Power of Story Send a Tweet        
- Advertisement -

Share on Google Plus Share on Twitter 1 Share on Facebook 7 Share on LinkedIn Share on PInterest Share on Fark! 1 Share on Reddit 1 Share on StumbleUpon Tell A Friend 1 (11 Shares)  

Printer Friendly Page Save As Favorite View Favorites (# of views)   1 comment
OpEdNews Op Eds

JPMorgan: Fish Rot from the Head

By       Message William K. Black, J.D., Ph.D.       (Page 1 of 4 pages)     Permalink

Related Topic(s): ; ; ; ; ; ; ; , Add Tags  Add to My Group(s)

Valuable 2   Must Read 1   Well Said 1  
View Ratings | Rate It

opednews.com Headlined to H2 10/23/13

Author 83093
Become a Fan
  (43 fans)
- Advertisement -

Reprinted from http://neweconomicperspectives.org/2013/10/jpmorgan-fish-rot-head.html#more-6761

The New York Times' spin of the tentative settlement of JPMorgan's latest myriad felonies begins early and runs throughout the article.  JPMorgan and Attorney General Eric Holder have reached a common meme on their settlement:  the Department of Justice (DOJ) and Holder are stalwarts who have demonstrated their toughness and JPMorgan is a model corporate citizen.  The inconvenient facts that the senior officers of JPMorgan, Bear Stearns (Bear), and Washington Mutual's (WaMu) grew wealthy through the frauds that drove the financial crisis and that JPMorgan's senior officers will not be prosecuted and will not even have to repay the proceeds of their crimes never appear in the article.

A word of caution is in order: I am discussing an article that is the product of leaks from DOJ and JPMorgan's press flacks about a tentative deal, so reality is certain to differ from the spin.  This article is a longer discussion of the settlement than my October 22, 2013 CNN op ed.

- Advertisement -

I am writing a side piece on the irony and implications of the civil and criminal investigation led by the U.S. Attorney for Eastern District of California, Benjamin Wagner.  The NYT article suggests that his investigation is of former WaMu officers.

WaMu was one of the world's largest criminal enterprises specializing in making fraudulent liar's loans and then selling the fraudulent loans to the secondary market through fraudulent "reps and warranties."  These frauds destroyed WaMu.  Dimon made the decision to buy WaMu -- and to do so without receiving indemnification from the FDIC for any losses JPMorgan might suffer due to WaMu's massive frauds.

JPMorgan purchased Bear and WaMu very quickly without conducting due diligence but that simply made the need for FDIC indemnification (or retention by the FDIC of Bear and WaMu's fraud liability) all the more essential given WaMu's notoriety on Wall Street for originating "liar's" loans and Bear notoriety that inspired the phrase: "Bear Don't Care."

- Advertisement -

Here's the NYT's description of the tentative deal.

"The deal, which the Justice Department took the lead in negotiating and which came together after a Friday night call involving Attorney General Eric H. Holder Jr. and JPMorgan's chief executive, Jamie Dimon, would resolve an array of state and federal investigations into the bank's sale of troubled mortgage investments. That type of investment, securities typically backed by subprime home loans, was at the heart of the financial crisis.

While the deal would put those civil cases to rest, it would not save JPMorgan from a parallel criminal inquiry from federal prosecutors in California, the people briefed on the talks said. Under the terms of the preliminary deal, the people said, the bank would also have to assist prosecutors with an investigation into former employees who helped create the mortgage investments."

The rate of spin accelerates thereafter like an ice skater pulling her outstretched arms inward to hug her body.  

"The cost to JPMorgan, the nation's biggest bank, goes beyond the bottom line. The settlement would deal a reputational blow to the bank and Mr. Dimon, who steered JPMorgan through the crisis without a quarterly loss or major government scuffle. Now Mr. Dimon's tenure is engulfed in turmoil, the consequence of fighting a multifront battle with federal authorities scrutinizing everything from a $6 billion trading loss in London last year to the bank's hiring of well-connected employees in China.

In the mortgage case, the size of the penalty underpins its importance. The $13 billion penalty, according to one of the people briefed on the talks, would include about $9 billion in fines and $4 billion in relief for struggling homeowners.

- Advertisement -

The $13 billion deal, which could still fall apart over issues like how much wrongdoing the bank is willing to acknowledge, would represent something of a reckoning for Wall Street, whose outsize risk taking in the mortgage business nearly toppled the economy in 2008. It might also provide a measure of catharsis to the investing public, which suffered billions of dollars in losses from buying bad mortgage securities."

To the NYT, and one prays earnestly only the NYT, the "reputational blow" to JPMorgan and Dimon does not come from JPMorgan, Bear, and WaMu committing the largest and most destructive financial crimes in history -- but from JPMorgan paying a miniscule percentage of the damage its officers' frauds caused the world.  The settlement does not require its controlling officers who grew wealthy from those crimes to return that wealth.  The frauds by JPMorgan's officers occurred while Dimon was in charge.

As I explained above, Dimon is also the one who thought, without due diligence and in the face of WaMu's and Bear's terrible reputation for fraud, that the purchase price from the FDIC was such a steal that JPMorgan should buy Bear and WaMu quickly without an FDIC indemnification lest a competitor snap them up.

Next Page  1  |  2  |  3  |  4


- Advertisement -

Valuable 2   Must Read 1   Well Said 1  
View Ratings | Rate It


William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon Share Author on Social Media   Go To Commenting

The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Related Topic(s): ; ; ; ; ; ; ; , Add Tags
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

The Incredible Con the Banksters Pulled on the FBI

History's Largest Financial Crime that the WSJ and NYT Would Like You to Forget

The Greek Depression, the Troika, and the New York Times (videos)

What if the Public Understood How Money Works?

The New York Times Urges the Troika to "Make an Example of Greece"

Rajan Calls Krugman "Paranoid" for Criticizing Reinhart and Rogoff's Research | New Economic Perspectives