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Late last week, we learned that several federal agencies have been quietly investigating JPMorgan Chase's role in the Bernie Madoff scheme.  According to the New York Times, the Justice Department, FBI and Office of the Comptroller of the Currency have amassed voluminous evidence that Chase knew Madoff had turned his wealth management business into a massive Ponzi scheme and failed to stop him or report him to authorities.   Chase is either going to have to sign a deferred prosecution agreement--something no major New York bank has ever had to do--or plead guilty to violations of the Bank Secrecy Act.  Whatever happens, one thing is beyond dispute.  Chase's CEO, Jamie Dimon, must pay for this with his job.

It's one thing to admit to reckless trading and oversight breakdowns, as Chase did in the London Whale affair.  It's another to admit to deceiving investors about the risks involved in mortgage-backed securities.  But when a bank has enough information to stop the largest investment fraud in world financial history and fails to stop it, on principle alone the CEO must go.  

When you look at the specific evidence that the feds are reportedly relying on, if there's anything to it it's even more reason to call for Dimon's ouster.  The feds appear to be relying on several emails that suggest Chase continued to do business with Madoff despite numerous questions about whether he was legitimate--questions that were apparently serious enough that Chase should have told regulators.

They also seem to be relying heavily on evidence obtained by Irving Picard, the trustee responsible for recovering the money Madoff stole.  Back in 2010, Picard sued Chase for $6.4 billion, claiming that some very senior people at Chase knew Madoff was a fraud and did nothing.  Two things Picard found stick out.  First, Chase had enough suspicions about Madoff's business that by 2008, it yanked every penny it had with him--and yet, failed to report it.  Second--and most damningly in my opinion--when Chase finally did tell regulators in the UK in October 2008 that it thought his returns were "too good to be true," it continued to allow Madoff to conduct normal banking activities right up until his arrest two months later.  The latter instance, to my mind, is like a lawyer who knows his client is committing a crime and doesn't report it to the police.

The White House forced GM's Rick Wagoner to resign as a condition of getting more more federal money.  So why shouldn't the feds force Dimon to resign after being at the helm for the worst of Madoff's crimes?  And if the feds don't make him resign, we need to put the heat on Chase to force him out.

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Comment Preferences

  •  Sounds like he should JAIL (14+ / 0-)

    as a co-conspirator.

    The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -- John Kenneth Galbraith

    by richardak on Sun Oct 27, 2013 at 12:16:34 PM PDT

  •  Matt Taibbi, at Rolling Stone on Friday, etc.... (13+ / 0-)

    "Nobody Should Shed a Tear for JP Morgan Chase," By Matt Taibbi, Rolling Stone, 10/25/13

    And, these multiple investigations have been going on for awhile, contrary to some of the spin to the contrary.

    The time to be "politically correct" in this community about this subject has long passed. And, frankly, with Bill Daley, who was the Vice Chair of JPMC, and the lead person responsible for their corporate governance (up until the day he became White House Chief of Staff in January 2011) there really never was a "good time to be politically correct" about this subject in this community.

    Now, we have a former Citigroup employee running the Treasury Department (being promoted there from his own Chief-of-Staff position at the White House, where he replaced Daley), who, when he was originally appointed Director of the Office of Management and Budget, received a $900,000 bonus from Citi for taking an influential position in D.C.

    So...from my post here, earlier this year,  "The Economic Terrorists Among Us"...

    Independent blogger and one-time Kossack David Dayen recently noted this about JPMorgan Chase…
    Mirabile Dictu! JP Morgan Finally on Regulatory Hot Seat for Widespread Control Failures and Alleged Lying by Blythe Masters Under Oath
    David Dayen
    Naked Capitalism
    May 3rd, 2013

    …The fact that JP Morgan is in hot water isn’t news. Josh Rosner revealed in an extensive report released in early March that the bank had paid out over $8.5 billion in fines since 2009, nearly 12% of its net income, for violations across virtually all of its operations. This account showed the carefully cultivated picture of JP Morgan as a well-managed operation was an artful fabrication. As Dave Dayen wrote here in his overview:

    ….as you read the report, it’s hard to see the bank as anything but a criminal racket just days away from imploding, were it not propped up by implicit bailout guarantees and light-touch regulators. Rosner paints a picture of a corporation saddled with pervasive internal control problems, which end up costing shareholders, and which “could materially impact profitability in the future.”

    ….It’s hard to summarize all of the documented instances in this report of JPM has been breaking the law, but here’s my best shot….

    Bank Secrecy Act violations;

    Money laundering for drug cartels;

    Violations of sanction orders against Cuba, Iran, Sudan, and former Liberian strongman Charles Taylor;

    Violations related to the Vatican Bank scandal (get on this, Pope Francis!);

    Violations of the Commodities Exchange Act;

    Failure to segregate customer funds (including one CFTC case where the bank failed to segregate $725 million of its own money from a $9.6 billion account) in the US and UK;

    Knowingly executing fictitious trades where the customer, with full knowledge of the bank, was on both sides of the deal;

    Various SEC enforcement actions for misrepresentations of CDOs and mortgage-backed securities;

    The AG settlement on foreclosure fraud;

    The OCC settlement on foreclosure fraud;

    Violations of the Servicemembers Civil Relief Act;

    Illegal flood insurance commissions;

    Fraudulent sale of unregistered securities;

    Auto-finance ripoffs;

    Illegal increases of overdraft penalties;

    Violations of federal ERISA laws as well as those of the state of New York;

    Municipal bond market manipulations and acts of bid-rigging, including violations of the Sherman Anti-Trust Act;

    Filing of unverified affidavits for credit card debt collections (“as a result of internal control failures that sound eerily similar to the industry’s mortgage servicing failures and foreclosure abuses”);

    Energy market manipulation that triggered FERC lawsuits;

    “Artificial market making” at Japanese affiliates;

    Shifting trading losses on a currency trade to a customer account;

    Fraudulent sales of derivatives to the city of Milan, Italy;

    Obstruction of justice (including refusing the release of documents in the Bernie Madoff case as well as the case of Peregrine Financial).

    In other words, the New York Times account is a pale rendition of the rap sheet against the bank…
    And, if you’ve been following JPMC over the past few years, Dayen’s only giving us a sampling of a much lengthier list...
    Long story short, there's no "polite" way to cover this story in this community. And, when one hears the "better-late-than-never" story in response, the fact of the matters is the statute of limitations on most of this travesty has already passed-by, too. (See my post here from early Saturday.)

    "Mission Accomplished."

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Sun Oct 27, 2013 at 12:29:06 PM PDT

  •  Work for a "too big to fail" bank... (4+ / 0-)
    Recommended by:
    a2nite, GDbot, OleHippieChick, Johnny Q

    and you'll never have to worry about facing criminal charges, evidently. Quoting from the diary link...

    Reflecting the magnitude of the investigation, prosecutors and JPMorgan have held preliminary discussions about a so-called deferred prosecution agreement, people briefed on the inquiry said. Such an arrangement would suspend criminal charges against JPMorgan in exchange for a fine, certain other concessions and an acknowledgment that the bank will face charges if it fails to behave. Prosecutors may also require JPMorgan, which has repeatedly said that “all personnel acted in good faith” in the Madoff matter, to hire an independent monitor.

    While deferred-prosecution agreements are the Justice Department’s preferred tool for punishing corporate giants — they allow prosecutors to appear tough without imperiling a company’s health — they are typically deployed only when misconduct is severe. For a large American bank, they are nearly unheard-of.

    It seems to me that sending the employees who conspire to commit fraud would do less damage to a company's health than a multi-billion dollar fine would.

    The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -- John Kenneth Galbraith

    by richardak on Sun Oct 27, 2013 at 12:43:58 PM PDT

    •  Sending them to jail that is (1+ / 0-)
      Recommended by:

      The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -- John Kenneth Galbraith

      by richardak on Sun Oct 27, 2013 at 12:49:47 PM PDT

      [ Parent ]

    •  Actually, the feds are thinking about charging (1+ / 0-)
      Recommended by:

      individuals as well.  From the same story:

      Representatives for JPMorgan, the Comptroller and the prosecutors declined to comment. Authorities could announce an action by the end of the year, the people briefed on the inquiry said, a move that could cap a multiyear investigation. Prosecutors, the people said, are weighing criminal charges against JPMorgan employees who did business with Mr. Madoff. It is unclear which employees are under investigation.
      Ten to one that Chase will have to cooperate with any prosecutions as part of any deferred prosecution agreement.
      •  Employees may get charged instead of the company? (1+ / 0-)
        Recommended by:

        Quite frankly, that's the way it should always work anyway. Lengthy jail sentences will do a lot more to end criminal behavior than fining a company would. Of course, that company should be forced to pay restitution to its victims.

        The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -- John Kenneth Galbraith

        by richardak on Sun Oct 27, 2013 at 02:15:02 PM PDT

        [ Parent ]

  •  No. We should support Dimon and the President (2+ / 0-)
    Recommended by:
    petral, doc2

    Madoff was a small fish and Dimon has done a lot for the Democrats.  We can continue to look forward on this and not dwell on the past.

    Obama: self-described Republican; backed up by right-wing policies

    by The Dead Man on Sun Oct 27, 2013 at 01:07:37 PM PDT

    •  Even if someone at Chase knew about (0+ / 0-)

      Madoff, Chase has thousands of people. Unless Dimon himself knew, it would make no sense to fire him. He's the most talented banking executive in the country, and Chase's shareholders know that.

  •  I watched Bill Moyers this morning and (3+ / 0-)
    Recommended by:
    wilderness voice, lotlizard, Johnny Q

    he reported that Dimon asked for, and was granted a private audience with our Attorney General. I don't know much about how these things work, but that seems to be wrong to me.

    Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

    by hestal on Sun Oct 27, 2013 at 01:15:12 PM PDT

  •  which is the worse evil? (4+ / 0-)
    Recommended by:
    GDbot, OleHippieChick, petral, snoopydawg
    It's another to admit to deceiving investors about the risks involved in mortgage-backed securities.
    Seliing goods you know are junk and misrepresented is worse IMHO than failing to blow the whistle on someone else. Especially since that whistle had been blown already several times to no effect:
    Markopolos discovered evidence over nine years suggesting that Bernard Madoff's wealth management business, Bernard L. Madoff Investment Securities LLC, was actually a massive Ponzi scheme. In 2000, 2001, and 2005, Markopolos alerted the U.S. Securities and Exchange Commission (SEC) of the fraud, supplying supporting documents, but each time, the SEC ignored him or only gave his evidence a cursory investigation
    For the next ten years, the investigative team Markopolos recruited warned the government, the industry, and the financial press that the largest and most successful hedge fund in the industry was a total fraud and that the respected and admired Bernie Madoff was a crook. But no one would listen.
    Yes, JPM/Chase deserves to get hammered.  But not for this.
  •  These culpables were coddled for too long. (2+ / 0-)
    Recommended by:
    greenbird, snoopydawg

    It's about time many do some hard time. Make it so.

    Based on the magnitude of hurt caused by the financial "products" the crooks dreamed up, they should rot in prison.

    So many people lost a shit ton of dough and equity and value and dividends, the house, everything that could be sucked out was sucked out. The last nickels. This is inhuman bullshit. And I don't mean inhumane.

    Speaking of inhumane, I should look into manufacturing guillotines. There may be a market coming.

    "He went to Harvard, not Hogwarts." ~Wanda Sykes

    Blessinz of teh Ceiling Cat be apwn yu, srsly.

    by OleHippieChick on Sun Oct 27, 2013 at 02:36:10 PM PDT

    •  piped-in audio, too ... (1+ / 0-)
      Recommended by:

      of readings from testimony or evidence, beginning with - why not? - Enron's 'granny in her wheelchair/rocking chair' and other melodious indicators of systemic pathology.

      the punishment meant to reinforce the words, the 'values' and the damage ... to be broadcast for the 24/7 duration of any incarceration.

      (bird has lots of very good head-separating devices in the bookmark folder of links ... returns from time to time to discuss with self whether still appropriate, less appropriate or more appropriate. it's always more appropriate, IMHO. and could effect a bloom of great literature again. and great music. and invention, ya mothers.)

      Addington's perpwalk? TRAILHEAD of accountability for Bush-2 Crimes. @Hugh: There is no Article II power which says the Executive can violate the Constitution.

      by greenbird on Sun Oct 27, 2013 at 04:08:25 PM PDT

      [ Parent ]

  •  buy shares so you can vote in that. (1+ / 0-)
    Recommended by:

    otherwise, its really not your call.

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