Senate “Whale” Report Says JP Morgan Lied Six Ways To Sunday, See Also ‘Out Of Control’

Today appears to be a day of reckoning of sorts for too-big-to-tell-the-truth JP Morgan and their “fortress balance sheet”.  The latest Senate Permanent Subcommitte report on the London Whale trades make JP Morgan and its smooth-talking CEO look more like the charlatans we know them to be.  The 301 page report is titled JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses.  As Yves, notes this morning, the findings in the report are worse than previously imagined. Just yesterday David Dayen suggested the latest findings behind a report by Josh Rosner at Graham-Fisher and Co portray JP Morgan as “mostly a criminal enterprise”.  To back up that claim, he highlights recently documented instances of JP Morgan breaking the law.  Keep in mind these activities don’t even include ongoing investigations over LIBOR and many of the mortgage securities cases currently under litigation.  The list of malfeasance at JPM is rather long indeed:

Bank Secrecy Act violations;
Money laundering for drug cartels;
Violations of sanction orders against Cuba, Iran, Sudan, and former Liberian  strongman Charles Taylor;
Violations related to the Vatican Bank scandal  (get on this, Pope Francis!);
Violations of the Commodities Exchange  Act;
Failure to segregate customer funds (including one CFTC case where the  bank failed to segregate $725 million of its own money from a $9.6 billion  account) in the US and UK;
Knowingly executing fictitious trades where the  customer, with full knowledge of the bank, was on both sides of the deal;
Various SEC enforcement actions for misrepresentations of CDOs and  mortgage-backed securities;
The AG settlement on foreclosure fraud;
The  OCC settlement on foreclosure fraud;
Violations of the Servicemembers Civil  Relief Act;
Illegal flood insurance commissions;
Fraudulent sale of  unregistered securities;
Auto-finance ripoffs;
Illegal increases of  overdraft penalties;
Violations of federal ERISA laws as well as those of  the state of New York;
Municipal bond market manipulations and acts of  bid-rigging, including violations of the Sherman Anti-Trust Act;
Filing of  unverified affidavits for credit card debt collections (“as a result of internal control failures that sound eerily  similar to the industry’s mortgage servicing failures and foreclosure  abuses”);
Energy market manipulation that triggered FERC  lawsuits;
“Artificial market making” at Japanese affiliates;
Shifting  trading losses on a currency trade to a customer account;
Fraudulent sales  of derivatives to the city of Milan, Italy;
Obstruction of justice  (including refusing the release of documents in the Bernie Madoff case as well  as the case of Peregrine Financial).

The entire report by Joshua Rosner is quite damning  indeed.  It spells out the case for concern for JPM’s handling of customer monies and segregation of client funds. It also exposes how JPMorgan has used the FDIC (American taxpayers) to cover losses at the WaMu mortgage unit it absorbed.  The Senate hearings today should be quite entertaining indeed.  Sadly, Mr. smoothie himself won’t be present for the grilling. We can only hope that something concrete and constructive will come from these latest findings. At this point, there is little doubt that our largest banks are out-0f-control welfare queens gambling with our money and our future.

Gf&Co Executive Summary: JPM – Out of Control

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