by Pam Martens and Russ Martens, Wall St On Parade:
Tomorrow at 9:30 a.m., the CEOs of the eight mega banks on Wall Street will take their seats at a hearing called by the Senate Banking Committee as part of its annual nod to the pretense that it is providing oversight of these inscrutable Frankenbanks.
Among the gang of eight will be Jamie Dimon, Chairman and CEO of JPMorgan Chase, the largest bank in the United States with a rap sheet that makes a mockery of U.S. rules for maintaining the safety and soundness of banks.
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JPMorgan Chase is an enigma wrapped in the surreal details of five felony counts, shrouded in the deepening intrigue of why crime boss Jamie Dimon is allowed to remain at the helm of this federally-insured bank despite his presiding over the worst banking scandals in U.S. history.
The scandals at this bank have evolved from facilitating brazen frauds like propping up Bernie Madoff’s Ponzi scheme (the bank admitted to two Madoff-related felony counts in 2014) to a cleverly named foreign bribery program called “Sons and Daughters” where the unqualified children of Chinese officials’ were given jobs at the bank in exchange for business deals. That violation of the Foreign Corrupt Practices Act resulted in a non-prosecution agreement conveniently hatched up by Big Law firm Paul Weiss and a miniscule fine of $72 million.
A former inside attorney later charged in a Federal lawsuit that the bank was violating the non-prosecution agreement in the Sons and Daughters matter by keeping two sets of books to disguise payments to politically-connected people. The bank quietly settled that lawsuit before it could go to trial.
When Senator Carl Levin was alive and chaired the U.S. Senate’s Permanent Subcommittee on Investigations, JPMorgan Chase’s travesties against the American people were taken far more seriously than the yawns they elicit in the halls of Congress today. Consider how Levin handled JPMorgan’s “London Whale” scandal in the spring of 2012:
In April 2012, the Wall Street Journal and Bloomberg News published articles alerting the public to the existence of massive derivative bets that JPMorgan Chase was making through its Chief Investment Office. The bets were so large that they were distorting the market and getting outcries from hedge funds who blew the whistle to the newspapers’ reporters.
The Dodd Frank financial reform legislation of 2010 was just two years old at that point and was supposed to have reined in these kinds of wild derivative abuses at the Wall Street banks. (Derivatives had played a major role in crashing Wall Street and the U.S. economy in 2008.)
Levin’s Subcommittee got immediately to work on an in-depth investigation of what JPMorgan Chase was doing with its derivative bets in London. That investigation spanned nine months. The Subcommittee collected 90,000 documents; reviewed over 200 recorded telephone conversations and instant messaging exchanges; and conducted over 25 interviews of bank and regulatory agency personnel. The Subcommittee also received more than 25 briefings from the bank and its federal regulators, including the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC).
Armed with the facts, Levin’s Subcommittee released a 300-page report on March 15, 2013 and called key participants to the scheme before a hearing on the same date. The bombshell finding was that the bank had used deposits from its federally-insured bank to make reckless derivative bets on its London trading desk and lose $6.2 billion of depositors’ money. In the process, said Levin, the bank had “piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”
The late Senator John McCain, ranking minority member of the Subcommittee at the time, said this about JPMorgan Chase’s actions:
“These losses came to light not because of admirable risk management strategies at JPMorgan or because of effective oversight by diligent regulators. Instead, these losses came to light because they were so damaging that they shook the market, and so damning that they caught the attention of the press. Following the revelation that these huge trades were coming from JPMorgan’s London Office, the bank’s losses continued to grow. By the end of the year, the total losses stood at a staggering $6.2 billion dollars. This case represents another shameful demonstration of a bank engaged in wildly risky behavior. The ‘London Whale’ incident matters to the federal government because the traders at JPMorgan were making risky bets using excess deposits, portions of which were federally insured.
“These excess deposits should have been used to provide loans for main-street businesses. Instead, JPMorgan used the money to bet on catastrophic risk. Through an extensive bipartisan investigation, this Subcommittee has uncovered a wealth of new information. Internal e-mails, memos, and interviews reveal that these trades were not conducted by a group of rogue traders, but that their superiors were well aware of their activities.”
Shortly after the London Whale scandal broke, Dimon was quoted in the press as calling the matter a “tempest in a teapot.” Levin’s 300-page report made clear that this was far from a tempest in a teapot. The FBI opened a criminal investigation but, ultimately, no criminal charges were brought against the bank. The bank paid more than $1 billion in related fines and admitted wrongdoing to settle investigations by U.S. and U.K. regulators.
JPMorgan Chase has been charged with, and admitted to, another three felony counts for rigging markets. In 2015, the bank was charged with one felony count by the U.S. Department of Justice for rigging foreign exchange markets. In 2020, the bank was charged with two felony counts, one count for rigging the precious metals markets and another count for rigging the U.S. Treasury market – the sovereign debt market of the United States which allows it to pay its bills. The bank was given deferred-prosecution agreements in both 2015 and 2020 despite its history of recidivist criminal activity.
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