Report: JP Morgan Makes Over Half A Billion Dollars Off Food Stamps
A new report by the Government Accountability Institute finds that JP Morgan has made at least $560,492,596 since 2004 processing the Electronic Benefits Transfer (EBT) cards of 18 of the 24 states it has under contract for the food stamp program.
Indeed, JP Morgan’s Christopher Paton told Bloomberg News that food stamps are big business for the big bank:
“We are the largest processor of food stamps in the country…[the EBT program] is a very important business to JP Morgan. 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 or so. The good news from JP Morgan’s perspective is the infrastructure that we built has been able to cope with that increase in volume.”
While some may be glad that a private company—not a government agency—is tasked with EBT transactions, the GAI report reveals that JP Morgan does not use the same fraud detection systems commonly used by today’s credit card companies. In fact, federal and state agencies—not EBT processors—are the ones tasked with policing food stamp fraud.
That means EBT processors enjoy multiple pathways to profits that run counter to efficiency and strong oversight. For example, writes GAI president Peter Schweizer:
Any time TANF recipients withdraw their cash benefits or make balance inquiries through out-of-network ATM machines, the user may incur ATM transaction fees generally ranging from $.75 to $1.50. In addition, most states allow EBT processors to charge card replacement fees. Arizona cardholders, for example, are permitted one free replacement a year, after which a $5 per card fee is imposed. The same goes for customer service calls: After an EBT cardholder exceeds the state’s maximum number of free calls, EBT processors typically tack on a $.25 per call fee.
By making welfare inefficiency and abuse lucrative, the poverty industry has created a potentially toxic brew of corporate cronyism and government inefficiency that lets food stamp abuse enforcement slip through the bureaucratic cracks:
According to the USDA’s website, the federal food stamp program has “over 100” inspectors to police the nearly 200,000 retailers nationwide that accept EBT cards. For its part, the state of Florida has 63 positions allocated to police over 3 million EBT users. JP Morgan is currently involved in an eight-month pilot project with Florida focused on EBT fraud and abuse. The total staff? Just one JP Morgan employee and five to ten state employees, according to Florida officials.
So how did EBT processors like JP Morgan land its lucrative half-billion dollars worth of contracts?
The GAI report, Profits From Poverty: How Food Stamps Make Corporations Money, says JP Morgan’s political donations to members of the House and Senate Agriculture Committees (who oversee the food stamp program) skyrocketed once the bank entered the EBT market:
Between 1998 and 2002, JPMorgan’s total contributions per election cycle averaged $82, 897. After JP Morgan entered the EBT services market until the 2010 election cycle, their average donation per cycle more than doubled to $215,120…. JPMorgan’s donations to political campaigns also show a clear trend. During the 2008 election, Barack Obama received more than twice the contributions of John McCain: $807,000 for Obama compared to McCain’s $345,505.
Today, one out of every seven people in America receive taxpayer-funded food stamps.