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This week’s credit check: A record 43.6 million Americans are using food stamps. JPMorgan’s segment that makes food stamp debit cards made $5.47 billion in net revenue in 2010.
You might think that if you’re on food stamps, big banks won’t be very interested in you. What could they possibly want with someone who’s struggling just to put food on the table? But it turns out that you’re actually part of a profitable business for big bank JPMorgan. While the money to pay for the stamps comes from the government, the technology to access it lies in private hands. Food stamps used to be literally stamps — that is, pieces of paper — but in this day and age paper is so old fashioned. Now you get your food stamps with a debit card, and JPMorgan knows all about creating plastic credit products.
As the head of this division at JPMorgan, Christopher Paton, told Bloomberg, “They act and feel very much like a debit card. A lot of stores increasingly take food stamps.” What convenience! And Paton points out that his bank is the largest processor of food stamps in the country. These are boom times for such services — a new report from the US Department of Agriculture reports that 43.6 million Americans are now using food stamps, nearly 14% of the population, which is a record number. Paton notes this trend himself: “Volumes have gone through the roof in the last couple of years,” he says. “This business is a very important business to JPMorgan in terms of its size and scale.” And the numbers bear him out. According to the company’s most recent quarterly filing with the SEC, the Treasury & Securities Services segment, which is the division that includes the food stamp business, was up 2% in the last three months of last quarter and brought in $5.47 billion in net revenue for most of 2010.
Paton’s quick to point out that this isn’t just about profit at JPMorgan — it’s also serving a “useful social function.” And department execs don’t have to sit around hoping for unemployment to skyrocket so they can make a buck — more than 40% of food stamp recipients have a job, as Paton notes. Even if you get a job, you still have an almost one in two chance of still not being able to buy groceries, so JPMorgan can continue to make its profits as unemployment falls (someday).
But it does show a misalignment between what the banks want and what’s good for the rest of us. It turns out that JPMorgan also provides unemployment benefit debit cards in some states on top of the food stamp cards. Talk about marketing off of misery — the profit made from these cards shoots up as workers lose their jobs and can’t pay for food. Whether or not they’re providing a needed service, you would be hard pressed to find a way in which the business interest of this segment is not aligned with further economic ruin for America’s workers. Instead of profiting when we all do well, they profit off of our misery.
And the decision to place card creation in private hands can turn out to be complicated for the actual users. While the government outsourced its card creation needs to JPMorgan, the bank in turn outsourced the customer service end to India. So if you’re a food stamp user who has a problem or a question, don’t expect to actually get someone in your own country to help you out. They can’t be bothered to actually deal with the people they’re giving such a necessary service to.
Bryce Covert is Assistant Editor at New Deal 2.0.