Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Guest Blogger
I am sure that you have heard the phrases, “Too Big to Fail” and “Too Big to Jail”, when it comes to the so-called Big Banks. Indeed, the topic has been written about and discussed on many occasions here on Professor Turley’s blog. Fellow Guest Blogger Elaine Magliaro wrote about it here, and I wrote about Big Banks plotting, along with the FDIC and the Bank of England to “steal” depositors money in order to bail out gambling banks, to name a couple of recent articles.
The stories about Big Banks being investigated and fined could fill a very large hard drive. Even with all of those stories and countless others, I was still shocked to read recently about a meeting that JP Morgan CEO Jamie Dimon had with the United States Attorney General, Eric Holder. It was reported that the purpose of the meeting was to discuss yet another financial settlement for alleged JP Morgan irregularities. The numbers they allegedly were discussing were staggering!
According to reports, Dimon and AG Holder were discussing settlements in the neighborhood of $3 Billion to $11 Billion. That is one hell of neighborhood!
“JPMorgan (JPM) CEO Jamie Dimon met with Attorney General Eric Holder on Thursday morning as rumors swirled about a possible $11 billion settlement to end criminal and civil charges against the bank. The Justice Department has a minimum of seven different probes into JPM and they’re reportedly trying to settle as many as possible in rapid fashion.
According to several reports JPM made a $3 billion settlement offer connected to alleged abuses in residential mortgage backed securities. Mr. Holder is said to have rejected the offer. Last week JPM paid $920 million and “admitted to some wrongdoing” to settle regulatory charges connected to the “London Whale” losses.” Yahoo
I just can’t imagine how any corporation could continue to do business when they are paying fines in the range that JP Morgan is paying or negotiating. However, when you are raking in the Billions as JP Morgan is, these large fines may just be like a mosquito bite. The Yahoo article linked above, goes on to give a more complete picture of the costs that JP Morgan has incurred in fines.
“Regarding JPMorgan’s settlements and charges and degrees to which the bank is willing to concede guilt, two things are clear. One, JPM has a ton of money. Earnings estimates are pegged around $22 billion for 2013 and the company has a market cap of about $200 billion. The other is that it will always be politically expedient for young prosecutors on the make to attack Wall Street banks. JPM is going to be in a constant state of legal defense for the foreseeable future.
Ritholtz Wealth Managment CIO and Big Picture editor Barry Ritholtz says JPMorgan has shelled out about $11 billion in fines and spent around $16 billion in legal fees in the last few years. “This is just the cost of doing business for these mega banks.”
I guess when you are “earning” $22 Billion in 2013 alone, the settlement amounts could be considered a pin prick to JP Morgan. However, at what point will JP Morgan’s shareholders revolt against the business practices that are causing these huge fines? I could go a step further and ask when will Americans insist that when any corporation has committed fraud, someone should pay a criminal price along with the financial price?
When I read that JP Morgan is shelling out Billions in fines and legal costs, I wonder why the business model hasn’t changed to prevent or reduce these allegedly illegal practices? The answer is in the aforementioned earnings numbers from JP Morgan. The fines and legal costs are just another cost of doing business. The problem is that they are not gambling their own money. They are gambling and paying out depositor’s monies and shareholder’s money.
It seems obvious to me that unless someone goes to jail and/or big financial institutions like JP Morgan are broken up, this improper activity will continue unabated. This is not a political issue. This is an issue of protecting shareholders and depositor’s funds from the continued shell game that is being played by the large financial institutions.
It is far past the time when cabals like JP Morgan are prosecuted for financial crimes and put out of business. I submit that putting some high executives in jail when they break the law, may have a deterrent effect on the rest of the industry. I not talking about making a few examples.
I am talking about dealing with alleged law breaking financial executives the same way that the government and law enforcement authorities deal with common criminals. If there is evidence that indicates illegal activity, no matter who and what organization is involved, investigate and indict and prosecute them.
Wasn’t it Mitt Romney who once said, and I am paraphrasing here, that corporations are people too? Then it is time that “people” like JP Morgan go to jail for their allegedly illegal activities. Do you agree? What action do you think the Justice Department should take in dealing with financial criminals? If we break up the big banks and/or put law breaking executives in jail, will that stop or reduce the financial crimes that rob shareholders and depositors? What do you think?
Additional resources: Nation of Change;
davidbluefish:
Socialism Is Legal Plunder
Mr. de Montalembert has been accused of desiring to fight socialism by the use of brute force. He ought to be exonerated from this accusation, for he has plainly said: “The war that we must fight against socialism must be in harmony with law, honor, and justice.”
But why does not Mr. de Montalembert see that he has placed himself in a vicious circle? You would use the law to oppose socialism? But it is upon the law that socialism itself relies. Socialists desire to practice legal plunder, not illegal plunder. Socialists, like all other monopolists, desire to make the law their own weapon. And when once the law is on the side of socialism, how can it be used against socialism? For when plunder is abetted by the law, it does not fear your courts, your gendarmes, and your prisons. Rather, it may call upon them for help.
To prevent this, you would exclude socialism from entering into the making of laws? You would prevent socialists from entering the Legislative Palace? You shall not succeed, I predict, so long as legal plunder continues to be the main business of the legislature. It is illogical—in fact, absurd—to assume otherwise.
The Law
Frederic Bastiat
davidbluefish:
Bastiat is wonderful.
1845 – from Economic Sophisms
Now since man is naturally inclined to avoid pain – and since labor is pain in itself – it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.
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It is evident … that the proper purpose of law is to use the power of its collective force to stop [a] fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.
——————————————————————————–
But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
Frederic Bastiat.
Elaine,
thanks for the Rolling Stone link. It is amazing that the rule of law does not include wealthy bankers and corporations.
As if we need another reason to break up the to large to fail financial institutions, from Elaine’s commentary of public pensions —
“Baker said it was important to ‘recognize’ the main factor that had contributed to the present problem facing underfunded public pensions—’the collapse of the housing bubble and the subsequent downturn in the economy and the stock market. The plunge in the stock market led to a sharp decline in the value of pension fund assets.’ The collapse also led to the budget shortfalls facing state and local governments all across the country. Those shortfalls, in turn, resulted in state and local governments making reduced payments to pension funds.”
Mike S:
if you throw in Barney Frank, Chrstopher Dodd, John McCain and Allen Greenspan its a deal.
Elaine:
I think what MT says at around 12 min about getting money from the Fed for 0% and lending it out is a big part of the problem.
We should get rid of the Fed and let the interest rate do what it will.
Mike,
I couldn’t agree more.
*****
Why Isn’t Wall Street in Jail?
Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them
by Matt Taibbi
February 16, 2011
http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216
Excerpt:
Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
“Everything’s f*cked up, and nobody goes to jail,” he said. “That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.”
I put down my notebook. “Just that?”
“That’s right,” he said, signaling to the waitress for the check. “Everything’s f*cked up, and nobody goes to jail. You can end the piece right there.”
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.
Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. “If the allegations in these settlements are true,” says Jed Rakoff, a federal judge in the Southern District of New York, “it’s management buying its way off cheap, from the pockets of their victims.”
To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. “You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.”
But that hasn’t happened. Because the entire system set up to monitor and regulate Wall Street is f*cked up.
Jamie Dimon needs to go to jail and not just get away with paying fines. He’s the boss, so he should take the heat……………Just daydreaming unrealistically.
What Justice Holmes said.
Elaine, excellent video.
Thanks again Elaine.
RWL,
I do not think any of us will recoup the losses in 3-5 years.
During the break up of AT&T (where big gov learned its lesson of the USPS grabbing AT&T back around a century ago) – Charlie Brown gave up the Yellow Pages (at that time the world thought he committed the ultimate sin – having NO idea {as AT&T did know} that the internet age would lay waste the Yellow Page dynasty anyway).
Yours truly had a limo company back then; which handled mostly AT&T and Bell Labs (that became Lucent Technologies)
We would be required to bring 2 or 3 sedans, instead of 1 limo, so that Bell Labs would “appear” to not be wasting monies. Most staff hated to travel, unless it was winter and the conferences were in exotic places. Then 20 people would go and party, instead of 1 or 2 key persons. (I heard the conversations on this OFTEN).
Depression did set in as salaries were reduced, expense accounts were reigned in – and AT&T was faced with competition from such precedent setting companies as WillTel (on of the first to reduce the cell phones from bogus schemes of 50% OFF “mystery” rates – to flat price of 10 cents per minute).
Break ups are good (as JP Morgan and Goldman Sachs appear to be Above the Law – and that’s Never a good thing).
Change must come.
Interesting article Raff!
I was one of those homeowners who paid off my home in 8 years, and then purchased a foreclosure property. I am still hoping, along with millions of homeowners, if I will still be able to sell my home and foreclosure property for what it was worth in 2007, in about 3-5 years. Doubt it.
This is the crime that they (Wall Street and the Federal Government) should be sued for.
I have been watching this meme since Stewart McKinney first coined it years ago. I didn’t believe it then and I don’t believe it now. He said that two years after AT&T was forced to break up, and AT&T was as big or bigger than the big banks of McKinney’s time. The AT&T situation should have been fresh on his mind; but hey, Ronnie Raygun was in the White House and all was well with the world.
It was traumatic for a lot of the phone company employees, because they liked working at the biggest and most powerful player in town. We admitted a number of them at the psychiatric hospital where I was on the staff at the time. Depression set in because they would never again wield the influence they once did. They got over it. Been there and done that. I am not impressed when somebody tells me they are too big to fail.
Power, money and influence are heady things. It is human nature to want to hang on. Those who are sucking at the teat of all that money have a vested interest in protecting their host.
As for Congressman Stewart McKinney? He died of AIDS.
rafflaw,
I finally got the correct Youtube link.
rafflaw,
I can’t fix it. Sorry about that. You’ll have to view the video on Taibbi’s blog;
Talking Jamie Dimon With Sam Seder of ‘The Majority Report’
By Matt Taibbi
POSTED: October 1, 2013
http://www.rollingstone.com/politics/blogs/taibblog/talking-jamie-dimon-with-sam-seder-of-the-majority-report-20131001
rafflaw,
The right video didn’t play. I’ll try to see if I can fix the link.
Thanks for the video Elaine.
Well said Justice.
rafflaw,
Check out the following video of Matt Taibbi and Sam Seder talking about Jamie Dimon and JP Morgan:
Matt Taibbi, Sam Seder on Alex Pareene Popping CNBC’s Bubble
Any corporation that is big enough that its demise would kill our economy should be broken up in a rational manner so that it will not pose such a danger. Any corporation that is too big to jail should not exist, period. What happened to antitrust enforcement and what happened to the beloved free enterprise system that says when you lose money you lose money and when you steal money you go to jail. Corporate entities don’t commit fraud the people who run them do. as a result, Mr. Dimon belongs in JAIL. His corporation should be broken up and it should have to repay every dollar it took from the government
.
As for the shareholders, most are institutional and they and their managers are generally in bed with the corporate managers so they are unlikely to do anything unless they lose money and JPM, in my opinion, has made fraud, as have other corporations in the US , an enormously lucrative profit center. As for small time shareholders, my advice is get of of the market. Its a casino and the house always wins. In this case even when it doesn’t you still lose.
As to the settlement figures, they look big to us but they mean nothing to the big banks, how many really average humans would get a meeting with the AG to negotiate down the enormous criminal charges that have been lodge against these guys. NONE. They are happy to pay Holder to make him look good to the little people but they know he will never really do his duty with regard to their bad acts.
As to you comment about these guys always being targets, don’t waste any sleep on them they deserve it. Unlike victims of “stop and frisk” in NYC these guys really are GUILTY.