money directly from the SNAP recipients.
The GAI said JPMorgan and the other two primary EBT administrators – a subsidiary of Xerox Corp. (NYSE: XRX) called Affiliated Computer Services, and eFunds Corp., a subsidiary of Fidelity National Information Services (NYSE: FIS) – make money from food stamp recipients in other ways as well.
Purchases made by EBT cards can only be made with special Point of Sale (POS) machines, for which the states also pay JPMorgan a monthly fee. Arizona pays $14.95 per POS machine per month.
In addition, any time a SNAP recipient uses an EBT card at an ATM machine outside of JPMorgan’s network, the bank charges a fee, just as it would any other customer.
JPMorgan also charges EBT users to replace lost cards, and for customer service calls (New York cardholders, for example, pay 25 cents per call.)
All those charges and fees come directly out of the pocket of SNAP recipients – people so poor they need food stamps to make ends meet.
You’d think a bank that needed a $94.7 billion bailout from U.S. taxpayers as a result of the 2008 financial crisis would have a better sense of civic responsibility.
But that’s just not in JPMorgan’s DNA.
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