An old saying in sporting circles is that culture comes from the front office, meaning that if the hierarchy set a good example it filters down into the club; to players, coaches, staff. If we accept this generalization and extrapolate into the business world, how then do we look at JPMorgan & Chase and its well known CEO, Jamie Dimon? How do we look at Wall Street as a collective of investment banks, hedge funds and financial services companies?
With these thoughts in mind it was reported overnight that JPMorgan had been fined $4 billion USD by a Dallas court for mismanaging the estate of a man named Max Hopper. The court found that the bank breached its fiduciary duty to protect its client’s interests, broke a fee agreement and also committed fraud.
Now who's a fraud you son of a bitch.
— RideTheLightning⚡️ (@MediumSqueeze) September 27, 2017
JPMorgan, Jamie Dimon, Bitcoin and Fraud
“Fraud” has long been a word eponymous with JPMorgan. And now, ever since CEO Jamie Dimon made his controversial claims about Bitcoin, the technology has become intertwined with JPMorgan, Dimon, and the subject of fraud.
Dimon made a few confused accusations about Bitcoin, claiming it is a “novelty” that is “worth nothing” and predicted that Bitcoin would be “closed down.” He did not qualify his assertions, but he has been publicly backed by convicted fraudster and personification of the Wall Street ethos, Jordan Belfort — better known as the “Wolf of Wall Street.”
Dimon had also vaunted the ability of central banks to print money in a cost effective way, saying “It’s very cheap to do … JPMorgan moves $6 trillion around the world every day very efficiently, very quietly, very effectively and very cost efficient.”
And yet, just last year at the Davos Economic Forum, Dimon said blockchain technology “could probably reduce the cost of real application in certain things. If it proves to be cheap and secure it will be adopted for a whole bunch of stuff.”
But who can trust anything that comes out of the mouth of the head of one of the most fraudulent companies in history?
A History of Financial Crime
You may think it would be difficult to commit a more distasteful offence than ripping off the estate of a grieving family — as mentioned above — but a quick look at JPM’s rap sheet would certainly dismiss that notion in a hurry.
Since 2000, JPM has been fined over $29 billion for a multitude of crimes.
Yet, we don’t hear Jamie Dimon tanking the JPM stock price by lambasting how he has helmed a company so married to fraud and other offences, nor does he ever offer his resignation for being party to such a wide array of criminality.
As Salon journalist Alex Pareene noted:
“Anytime you’re looking at the greatest fine in the history of Wall St regulation, it’s worth asking should this guy stay in his job….If he managed a restaurant and it got the biggest health department fine, no one would be like ‘yeah but its a great restaurant’”
Instead, through an influential relationship with the US government, JPMorgan & Chase has been allowed to profit enormously for its abuse of laws and regulations. When caught, JPMorgan simply pays lip service to the general public by agreeing to a settlement with the representative body of the US government. Rarely publicized, the settlement is often only a percentage of the profit made conducting the actual fraud, and the company is never compelled to admit its guilt.
To reinforce the scale of JPMorgan & Chase’s fraudulent activities, in 2013 alone the firm was fined:
- $4.5 billion to settle a case where it is alleged to have misrepresented mortgage bonds sold to a number of pension funds and other investors. This came after $5.3 billion for mortgage loan servicing and foreclosure abuses in 2012.
- over $900 million to settle an investigation into the London Whale scandal.
- $80 million for defrauding its own credit card customers – charging them over $390m (which it was forced to refund) for identity protection services it did not provide.
- $410 millioin for manipulating the Californian electricity market.
- a whopping $13 billion for misrepresenting the mortgage backed securities it sold when it acquired the failed Bear Sterns and Washington Mutual MBS portfolios at the height of the financial crisis.
This last fine of $13 billion was heralded for its size, even though in reality it was only $9 billion, with $7 billion being eligible as a tax write-off. Attorney General Eric Holder commented that it matched the severity of the offenses, saying “Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown.”
Yet what wasn’t mentioned is that the fines largely came about because of the tenacity of one whistleblower, Alayne Fleischmann, who risked her whole livelihood to report on what she called “massive criminal securities fraud.”
In 2006, Fleischmann worked as a JPMorgan securities lawyer and was worried about the quality of loan deals she was asked to review. After emailing her worries to her supervisor, she was told to stop doing so as it would leave a paper trail. This, she says, “shows these people knew what they were doing and were trying not to get caught.”
Others who had the same objections were shouted down, threatened and forced to work long hours until the loan pools were cleared for sale.
Fleischmann was not deterred, and wrote to managing director William Buell about her concerns. The letter would later be referred to as “The Howler,” and she thought it would be enough to stop JPMorgan from selling the loans. But, as she later learned, “when the Justice Department doesn’t do anything, that (writing a memo) stops being a deterrent.”
Fleischmann was later laid off, but as the crisis unfolded in 2008 Dimon boasted in Fortune magazine about seeing the crisis coming “We concluded that underwriting standards were deteriorating across the industry … we need[ed] to sell a lot of our positions … This stuff could go up in smoke!”
This means Dimon knew how toxic many tranches of mortgages were two months before Fleischmann raised her objections. Still, JPMorgan continued to securitize them for many months to come. And yet when he testified before the Financial Crisis Inquiry Commission he trotted out a different line – “In mortgage underwriting, somehow we just missed, you know, that home prices don’t go up forever.”
Too Big to Jail
The process of fining JPMorgan was lengthy and not without controversy. A press conference to announce charges against JPMorgan was abruptly cancelled. Soon after, Dimon personally met with Eric Holder to thrash out a deal, leading many to believe that the bank was being given special treatment. JPMorgan admitted no guilt and the settlement was not looked over by a judge before publication.
Ironically the “special treatment” argument was initiated by Eric Holder himself, who years before had argued that banks should be fined and not criminally prosecuted for any crimes committed in order to minimize the “collateral consequences” a bankruptcy may put upon the financial system.
This was the beginning of “Too Big To Jail.”
The glaring irony here, probably lost on Dimon, is that the Bitcoin software was released in response to the exact fraudulent behavior and cozy relationships that came to exemplify the after effects of the financial crisis. So while there is no doubt that the Bitcoin industry has had its instances of fraud and scandal — such is the nature of new, unregulated industries — it is ridiculous to label a technology fraudulent, especially when your company has been the undisputed big swinging dick of fraud in an arena full of pricks.
Do you think Jamie Dimon’s statement about Bitcoin was hypocritical? Share your thoughts in the comments below.
Images via CNBC, SatoshiGallery, Getty Images