DOJ stands up to corporate greed

In back to back announcements the Department of Justice signaled it was standing up to unrestricted corporate business practices on Wall Street.

Yesterday, the DOJ said it would bring criminal charges against two former JPMorgan Chase employees who are said to be responsible for a $6 billion trading loss last year that they tried to cover up. Javier Martin-Artajo and Julien Grout are charged with wire fraud, falsifying bank records, and contributing to false regulatory records. Federal authorities are also charging them with conspiracy to commit those crimes after an investigation concluded that the traders “artificially increased” the value of their bets “in order to hide the true extent of hundreds of millions of dollars of losses.” The Securities and Exchange Commission is also planning to take action against JPMorgan for allowing the misconduct. It filed civil charges on Wednesday against the two traders.

In a separate announcement the DOJ also said it would file an injunction seeking to block the merger of American Airlines and U.S. Airways. The merger, which was announced last year, would create nation’s largest air carrier, but federal officials claimed in court papers that the merger would have monopolistic results leading to less choices for consumers and higher ticket prices. Both airlines contend the deal would lead to lower prices and better choices for consumers, and they vowed to fight the Justice Department’s claims in court.

When it comes to smart investing, the lesson is bankers gamble big

The CEO of JPMorgan Chase continued his testimony before Congress today concerning the multi-billion trading loss that bank announced last month. Jamie Dimon testified before the House Committee on Financial Services yesterday, and in a humorous exchange with Rep. Gary Ackerman (D-NY) revealed just how deep self-deceit goes for those holding the cards of America’s financial future.

Ackerman: What is the difference between gambling and investing?

Dimon: I think when you gamble you usually lose to the house.

Ackerman: That’s been my general experience with investing.

Dimon: I’d be happy to get you a better financial advisor.

The idea that the house is fixed but investing is not is increasingly falsified by our experience with the financial collapse. The joke would be funny if Dimon could deliver better financial advise, but as it is JP Morgan does not have a great track record when it comes to making winning bets on acceptable risks.

Andrew Rosenthal of the NYT said this:  “There are many obvious differences between gambling and investing, but let’s just stick to the one that Mr. Dimon offered – there is no fix for the house (the bank) when you invest.”

Rosenthal reports that Chase regularly engages in questionable gambles with apparent fixes. According to an article from last year on JPMorgan and Sigma, a troubled pre-crash investment vehicle. “In the summer of 2007, as the first tremors of the coming financial crisis were being felt on Wall Street, top executives of JPMorgan Chase were raising red flags about … Sigma…But the bank chose not to move out $500 million in client assets that it had put into Sigma two months earlier.”

As a result Sigma collapsed and all of the bank’s clients lost nearly all their money, while JP Morgan collected nearly $1.9 billion. That’s one more example of gamblers losing to the house. I’ll take 10 to 1 odds that its clients wish they had a better financial advisor!

JP Morgan’s Dimon lies to Congress

Today marks the second day of testimony before Congress from JP Morgan’s CEO and chief financial officer Jamie Dimon regarding a multi-billion trading loss the bank recently disclosed to investors.

Despite an increasingly heated debate about financial regulation and banking reform Dimon and other CEOs from the nation’s largest banks have insisted all along that oversight is not necessary, that financial institutions are capable of policing themselves. His testimony before the Senate Banking Committee today included the same naïve assessment—or is it “bad faith”?—despite the fact that risky investments with massive social and economic consequences has become standard operating procedure in the unchecked derivatives markets.

Dimon claimed the loss was an “isolated incident” and spent much of his time defending a pipe-dream vision of the economy called the “free market.” When Sen. Jeff Merkeley (D-OR) asserted that the government had already bailed out Chase Bank in 2008 from similar risky ventures, Dimon (falsely) asserted, “You’re factually wrong.”

Maybe Dimon’s wealth has insulated him from reality and the truth because he is dead wrong, and someone should put his impromptu lying in its context.

  • Fact:  JP Morgan/Chase was on the verge of bankruptcy in 2008 after it colluded with other banks, insurers, and credit agencies in packaging toxic assets and selling them on the derivatives market, all the while betting against its own toxic assets as a form of insurance fraud.
  • Fact:  The U.S. taxpayer bailout of its risky and unethical behavior amounted to $25 billion.
  • Fact:  The recent disclosure of a trading loss on he same derivatives market is likely to reach $5 billion, proving beyond a reasonable doubt that JP Morgan continues its pattern of risky and unethical behavior.
  • Fact:  The U.S. needs serious financial regulation and banking reform. Without such efforts financial institutions like JP Morgan and their lying-for-a-living CEOs will continue to erode the economy, our trust in one another, and the social fabric as well.