By Richard Mellor
Afscme Local 444, retired
There’s some really good news to report on today. JP Morgan, the largest US moneylending outfit by assets had to pay a $2.6 billion penalty to keep government regulators and legislators noses’ out of their books.
There’s some really good news to report on today. JP Morgan, the largest US moneylending outfit by assets had to pay a $2.6 billion penalty to keep government regulators and legislators noses’ out of their books.
This comes on top of some $13 billion the bank paid already
due to role in the
crash. The company was also hit with a $1 billion fine for the questionable
trading practices at its London branch that has notched up some $7 billion in
losses.
The
latest penalty is for the bank’s role in keeping Bernie Madoff’s Ponzi scheme
out of the public eye. Naturally, the
bank had something to say about this: “JP
Morgan said it recognized it could have done a better job pulling together
various pieces of information and concerns about Madoff from different parts of
the bank over time”. “JP
Morgan” told the FT this because the
bank is a person you see.
As
far back as 1998 and then again in 2007, JP Morgan “declined to invest in
Madoff funds” the FT says because, as one manager put it, the returns were, “too good to be true.” Anyway Madoff
refused to meet with them. The bank said also that it didn’t believe any
employee, “knowingly assisted Madoff’s
Ponzi scheme.” We’re dealing with a very talkative bank here. Talkative as
it is though, it never mentioned anything to authorities until after Madoff was
arrested.
Business
Week estimated late last year that when BofA’s $8 billion penalty for selling
faulty mortgages to Fannie Mae and Freddie Mac is included, the total paid by
the banks was $93 billion. JP Morgan has
put aside $23 billion to fight legal battles arising from its practices
(currency manipulation is another). Madoff is estimated to have stolen some $50
billion, mostly from rich folks. They
don’t like it when their own kind steals from them; there has to be honor among
thieves. As BusinessWeek pointed out in October of last year, “It
remains the case that no high-ranking Wall Street executives have been
criminally prosecuted or seen the inside of a courtroom since 2008.”
As Ipointed out in a previous commentary last November, “The banks’ profits are so
lucrative though that they’ll face the music with fines, better that than jail
terms. The banks just had two straight
quarters of record profits according to the FDIC. 'This
years fines may be large but don’t come close to undoing the profits banks made
in the subprime craze’s headiest days' says BW. Barry Ritholtz, author of “Bailout Nation” puts it a another way, 'We’ve taken what used to be jail terms—and
that should in theory prevent that kind of behavior from happening—and instead
it became, ‘Let’s engage in some extralegal activities, we’ll pay some
penalties, but we’ll make a load more in revenue,’ he says. 'If I steal a billion dollars and have to
give back $500 million as a fine, I’ll take that trade every day. Every
day.'"
Just
think about the figures here and remember that it is the tip of the
iceberg. The $23 billion the
moneylenders are spending to cover legal expenses would go a long way to
solving a few problems in in society wouldn’t it? The $93 billion it’s already paid would too.
And, as BW points out, it’s chump change to them.
I
started off reading this news with my position that the entire financial
industry should be nationalized, it should be taken in to public ownership and the
capital they store, the wealth of society that is deposited in them, should be
allocated on the basis of social need. Committees composed of workers,
representatives of community businesses, community organizations, unions, youth
etc. can determine the best social use of our surplus. In other words, it is not the savings of the
worker or community business (they can receive cheap loans) that is taken in to
public hands, but the institutions themselves and their content managed and
distributed through a collective democratic socialist plan.
However,
the Financial Times article convinced me to change my views, I was concerned JP
Morgan may not be able to change it’s ways, but when I read a bit further, I
see I can breathe a sigh of relief, “As
part of the deferred prosecution deal, and fine which spares the bank from criminal
prosecution in exchange for the payment…” says the Times (did we vote on
that?), the bank made a “…promise to
reform its practices.”
Problem solved.
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