“Exceptions, Exemptions And Loopholes”: How J.P. Morgan Chase Has Made The Case For Breaking Up The Big Banks
J.P. Morgan Chase & Co., the nation’s largest bank, whose chief executive, Jamie Dimon, has lead Wall Street’s war against regulation, announced Thursday it had lost $2 billion in trades over the past six weeks and could face an additional $1 billion of losses, due to excessively risky bets.
The bets were “poorly executed” and “poorly monitored,” said Dimon, a result of “many errors, “sloppiness,” and “bad judgment.” But not to worry. “We will admit it, we will fix it and move on.”
Move on? Word on the Street is that J.P. Morgan’s exposure is so large that it can’t dump these bad bets without affecting the market and losing even more money. And given its mammoth size and interlinked connections with every other financial institution, anything that shakes J.P. Morgan is likely to rock the rest of the Street.
Ever since the start of the banking crisis in 2008, Dimon has been arguing that more government regulation of Wall Street is unnecessary. Last year he vehemently and loudly opposed the so-called Volcker rule, itself a watered-down version of the old Glass-Steagall Act that used to separate commercial from investment banking before it was repealed in 1999, saying it would unnecessarily impinge on derivative trading (the lucrative practice of making bets on bets) and hedging (using some bets to offset the risks of other bets).
Dimon argued that the financial system could be trusted; that the near-meltdown of 2008 was a perfect storm that would never happen again.
Since then, J.P. Morgan’s lobbyists and lawyers have done everything in their power to eviscerate the Volcker rule — creating exceptions, exemptions, and loopholes that effectively allow any big bank to go on doing most of the derivative trading it was doing before the near-meltdown.
And now — only a few years after the banking crisis that forced American taxpayers to bail out the Street, caused home values to plunge by more than 30 percent and pushed millions of homeowners underwater, threaten or diminish the savings of millions more, and send the entire American economy hurtling into the worst downturn since the Great Depression — J.P. Morgan Chase recapitulates the whole debacle with the same kind of errors, sloppiness, bad judgment, excessively risky trades poorly-executed and poorly-monitored, that caused the crisis in the first place.
In light of all this, Jamie Dimon’s promise that J.P. Morgan will “fix it and move on” is not reassuring.
The losses here had been mounting for at least six weeks, according to Morgan. Where was the new transparency that’s supposed to allow regulators to catch these things before they get out of hand?
Several weeks ago there were rumors about a London-based Morgan trader making huge high-stakes bets, causing excessive volatility in derivatives markets. When asked about it then, Dimon called it “a complete tempest in a teapot.” Using the same argument he has used to fend off regulation of derivatives, he told investors that “every bank has a major portfolio” and “in those portfolios you make investments that you think are wise to offset your exposures.”
Let’s hope Morgan’s losses don’t turn into another crisis of confidence and they don’t spread to the rest of the financial sector.
But let’s also stop hoping Wall Street will mend itself. What just happened at J.P. Morgan – along with its leader’s cavalier dismissal followed by lame reassurance – reveals how fragile and opaque the banking system continues to be, why Glass-Steagall must be resurrected, and why the Dallas Fed’s recent recommendation that Wall Street’s giant banks be broken up should be heeded.
By: Robert Reich, Robert Reich Blog, May 10, 2012
Mitt Romney: Goldman Sachs Guy
Mitt says he’s “not a Wall Street guy.” But in one key way, he’s pure Wall Street.
“I am not a Wall Street guy, classically defined,” said Mitt Romney in a December interview with the Huffington Post. Private equity firm Bain Capital, Romney’s longtime employer and the company that made him rich, he seemed to say, was a different breed from JPMorgan Chase, Goldman Sachs, and the other Wall Street financial titans. It was as if he was distancing himself from the unpopular Wall Streeters who helped cause the 2008 economic collapse.
But in one key way, Romney is pure Wall Street. A review of his personal financial disclosure records shows that a chunk of Romney’s wealth—he’s worth an estimated $190 million to $250 million—comes from investments in an array of Wall Street banks and investment houses, none more so than Goldman Sachs.
Romney and his wife, Ann, have investments in nearly three-dozen various Goldman funds together valued at between $17.7 million to $50.5 million, according to a financial disclosure form (PDF) filed in August 2011. Those investments appear in the blind trusts and individual retirement accounts belonging to the Romneys. Romney’s been a loyal Goldman Sachs client. His 2007 disclosure, filed before his first presidential run, showed Goldman investments valued at between $18.2 million and $51.5 million.
No other Republican presidential candidate comes to close to matching the size and breadth of Romney’s investment portfolio. Nor do any of the other candidates’ personal financial disclosures list any investments in Goldman-run funds. Romney’s big bet on Goldman’s financial wizardry could give more ammo to his critics who attack him as a out-of-touch corporate elite who profited by flipping companies and laying off workers, and who has little in common with average Americans. (A Romney spokeswoman did not respond to a request for comment.)
Goldman Sachs is considered by many one of the villains of the 2008 financial crisis. In 2010, Rolling Stone‘s Matt Taibbi acidly described Goldman as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” After a lengthy investigation into the firm’s activities, Sen. Carl Levin (D-Mich.) accused Goldman last year of deceiving its clients by selling them complex investments that the firm’s own traders predicted would fail—a charge Goldman vehemently denied. Levin also accused Goldman brass of misleading Congress about its trading activities, referring the matter to the Justice Department and the Securities and Exchange Commission.
The Goldman investments in Romney’s 2011 disclosure are spread across a variety of portfolios and investment funds. A private, Goldman-managed stock portfolio in Mitt Romney’s blind trust worth between $1,000,001 and $5,000,000 contains stock holdings in 32 companies, including Bank of America, McDonald’s, Staples, and Occidental Petroleum. Another Goldman fund, also worth between $1,000,001 and $5,000,000, invests in (PDF) everything from junk bonds to US Treasuries, derivatives to futures, foreign currencies to the government housing corporation Fannie Mae.
Here’s a list of the Romneys’ most recent Goldman investments:
| Investment | Lowrange | Highrange | Holder | Type |
|---|---|---|---|---|
| GS Financial Square Federal Fund – FST Shares | $5,000,001 | $25,000,000 | Mitt | IRA |
| GS Private Client Portfolio | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| GS Strategic Income Fund Class 1 | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| Goldman Sachs Small Cap Value Class 1 | $500,001 | $1,000,000 | Mitt | Blind trust |
| GS Financial Square Federal Fund – FST Shares | $1,000,000 | $1,000,000 | Ann | Blind trust |
| The Goldman Sachs Group Inc. Linked to GP GSCI Agriculture, structured note | $500,001 | $1,000,000 | Ann | Blind trust |
| Goldman Sachs Trust GS Inflation Protected Securities Funds – INSTL SHS | $1,000,000 | $1,000,000 | Ann | Blind trust |
| The Goldman Sachs Group Inc. Linked to MSCI EAFE Structured Note | $500,001 | $1,000,000 | Ann | Blind trust |
| GS Local Emerging Mkts Debt FD Mutual Fund | $500,001 | $1,000,000 | Ann | Blind trust |
| GS Strategic Income Fund CL 1 | $500,001 | $1,000,000 | Ann | Blind trust |
| The Goldman Sachs Group Inc Linked to DJIA Structured Note | $500,001 | $1,000,000 | Ann | Blind trust |
| The Goldman Sachs Group Inc Linked to DJIA Structured Note | $500,001 | $1,000,000 | Ann | Blind trust |
| GS 2002 Exchange Place Fund LP | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Capital Partners Fund 2000 LP | $500,001 | $1,000,000 | Ann | Blind trust |
| Goldman Sachs Global Opportunities Fund LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| Goldman Sachs Hedge Fund Partners LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| Goldman Sachs Hedge Fund Partners II LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| Goldman Sachs Trust GS Inflation Protected Securities Fund – INSTL SHS | $250,001 | $500,000 | Mitt | Blind trust |
| The Goldman Sachs Group Inc Linked to Russell 2000 Index Structured Note | $250,001 | $500,000 | Ann | Blind trust |
| Cash – GS Account | $100,001 | $250,000 | Ann | Blind trust |
| Cash – GS Account | $50,001 | $100,000 | Mitt | Blind trust |
| GS Emerging Markets Opportunities Fund LLC | $50,001 | $100,000 | Mitt | Blind trust |
| GS Capital Partners III LP | $15,001 | $50,000 | Ann | Blind trust |
| GS Financial Square Federal Fund – FST Shares | $1,001 | $15,000 | Ann | IRA |
| Goldman Sachs Core Fixed-Inc Mutual Fund | $1,001 | $15,000 | Ann | IRA |
| The Goldman Sachs Group CMN (Sold) | $0 | $1,001 | Mitt | Blind trust |
| Goldman Sachs Investment Grade Credit Fund – Inst (Sold) | $0 | $1,001 | Mitt | Blind trust |
| GS Global Equity Partners I, LLC (Sold) | $0 | $1,001 | Mitt | Blind trust |
| Cash – GS Account | $0 | $1,001 | Mitt | IRA |
| Goldman Sachs Ultra-Short Duration Government FD (Sold) | $0 | $1,001 | Mitt | IRA |
| Goldman Sachs Short Duration Government FD (Sold) | $0 | $1,001 | Mitt | IRA |
Here’s a list of Goldman investments in Romney’s 2007 disclosure:
| Investment | Lowrange | Highrange | Holder | Type |
|---|---|---|---|---|
| Goldman Sachs Financial Square (Sold) | $0 | $1,001 | Mitt | Blind trust |
| Goldman Sachs Institutional LI (Sold) | $0 | $1,001 | Mitt | Blind trust |
| Goldman Sachs Bank Deposit | $500,000 | $1,000,000 | Mitt | Blind trust |
| Goldman Sachs Emerging Equity Fund | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| Goldman Sachs Group, Inc | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| Goldman Sachs Struct Intl Equity Fund | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| GS Global Equity Partners | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| The Goldman Sachs Group Inc 0% 9/25/08 (Sold) | $0 | $1,001 | Mitt | Blind trust |
| The Goldman Sachs Group Inc 0% Due 12/11/2009 (Sold) | $0 | $1,001 | Mitt | Blind trust |
| The Goldman Sachs Group Inc 0% Due 3/25/10 | $250,001 | $500,000 | Mitt | Blind trust |
| GS Emerging Markets Opportunities Fund, LLC | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| Goldman Sachs Global Strategic Energy Fund, LLC | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| Goldman Sachs GTAA Fund, LCC | $1,000,001 | $5,000,000 | Mitt | Blind trust |
| Goldman Sachs Financial Square Federal Fund | $1,000,000 | $1,000,000 | Ann | Blind trust |
| Goldman Sachs Intl Real Estate Secs Fund | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS 2002 Exchange Place Fund LP | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Global Opportunities, LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Direct Strategies Fund LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Hedge Fund Partners II LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Hedge Fund Partners LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Quant and Active Direct Strategies Fund, LLC | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Capital Partners Fund 2000, LP | $1,000,000 | $1,000,000 | Ann | Blind trust |
| GS Capital Partners III LP | $100,101 | $250,000 | Ann | Blind trust |
| Goldman Sachs Financial Square Federal Fund | $1,000,001 | $5,000,000 | Mitt | IRA |
| Goldman Sachs Emerging Markets Equity Fund | $250,001 | $500,000 | Mitt | IRA |
| GS Structured US Equity Institutional | $100,101 | $250,000 | Mitt | IRA |
| Goldman Sachs Japanese Equity Fund | $0 | $1,001 | Mitt | IRA |
| Goldman Sachs Financial Square Federal Fund | $0 | $1,001 | Ann | IRA |
| Goldman Sachs Core Fixed-Inc I Mutual Fund | $1,001 | $15,000 | Ann | IRA |
Romney has grappled with accusations in both of his presidential bids that he’s a lifelong member of the wealthy elite who can’t relate to blue-collar Americans. Romney has recently compounded his 1-percent problem by claiming that $374,000 in speaking fees is “not very much,” betting Rick Perry $10,000 during a nationally televised debate, and revealing that he pays roughly 15 percent in taxes. (A typical middle class family pays closer to 25 percent.)
Larry Sabato, director of the University of Virginia’s Center for Politics, says that while Romney isn’t the first very wealthy man to run for president (think John F. Kennedy and Franklin Delano Roosevelt), one of Romney’s basic problems is connecting with middle-class Americans. His many investments in Goldman could shape voters’ opinions of Romney. “The massive Goldman holdings would be another bit of the Romney mosaic,” Sabato says. “It’s another reason why Romney has to find ways to better connect with average people’s problems—because he doesn’t have any of the same problems on his plate.”
By: Andy Kroll, Mother Jones, January 23, 2012
Have Banks Been Robo-Signing Credit Card Documents Too?
Several months ago, the nation’s biggest banks became embroiled in the “robo-signing” scandal, when it became clear that they had been approving thousands of foreclosures without verifying the proper documents or guaranteeing borrowers due process. The banks submitted fraudulent documents to courts and were forced to halt their foreclosures processes entirely as they sorted out what happened. “I had no idea what I was signing,” said one Bank of America employee. “We had no knowledge of whether the foreclosure could proceed or couldn’t, but regardless, we signed the documents to get these foreclosures out of the way.”
Robo-signing people into foreclosure is bad enough. But as it turns out, the practice may not have been limited to residential mortgages. American Banker, in fact, notes that JP Morgan Chase may also have been robo-signing credit card deals:
JPMorgan Chase & Co. has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments…It is unclear whether Chase has stopped pursuing collection on many claims nationwide, or if intends to pursue the debts in some other fashion. The bank has not explained its apparent moratorium and declined comment.
Chase’s halt does, however, follow scattered defeats in state courts and a whistle-blower’s allegation that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party. Former Chase employees and debt collection experts insist that the bank would not have abruptly retreated from its collections efforts in the absence of trouble. […]
Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. Chase’s current pullback raises at least the possibility that at least some banks may have documentation problems in other business lines…”If sloppy record keeping and problems with false affidavits is a problem with mortgages, it’s 100 times bigger in credit card accounts,” says Michelle Weinberg of the Legal Assistance Foundation of Metropolitan Chicago.
As one finance blogger put it, “When a bank leaves money on the table for no obvious reason, you know that something’s not quite right.” It seems that JP Morgan, and who knows how many other banks, were attempting to collect on debts without being certain that the amount they were asking for was accurate. One whistle blower looked at $200 million in JP Morgan customer accounts and claims to have found that “half the accounts lacked adequate documentation of judgment and one-sixth listed the wrong amounts owed.”
Banks have been robo-signing documents since as least 1998, as an Associated Press investigation found, and its not all that surprising that a practice that worked so well for so long (at least in the eyes of the banks) would have migrated to other areas.
By: Pat Garofalo, Think Progress, January 17, 2012
Wall Street Is Still Playing Us For Suckers
As a mere youth, I bought a used car in New York to drive to California to be with the woman of my dreams. Inexplicably, she decided to rush back to New York, so I promptly took the car back to the dealer. He made a shockingly low offer. The car had been in an accident, he explained. The chassis was bent. I was flabbergasted. I had just bought the car from him. If the chassis was bent, it was bent when I bought it. The salesman offered me a take-it-or-leave-it shrug. He probably now works on Wall Street.
That the morality of the used car lot has been adopted by Wall Street is now abundantly clear. Citigroup recently settled a civil complaint in which it was accused of selling mortgage-related investments that it knew were dogs. It was so certain that the investments were the financial equivalent of my used car that it bet against them — heads I win, tails you lose — and even selected the investments themselves, choosing from a cupboard of depleted and exhausted financial instruments. An investment in the Brooklyn Bridge would have been safer.
These investments are known as collateralized debt obligations (CDOs), and they consisted of the sort of mortgage securities that nearly sunk the U.S. financial system. According to federal regulators, they were sold with the full knowledge that they were careening toward worthlessness and that, by deduction, their buyers were patsies. The bank made substantial profits on them. But when the Securities and Exchange Commission decided to act, it got Citigroup to pony up a mere $285 million fine that, to presumed chuckles, will doubtlessly be taken out of petty cash. The bank last quarter reported a profit of $3.8 billion.
Mirth must have turned to guffaws when Citigroup read on. It did not even have to admit guilt — “without admitting or denying” is the language the SEC used — and no single executive was held culpable. The CDOs, apparently, were contrived by no one and sold by no one. There’s a Nobel Prize in something (maybe alchemy) for anyone who can explain how that happened.
The Citigroup settlement is being reviewed by a perplexed U.S. District Court Judge Jed S. Rakoff. Among other things, he wants to know why he should authorize a settlement “in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing.” This is a marvelous question that goes to the heart of the matter. The settlement is itself a CDO, a legal version of a black hole in which next to nothing is disclosed. Why no guilt? Why no guilty people? Why such a non-punishing punishment? The SEC will have to tell it to the judge.
I do not want to be excessively harsh on dear Citigroup. It was not the only one selling smoke. Goldman Sachs and JPMorgan did something similar. In the words of Jesse Eisinger of the online journalistic group ProPublica, “This was the Wall Street business model.” And it was a model permitted and encouraged from the top, by people who became filthy rich from filthy practices and now take umbrage when President Obama calls out their industry for approbation. They should first spend a year in community service and then, if they still feel slighted, denounce Obama.
As for Obama’s government, it has been too gentle with these miscreants. Why not a single major banker has been cuffed and frog-marched to some Financial District Guantanamo is unclear. Why their firms have gotten off with modest fines and non-confession confessions is not clear, either. That, in itself, is a crime.
Somebody has to break this culture. In this sense, Wall Street is no different than the New York Police Department, where it apparently has been customary to fix traffic tickets for friends, family and — almost certainly — the odd person with some cash. When 16 of the alleged ticket-fixers were arraigned last week, hundreds of off-duty cops came to cheer them, denounce the DA and manhandle reporters. Their union took a firm position in defending this behavior. An appalled city awaits firm action by the mayor and police commissioner.
An appalled nation awaits a similar response to what went on in the financial sector. What we would like to see is some version of a public hanging, the appropriate reaction to the breathtaking fleecing of investors. In the end, those investors got their money back.
That’s more than we can say about our lost faith in justice.
By: Richard Cohen, Opinion Writer, The Washington Post, October 31, 2011
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 