by Pam Martens and Russ Martens, Wall St On Parade:
The full day conference sponsored by nonprofit watchdog Better Markets last Wednesday was a unique opportunity to gain brilliant insights from academic experts who have battled on the frontlines of the most unprecedented and ongoing era of corruption in U.S. financial history. (You can watch it on YouTube at this link.) In fact, at the close of the conference, Anat Admati, Professor of Finance and Economics at Stanford Graduate School of Business, summed up the U.S. financial system in five words: “Corruption has become the system.”
TRUTH LIVES on at https://sgtreport.tv/
Admati’s celebrated 2013 book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It, co-authored with German economist Martin Hellwig, will have an expanded new edition coming out in early January. The new edition includes coverage of the banking failures this spring and four new chapters: “Too Fragile Still,” “Bailouts and Central Banks,” “Bailouts Forever,” and “Above the Law?” (The question mark is perhaps too kind.)
Given its serial crimes, it is not surprising that JPMorgan Chase is featured in the chapter, “Above the Law?”
Admati and Hellwig dig into the Justice Department’s settlement with JPMorgan Chase over its London Whale scandal. (In that case, the bank’s Chairman and CEO, Jamie Dimon, did not lose his job, despite the fact that the bank used deposits from its federally-insured banking unit to make massive gambles in high-risk derivatives in London and lose $6.2 billion of depositors’ money. This occurred just two years after Congress had passed the Dodd-Frank financial reform legislation of 2010, which was promoted as putting an end to this kind of reckless speculation at federally-insured banks owned by Wall Street trading houses.)
The London Whale episode in 2012 clearly showed that the repeal of the Glass-Steagall Act in 1999, which had barred for 66 years the merger of Wall Street trading houses and investment banks with federally-insured commercial banks, was a dangerous mistake. Even the New York Times apologized that year for its editorial board waving the pompoms to repeal the Glass-Steagall Act. The Times acknowledged that it had been wrong.
The gambles that JPMorgan Chase took with deposits from its federally-insured bank were so outrageous that the U.S. Senate’s Permanent Subcommittee on Investigations spent nine months investigating the matter and delivered a 300-page report, which noted the following:
“The JPMorgan Chase whale trades provide a startling and instructive case history of how synthetic credit derivatives have become a multi-billion dollar source of risk within the U.S. banking system. They also demonstrate how inadequate derivative valuation practices enabled traders to hide substantial losses for months at a time; lax hedging practices obscured whether derivatives were being used to offset risk or take risk; risk limit breaches were routinely disregarded; risk evaluation models were manipulated to downplay risk; inadequate regulatory oversight was too easily dodged or stonewalled; and derivative trading and financial results were misrepresented to investors, regulators, policymakers, and the taxpaying public who, when banks lose big, may be required to finance multi-billion-dollar bailouts.”
Since the London Whale debacle in 2012, and under Dimon’s stewardship, JPMorgan Chase has admitted to five felony charges brought by the U.S. Department of Justice and entered into three deferred-prosecution agreements and two non-prosecution agreements with the DOJ. And yet, there is zero indication that its appetite for crime in order to boost profits has been satisfied. The Attorney General of the U.S. Virgin Islands has currently brought credible evidence into federal court in Manhattan that JPMorgan Chase “actively participated” in Jeffrey Epstein’s sex trafficking of minors by ignoring a decade of his money laundering inside the bank – the very money laundering conduct that resulted in the bank admitting to two felony counts in 2014 for its decades of providing banking “services” to Ponzi mastermind Bernie Madoff. In both cases, the bank failed to file the legally mandated Suspicious Activity Reports with the Financial Crimes Enforcement Network (FinCEN) despite internal communications showing it was well aware that the financial transactions were highly suspicious.
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