NEW YORK (Fortune) -- It was the second week of October 2006. William King, then J.P. Morgan's chief of securitized products, was vacationing in Rwanda. One evening CEO Jamie Dimon tracked him down to fire a red alert. "Billy, I really want you to watch out for subprime!" Dimon's voice crackled over King's hotel phone. "We need to sell a lot of our positions. I've seen it before. This stuff could go up in smoke!"
Now five years later, more banks, mortgage companies, and even insurance companies are getting out of the mortgage servicing business due to the subprime bubble burst. History repeats itself. Now, JP Morgan Chase is getting out of the student loans.
American Banker has the full story:
U.S. Bancorp (USB) is pulling out of the private student loans market and JPMorgan Chase (JPM) is sharply reducing its lending, as banking regulators step up their scrutiny of the products.
JPMorgan Chase will limit student lending to existing customers starting in July, a bank spokesman told American Banker on Friday. The bank laid off 24 employees who make sales calls to colleges as part of its decision.
The official reason:
"The private student loan market is continuing to decline, so we decided to focus on Chase customers," spokesman Thomas Kelly says.
No wonder US Bank and Chase are getting out of student loans now that Consumer Financial Protection Bureau had been taking complaints from the public on student loans last month.