Mirabile Dictu! JP Morgan Finally on Regulatory Hot Seat for Widespread Control Failures and Alleged Lying by Blythe Masters Under Oath. It’s been far too long in coming, but Jamie Dimon may finally be getting his comeuppance. A New York Times report reveals the Morgan bank is in the crosshairs of multiple regulators for poor controls and dishonest dealings with the authorities: Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath…In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington.
The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say. The fact that JP Morgan is in hot water isn’t news.
Fraud settlements with SEC. JPMorgan & Libor rigging. How Wall Street Scams Counties Into Bankruptcy. Lord knows we’ve had more than enough scandals ginned up by Wall Street over the years, and the message that banking executives proclaim after each is: “Don’t worry, we’ve learned that lesson, and it will never happen again.” Which is how we got to the recent spectacle of Jamie Dimon, the chief executive officer of JPMorgan Chase & Co., testifying twice before Congress that although the bank’s chief investment office was taking huge proprietary risks with some $350 billion of its depositors' money -- and lost $3 billion (and counting) by making a bunch of risky bets on an obscure, thinly traded derivatives contract -- everything is now fine and dandy because the unjustifiable gambling has been stopped dead in its tracks.
We are told repeatedly that when Wall Street’s deeply flawed incentive system leads to one bad outcome after another, year after year, it will never happen again. Yet it does. Minor Penalties Over time, the how and why of the firm’s success revealed itself. Fraud Charges.
Michael Crimmins: Why Hasn’t Jamie Dimon Been Fired by His Board Yet? By Michael Crimmins, who has worked on risk management and Sarbanes Oxley compliance for major banks JP Morgan’s jawdropping revelations in its Friday earnings call don’t seem to be attracting the attention they deserve. The market may have shrugged off the size of the losses and the corporate governance modifications plans, but the announcement opens the door wide for the next phase of this scandal.
The biggest question is whether Jamie Dimon should keep his job. The first stunner, that JP Morgan was restating the first quarter financials, should have caused a deafening ringing of alarm bells. For a company of JP Morgan’s stature to be compelled to restate prior period financials is a very clear signal of bigger problems with their overall financial reporting. In isolation we would normally expect to see a massive selloff with an event of that seriousness. But the real cause for alarm is the reason for the restatement. Which leads to the second underreported stunner. Who Wants Big Banks. By James Kwak Thirty years ago, Merton Miller, one of the giants of modern finance, was at a banking conference when a banker said he couldn’t raise more capital by selling stock because that would be too expensive: his stock was selling for only 50 percent of book value. Merton responded, “Book values have nothing to do with the cost of equity capital.
That’s just the market’s way of saying: We gave those guys a dollar, and they managed to turn it into 50 cents. Now that’s what a growing number of sophisticated investors are saying about today’s banking behemoths, especially JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley. A brief aside: Book value refers to the amount that shareholders have historically invested in a firm, plus profits that have not been paid out to them as dividends. But now people who matter (that is, people with real money) are also saying the banks should be broken up—because then they would be worth more to their shareholders. "Too Big to Fail"
Occupy the SEC Urges the SEC to Investigate JP Morgan Over Likely (As in Bloomin’ Obvious) Sarbanes Oxley Violations #OWS. We’ve written at length how the Obama Administration claim that it couldn’t prosecute bank CEOs and senior executives because they didn’t do anything illegal is utter hogwash. Sarbanes Oxley, passed in the wake of Enron, was designed to prevent CEOs and other top executives from escaping liability by claiming they were clueless face men. And it provides for a clear path to criminal prosecutions. But the way Sarbanes Oxley was defanged is by making it an exercise in form over substance. Public firms engage in compliance theater while the SEC sits on its hands as far as enforcement is concerned (Note that the SEC did fail on its lone effort to use Sarbox against a CEO in the case of Richard Schrusy and Healthsouth.
But that case was tried before a jury in Birmingham, Alabama, and I will spare readers the long form account as to why you can’t generalize from these results). I hope you’ll read their succinct and forceful letter.
Regression to the Mean, JPMorgan Edition. By James Kwak I haven’t been writing about the JPMorgan debacle because, well, everyone else is writing about it. One theme that has stuck out for me, however, has been everyone’s reflexive surprise that this could happen at JPMorgan, supposedly the best and most competent of the big banks. For example, Lisa Pollock of Alphaville, who has provided some of the most detailed analyses of what happened, asked, “could this really happen under CEO Jamie Dimon’s watch?”
Dawn Kopecki and Max Adelson at Bloomberg referred to “JPMorgan’s cultivated reputation for policing risk.” Articles about Ina Drew’s resignation are sure to point out her relative success at dealing with the financial crisis of 2007–2009. “Highly intelligent women tend to marry men who are less intelligent than they are.” No. The performance of anyone doing anything will exhibit regression to the mean. The more disturbing thing isn’t that commentators fell for this statistical red herring. JP Morgan Chase. J.P. Morgan. The Shadow Banking System. Financial sector reguatory reform?
Derivatives - The Unregulated Global Casino for Banks. Note the little man standing in front of white house. The little worm next to lastfootball field is a truck with $2 billion dollars. There is no government in the world that has this kind of money. This is roughly 3 times the entire world economy. The unregulated market presents a massive financial risk. If you don't want to bank with these banks, but want to have access to free ATM's anywhere-- most Credit Unions in USA are in the CO-OP ATM network, where all ATM's are free to any COOP CU member and most support depositing checks.
Keep an eye out in the news for "derivative crisis", as the crisis is inevitable with current falling value of most real assets. Cognitive Regulatory Capture. What went wrong with finance? JPMorgan: If This Is a Financial Fortress, Run For the Bunkers | Education. June 6, 2012 | Like this article? Join our email list: Stay up to date with the latest headlines via email. The U.S. Senate Banking Committee spent over two hours on Wednesday proving to the American people that any shred of confidence they might still have in our financial markets is misplaced. Thomas Curry, head of the Office of the Comptroller of the Currency (OCC) since April 9 of this year, did confirm one important detail during the hearing: the reckless derivative trading at JPMorgan’s London office occurred in a unit of the national bank (not the broker-dealer), using insured deposits of bank customers, while 65 of the OCC’s examiners sat in offices of JPMorgan in New York, where they are permanently stationed.
The OCC oversees all national banks, including those deemed systemically important. The U.S. Elizabeth Friedrich, a member of Occupy the SEC, offered the following insight into these dangerous conflicts of interest: Where the OCC should have looked.
JPMorgan made some $5bn on Friday using accounting magic called DVA. With all the talk about JPMorgan's losses out of the CIO's office, nobody is discussing the money the firm made on Friday due to the accounting magic called DVA. After all, CIO's positions were (at least in principle) meant to act as an offset to this earnings volatility. As an example the chart below shows the price action for JPM's newly minted bond (issued just last month). It's a 4% coupon bond maturing in 20 years. With roughly $12bn of this bond outstanding, JPMorgan will record a gain of some $350MM based on Friday's price move just for this bond. It's important to note that this bond represents only a fraction of the $2.3 trillion balance sheet funding.
Since the firm's long-term debt is some 12% of total liabilities, one can do a quick back of the envelope estimate. SoberLook.com.
JPMorgan - lobbying.