Profiting from American Hunger the JP Morgan Way

 

Let's open by looking at the growth in the number of America's using food stamps also known as the Supplemental Nutrition Assistance Program or SNAP and the number of Americans that have incomes at 130 percent of the poverty line after the Great Recession:

According to the USDA, the number of participants grew from 33.49 million in fiscal 2009 to 47.64 million in fiscal 2013, an increase of 42.2 percent.

 

Other than SNAP beneficiaries who get an average $133.07 per month per person, who is benefitting from SNAP?  Why, it's none other than JP Morgan through its Electronic Financial Services subsidiary and two other companies including Affiliated Computer Services now owned by Xerox and eFunds who have been massive beneficiaries, particularly now that recipients are issued debit cards or EBTs (Electronic Benefit Transfers) rather than the old-style paper chits.

 

A September 2012 study by the Government Accountability Institute looked at profiteering by corporations that managed the government's food stamp program.  The study noted that there are several streams of income for the aforementioned three companies from their participation in SNAP:

 

1.) The Cost Per Case Month or CPCM:  Every month, the company is paid a fee for each individual enrolled in SNAP, ranging from $0.65 to $1.45 depending on the state.  The fee can be higher if the state government decides to have the contractor distribute multiple welfare services on a single EBT card (i.e. TANF and SNAP).  Basically, an expansion of the number of Americans receiving SNAP benefits translates directly into increased fees paid to JP Morgan et al.

 

2.) ATM Fees: When an EBT card is used at an ATM machine, particularly a machine that is not within a company's network, a fee is charged for withdrawing TANF cash or making a balance inquiry.  In the case of Nevada, cardholders are charged $0.85 for each withdrawal at an out-of-network terminal.

 

3.) Point of Sale (POS) Machines: States rent POS machines and pay a monthly fee to the EBT service provider.  In the case of Arizona, this fee is $14.95 per month per machine.

 

4.) Card Replacement Fees:  Fees are charged for lost cards.

 

5.) Customer Service Call Fees.

 

How much has all of this been worth to the providers?  Between 2004 and 2012, 18 of the 24 states that contracted with JP Morgan to provide welfare benefits have agreed to pay $560,492,596.02 in total.  New York alone has a seven-year contract worth $126.4 million.

 

Let's close by looking at JP Morgan's contributions to individuals and PACs since 1990:

 

Since 1990, JP Morgan has contributed $32.215 million to election campaigns, most of it since 2003 when it acquired its Electronic Financial Services subsidiary from Citicorp Electronic Financial Services.  Major recipients of JP Morgan's largess include the following members of the Senate Committee on Agriculture, Nutrition and Forestry who are responsible for administering SNAP:

 

Mitch McConnell – $159,750 since 1989

Kirsten Gillibrand – $161,700 since 1989 

 

Overall, the top recipient of funds from JP Morgan was Barack Obama who received a significant $1,211,644 compared to "only" $962,246 for his opponent, Mitt Romney.

 

JP Morgan has also spent $82.388 million on lobbying since 1999 as shown on this graphic:

Even though the business is highly profitable, according to Reuters, in early 2014, JP Morgan  is threatening  to exit the government prepaid card business because of the risks associated with these products including the hacking of personal data and the mailing out of incorrect replacement cards in Connecticut.

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