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;
Ugh! My comments were lost in wordpress! 🙁
David Said: “You ask us if they should go to jail, my first question is, what did they do wrong? Investigation by someone looking to settle for lots of money does not necessarily mean that a crime has been committed.”
Really, David? Please read the following article:
http://www.dailykos.com/story/2012/01/05/1051948/-BS-Bernanke-The-Fed-Knew-About-Appraisal-Fraud-in-2005
In 2005, over 8,000 appraisers sent out a petition TO BEN BERNANKE AT THE FED, ringing the Appraisal Fraud by Lenders Alarm.
HAD BERNANKE, THE FED, PAULSON, AND TREASURY ACTED to stop the APPRAISAL FRAUD that jacked house prices through the roof, THEY could of saved us and the WORLD from the brink of economic disaster.
No one listened. Our entire GOVERNMENT AND THE FED allowed the Appraisal Fraud to run rampant even to this day.
This diary was originally posted on OCT 25, 2010 AT 04:18 PM PDT
I am reposting in response to this diary:
ON SECOND THOUGHT: Fed Chair Bernanke Now OPPOSES Fraudclosure
Today there are more than 10,000 signatures from Appraisers throughout the country.
In June, 2007 the American Society of Appraisers’ sent another Alarm to BS Bernanke: Letter to Bernanke.
June, 2008, another letter to Bernanke thanking him for the “final rule amending Regulation Z (Truth in Lending Act and Home Ownership and Equity Protection Act”).
2009 – The highest “reported” appraisal fraud incidents. Some fix, BS:
It took Bernanke more than year to figure this out. Oh wait, he knew in 2005. It took Bernanke 7 years to figure this out. I have a bridge to sell if you believe him.
em>Keep in mind that there is a cya fraud reporting system, set up by a
division of our records keeper: ChoicePoint. The table lists ONLY those that were reported, Most were not reported. This hammer has yet to hit. I refuse to let them keep hiding this gruesome reality)
Appraisal Fraud Jumps 50% in 2009: MARI
Short-sale appraisal fraud to be 2010 story?
People are NOT underwater today because of this or that.
HOUSES ARE UNDERWATER BECAUSE OF RUN AWAY APPRAISAL THAT CONTINUES!
Banks didn’t refuse to refinance/reset people out of their unmanageably expensive adjustable mortgages to 30 year fixed because of this or that.
Houses didn’t decrease in value 30% because of this or that.
FREAKIN HOUSES WERE UNDERWATER THE MINUTE A MORTGAGE WAS EXECUTED DUE TO APPRAISAL FRAUD. Many by more than 30%!!!
Apologies for the bolded caps. I am so angry. EVERYONE charged with protecting the integrity of the market, the homeowner, and the investors did jack! They enabled what I consider to be
THE GREATEST ROBBERY IN THE HISTORY OF THE WORLD
AMERICA IS A CRIME SCENE
WHO WILL HELP US?
And now we hear about the Fed study for this and a Congressional Study for that.
BS Bernanke, you and Congress and all the cohorts on Wall Street know exactly what was going on from Day #1. You took the wealth of our people, our pension funds, and the wealth of many overseas via bogus MBS, CDO, and CDS.
And you have the evil temerity to take homes right out from under people? children? babies? the elderly?
Excuse Me, Your Assholiness: Couldn’t you and all those brainy, quanty so-called professionals that we have to pay so much to keep come up with anything less harmful to stimulate the economy?
BS, BS: you, tim, paulson, congress, the fed, the treasury, summers, rubin, fanny, freddie, cotton tail, donkey, aliens, and everyone/anyone who profited from this hair brained, insane, criminal adventure can fix it.
We demand you fix it.
Oh no, I just had the sickest thought. What if all those MBS, CDO, and CDS were purchased with Afghanistan heroine money? Where the heck did that crazy thought come from. Where do such bizarre thoughts come from? Anyway……
We all wondered, as we watched thousands of homes being built, as if overnight, why the housing values were increasing dramatically. That isn’t the way markets usually operate. Prices rise in times of scarcity.
Well, we now know that the co-opted appraisers knew, the mortgage brokers knew, the lender knew, and the regulators will have a hard time convincing us that they didn’t know (ref: Alarms in Intro) that the only explanation for the rapidly rising values in a market glutted with merchandise was appraisal fraud.
Again:
The problem is so widespread, that more than 8,000 appraisers – roughly 10 percent of the industry – have signed a petition asking the federal government to take action.
“What is actually happening is lenders and brokers are telling them what value they want,” he said. “If [appraisers] don’t play ball, they don’t get paid or don’t get work again.”
“The cumulative effect of appraisal fraud is you may have investors holding mortgage debt that’s backed by real estate worth less than they think it is,” said Martin. “It’s a train wreck waiting to happen.”
“All [lenders and brokers] want to do is hit the number because if they don’t hit the number the deal doesn’t go through and if the deal doesn’t go through they don’t get the commission,” said Zielinski.
In theory, it’s in a bank’s best interest to make sure its loans are based on accurate appraisals, said M. Thomas Martin, of the National Mortgage Complaint Center in Seattle. “But if you’re selling the loans to the secondary market, you really don’t care,” he said. “The higher the value, the better.”
There you have it. Our question is answered. Home values didn’t magically double and quadruple their value in 4-5 short years. Fraudulent appraisals did that.
Or worse! There may e several investors attached to a property each claiming the mortgage amount. This subject is another diary:
“Who knows who owns What?”
Tens of millions of homeowners who were charged too much for their home!
Tens of millions of homeowners who borrowed against NO EQUITY.
“There are a lot of people who have refinanced for more than their homes are actually worth and they’re effectively already upside down even without a real estate bubble bursting,” said Callahan. Down the road if they have to sell or decide to refinance, a more accurate appraisal might show that they owe more than the house is worth.
Is there no recourse for these victims of fraudulent appraisals?
AMERICA IS A CRIME SCENE
Well, here’s the truth. There was no HUGE home valuation increase. There was thuggery, coercion, and collusion. There was a crime spree.
Listen to the desparation in this 2007 Letter from the Appraisers. No one has listened to their alarms. They have given up on the Senate:
Our organizations believe the cited regulation gives the Fed Board the jurisdiction to punish the bad actors in the mortgage lending industry, and with the Senate not likely to legislate a solution, we encourage you use this guidance to protect consumers and honest mortgage professionals from abusive lending practices in all types of mortgage loans.
Moreover, with the rising numbers of appraisers subjected to pressure during the mortgage process, we would like you to include “appraiser coercion” on the list of prohibited practices in the Truth in Lending Act.
Several states have laws banning appraiser pressure, and recently, the Attorneys General of Ohio and New York have subpoenaed mortgage brokers, lenders and appraisers in ongoing investigations, for improperly pressuring appraisers to inflate home values.
_________________________
So, BS, since you all have proven you and the rest either completely lack an iota of common sense and/or are psychotically criminal, or both and more, I feel a lot less hubristic about offering you a solution:
STOP THE MUSICAL HOME GAME NOW!!!
We know what happened. We are disgusted. We want resolutions now.
And put people back in the damn homes at a price that meets their income, create flexible mortgages that can compensate for income fluctuations, and then resign.
DavidM:
very good point.
Chase, Once ‘The Good Bank,’ Will Pay Another Huge Settlement
By Matt Taibbi
http://www.rollingstone.com/politics/blogs/taibblog/chase-once-considered-the-good-bank-is-about-to-pay-another-massive-settlement-20130718
Excerpt:
In the three-year period between 2009-2012, Chase paid out over $16 billion in litigation costs. Noted financial analyst Josh Rosner of Graham Fisher slammed Chase in a report earlier this year, pointing out that these settlements and legal costs represented a staggering 12% of Chase’s net revenue during this time. There couldn’t possibly be a clearer demonstration of the modern banking model, in which companies break rules/laws as a matter of course, and simply pay fines as a cost – a significant cost – of doing business.
For sheer curiosity’s sake, I thought I’d list, in capsule form, some of the capers Chase has been caught up in in recent years:
• They were fined $153 million for the infamous “Magnetar” fund case, another scam in which a bank allowed a hedge fund to create a “born-to-lose” mortgage portfolio to bet against. Very similar to the Abacus case that’s at the heart of the ongoing “Fabulous Fab” trial;
• Chase paid $228 million for its role in the egregious municipal bond bid-rigging case we wrote about in Rolling Stone in 2011;
• Chase paid $297 million to the SEC last November for fraud involving mortgage-backed securities;
• Chase paid $75 million in cash and generously agreed to forego $647 million in fines in the Jefferson County, Alabama mess, in which a small-town pol was bribed into green-lighting a series of deadly swap deals;
• In two separate orders this spring, Chase was reprimanded by the OCC and the Fed for money-laundering behaviors similar to the infamous HSBC case, and also for regulatory failures and fraud in the London Whale episode. There was a separate FBI investigation into the London Whale probe in which they allegedly lied to customers and investors about the loss;
• They’re under investigation for allegedly failing to disclose Bernie Madoff’s trading activities to authorities;
• They were one of 13 banks asked to pay up in this year’s $9.3 billion robosigning settlement;
• They were one of four banks last year to settle for a total of $394 million with the OCC for improper mortgage servicing practices;
• They were ordered by the CFTC to pay $20 million last year for improper segregation of customer funds (this was part of the Lehman investigation). The CFTC also fined Chase $600,000 last year for violating position limits in the cotton markets;
• Last year, Chase paid a $45 million settlement to the federal government for improperly racking up fees for veterans in mortgage refinancings. Hey, if you’re going to steal from everyone, you can’t leave out those veterans overseas!
• In 2010, Chase paid $25 million to the state of Florida for selling unregistered bonds to a state-run municipal money-market fund;
• The bank last year was convicted in Europe along with several other banks for fraudulent sales of derivatives to the city of Milan. A total of about $120 million was seized from Chase and three other banks.
Elaine,
thanks for the links that reflect just what kind of allegedly illegal activities that JP Morgan has been involved in.
JPMorgan Pays $920 Million to Settle London Whale Probes
By Dawn Kopecki
Sep 20, 2013
http://www.bloomberg.com/news/2013-09-19/jpmorgan-chase-agrees-to-pay-920-million-for-london-whale-loss.html
Excerpt:
JPMorgan Chase & Co. (JPM), settling U.S. and U.K. probes of a $6.2 billion trading loss, agreed to pay $920 million in penalties and admitted violating securities laws last year as top managers withheld information from the board.
Senior executives had evidence by late April 2012 that traders in the chief investment office in London were pricing a derivatives portfolio in a way that reduced reported losses, the Securities and Exchange Commission said yesterday in a cease-and-desist order. The losses at the unit, which was supposed to help reduce risk and manage excess deposits, forced the bank to restate results for last year’s first quarter.
The episode shows that after weathering the worst financial crisis since the Great Depression (INDU), executives at the biggest U.S. bank engaged in what watchdogs called a “pattern of misconduct” by maintaining poor internal controls, failing to keep their board informed and allegedly misleading regulators. The firm also is grappling with probes of its hiring practices in Asia and criminal inquiries tied to mortgage-bond sales and energy trading.
Sep 19 2013
CFPB Orders Chase and JPMorgan Chase to Pay $309 Million Refund for Illegal Credit Card Practices
http://www.consumerfinance.gov/newsroom/cfpb-orders-chase-and-jpmorgan-chase-to-pay-309-million-refund-for-illegal-credit-card-practices/
Excerpt:
WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) ordered Chase Bank USA, N.A. and JPMorgan Chase Bank, N.A. to refund an estimated $309 million to more than 2.1 million customers for illegal credit card practices. This enforcement action is the result of work started by the Office of the Comptroller of the Currency (OCC), which the CFPB joined last year. The agencies found that Chase engaged in unfair billing practices for certain credit card “add-on products” by charging consumers for credit monitoring services that they did not receive.
JPMorgan Pays Huge Fine After Manipulating Electricity Prices
By Chris Mullins
http://www.policymic.com/articles/57411/jpmorgan-pays-huge-fine-after-manipulating-electricity-prices
Excerpt:
This week, the Federal Energy Regulatory Commission (FERC) announced that it had evidence that on at least eight occasions, JPMorgan Chase was found manipulating the energy market in California and the mid-west to siphon an additional $125 million from consumers. JPMorgan Chase has already settled with FERC, to the tune of a $410 million dollar fine.
While $410 million may sound fair, to one of the nation’s largest banks it represents just a day’s worth of income — a penalty some have deemed too lenient. The bank has, as of yet, not taken action regarding the four employees that FERC singled out as leading the scheme, nor have those employees been held liable by other state agencies. Though there is room for individual penalties in the courts, it seems unlikely that direct action against those employees will be taken.
http://www.zerohedge.com/contributed/2013-10-07/how-should-people-faith-or-atheists-who-want-talk-them-think-bank-fraud
david,
you need to review the articles linked above to see what crimes are alleged. Actually, the government has been taking it too easy on the big banks. Especially in light of the crimes committed and the damage that they have done to the economy and are doing. Once again, if JP Morgan is not worried about the validity of the charges, why is Jamie Dimon trying to buy his way out of the civil and criminal investigations?
It seems kind of strange to me to focus so much on how much money is being made by the business rather than what the actual crime is that is allegedly happening. You ask us if they should go to jail, my first question is, what did they do wrong? Investigation by someone looking to settle for lots of money does not necessarily mean that a crime has been committed. The government action here reminds me of a mafia shakedown in neighborhoods where they ask for money to keep off their back. The governments attitude is that they provide the environment for them to prosper, so give government a piece of the pie.
Excellent Elaine…..
What Mike A said….
Dredd:
“Veterinarians use different treatments on animals than an M.D. woud use on humans.”
Not really, a living organism, an advanced organism like a dog or a cat which has liver, heart, etc is going to be subject to the same sorts of problems. The drugs may be different in some cases but castrating a pig is the same operation as castrating a man. Although there are probably some minor anatomical differences between a pig teste and a human’s.
Putting pins in a dogs leg is pretty much the same as putting it in a human’s leg.
Humans are animals.
Davidbluefish:
Bastiat only lived to about 48 but he wrote some really good stuff.
The Broken Window is excellent also What is Seen and Unseen is good too.
Check out Algernon Sidney as well and of course John Locke.
Veterinarians use different treatments on animals than an M.D. woud use on humans.
Using techniques that work in a middle class driven economy will not make effective changes to a plutonomy.
First we lose the denial about the economic coup that has taken place then we see if we have the wherewithal to deal with it.
Hear, hear, Mike A.!
Seconded with without reserve.
Mike A.,
Now if we can only get Eric Holder to agree, we may be able to deter the big banks from their continued gambling of depositor and shareholder funds.
I agree completely,raff. In my view, we ought to consider imposition of the death penalty against corporations engaged in massive fraud. The fundamental issue is accountability. Officers execute policies approved by directors. Directors are elected by shareholders. There is nothing irrational about imposing upon shareholders all losses resulting from the dissolution of a corporate entity engaged in a criminal enterprise.
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
I am always being amazed at the stuff I don’t know, and/or am unaware of.
Bron, I think I will read some more of this fellow.
All those in power with the freedom to plunder, may choose this as a strategy to reach their ends. All systems of governance must have checks and balances. IMHO our current USA government is in the pocket of Wallst and the CMIC.
Capitalism too is legal plunder.
.. I wonder what a Government in the pocket of the people would be like?
I would rather trust the decision of a 1000 people, than that of a leader of a 1000 people. The leader does not think for the 1000, He/She thinks for theirself and then sells their idea at a 1000X value. Kinda like derivatives :o). Power corrupts be ye a socialist or capitalist.