Climate of Fraud, Negligence, Incompetence and JP Morgan


I was thinking about titling this post “Fire Jamie Dimon.”  I changed my mind because this article is much, much bigger than Mr. Dimon.  This is really an article about the current climate of fraud, negligence and incompetence that is accepted as the new normal.  Dimon and JP Morgan Chase are just the larger-than-life faces of the profound problems that are not getting fixed.  JP Morgan is the nation’s biggest bank; so, for the sake of simplicity, I just want to use JP Morgan and its CEO, Jamie Dimon, to illustrate what is really stopping the economy from getting better.  This is the 8,000 pound elephant in the room that nobody wants to even acknowledge.

Look no further than this past year.  There are big examples that come to mind that should have brought some criminal charges against bank personnel, or at least been grounds to fire Mr. Dimon.  Most recently, JP Morgan and Credit Suisse paid nearly $417 million (combined) to settle civil fraud charges by the Securities and Exchange Commission (SEC).  Reuters recently reported, “JPMorgan will pay $296.9 million, while Credit Suisse will pay $120 million in a separate case, with the money going to harmed investors, the U.S. Securities and Exchange Commission said.  Both settlements addressed alleged negligence or other wrongdoing in the packaging and sale of risky residential mortgage-backed securities . . .” Of course, both JP Morgan and Credit Suisse didn’t admit guilt, and no individuals were charged criminally.  The Reuters story went on to say, “On a conference call with reporters, Robert Khuzami (SEC enforcement chief) said it is hard to bring cases against individuals over ‘structured’ financial transactions because different people work on different aspects, making it hard to pin blame.”  (Click here for the complete Reuters story.)  It was the same story in 2011.  According to Reuters, “JPMorgan had in June 2011 agreed to pay $153.6 million to settle a separate SEC fraud case over its sale of mortgage securities to investors, also without admitting wrongdoing.”  Anybody see a pattern here for JP Morgan or government prosecutors?

Hey, you know what else makes it “hard to pin blame”?  Lots of cash donated to both parties by banks like JP Morgan.  So much cash that the boss will come down hard on prosecutors who bring charges.  One thousand financial elites were successfully prosecuted in the wake of the S&L crisis 20 years ago.  It was 70 times smaller than the 2008 financial meltdown that was caused by greedy bankers.  The “$296.9 million” paid by JP Morgan didn’t even come with an apology, let alone criminal charges for individuals.  This certainly didn’t fix anything, but it did let bankers and Jamie Dimon off the hook–once again.  Is this the business plan that Jamie Dimon condones?

Remember the $2 billion “London Whale” trading loss Mr. Dimon apologized for back in May just before shareholders approved a $23 million pay package for him?  That $2 billion loss turned into more than $6 billion.  That’s triple the original amount Dimon himself announced!   He missed by more than $4 billion!  Did he mean to mislead or is he just incompetent?  Was Dimon negligent as a CEO for allowing these kinds of losses?  Now, JP Morgan is suing its own former employees involved in the scandal, and JP Morgan will not comment on the lawsuit.  A recent New York Times story reported, “Since announcing the problem in May, JPMorgan has worked to reassure skittish investors. The bank has broadly reshuffled its management ranks and united some of its business operations.”  (Click here for the complete NYT story.)  Shouldn’t Mr. Dimon be “reshuffled”?  I mean, just before a big payday, he told shareholders the loss would be $2 billion when, months later, it turned into more than $6 billion.  Why didn’t Dimon know about this?  Where was his supervision? This is one of the nation’s top bankers, and he doesn’t know if a loss is $2 billion or $6 billion?

What about the LIBOR (London Inter-bank Offered Rate) interest rate rigging scandal that erupted earlier this year?  Once again, JP Morgan is involved.  I wrote about this back in July and said, “The Libor interest rate rigging scandal is being called the biggest financial fraud in history.  Libor is a key interest rate that is used globally to set as much as $800 trillion in transactions.  It is used to set interest rates for things such as credit cards, student loans, mortgages, corporate bonds and hundreds of trillions of dollars in derivatives.”  (Click here for the complete post.)  In August, the Huffington Post reported, “Pretty much everybody in the world with subpoena power has hit JPMorgan Chase with requests for information in the Libor-rigging scandal. . . . JPMorgan also said it was the subject of a large and growing number of lawsuits coming out of the Libor mess. State and local governments, for example, are suing banks for keeping Libor too low, hurting the value of interest-rate swaps they bought to protect against rising rates.”  (Click here for the complete Huffington Post story.)  Again, Dimon does not know what is going on in his own bank, or is this part of the business model that he condones?

All the above mentioned stories happened in just the last year or so.  The thing they all have in common is that Jamie Dimon was and still is–in charge.  When the captain of a ship keeps running aground and the ship owners keep patching the hull, when is it more practical to replace the captain?  Hasn’t Dimon run the bank aground on several occasions?  Aren’t the other banking executives crashing their boats into the rocks?  Don’t get me wrong, I think Mr. Dimon should be fired, but that’s not going to happen.  The mainstream media will not criticize Dimon or any the CEO of a big bank despite their dismal track records.  If any reporter did, I think they would be fired.   The public accepts this behavior, and our own government officials enable the fraud, negligence and incompetence to go unprosecuted and unpunished in the banking industry.  The economy will never truly recover against this kind of financial backdrop.

Greg Hunter – USA Watchdog