Following the recent US Senate hearings on the circumstances surrounding the USD 2 Billion, subsequently revised to USD 6.2 Billon, losses caused by J P Morgan's proprietary trading activities, by the so called "London Whale" an exasperated Senator Carl Levin, chairman of the inquiry commented:
"the trading culture at J P Morgan ... piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight and misinformed the public."
What more devastating indictment can there be, and one has to wonder why the executives involved and their masters behind the scenes were not immediately arrested after giving evidence?
The initially reported losses prompted Jamie Dimon the CEO of the "Fortress Bank" to comment that it was a storm in a tea cup, and just to ensure that it remained so, he apparently ordered his subordinates NOT to report the true financial situation to regulators. It would appear that London also was not reporting the true situation to New York, just to add another ripple to the storm in a teacup.
When many months after external analysts had estimated far more accurately than J P Morgan the extent of the losses, management finally admitted the truth, they obviously stated there had been no wrongdoing and that they were working hard on amending internal controls and procedures.
The rogue trader and some other staff members were retired/fired and as an illustration of how seriously the CEO Jamie Dimon took the whole affair, he did not even turn up to this Senate hearing. Perhaps it was a good thing as last time he appeared in committee he was wearing prominently a set of White House gift cuff links.
So now this incident caused by the proverbial "Rogue Trader" acting as always completely alone, within the framework of America's biggest bank, has been swept under the table, we can rest assured that J P Morgan will go back to business as usual.
There are of course just a few niggling little facts that have not been mentioned, which makes the London Whale story look exactly like business as usual, inside a vast constellation of similar activities, some alleged, some proven and many settled out of court.
The list is so extensive as to turn my Blog into a full length novel so I provide a link below for your perusal:
The list is so extensive as to turn my Blog into a full length novel so I provide a link below for your perusal:
Malpractice includes money laundering for drug cartels, sanction violations, violation of commodities and exchange acts, failure to segregate customer funds, executing fictitious trades, misrepresentations of CDO and MBS, foreclosure fraud, fraudulent sale of unregistered securities, energy market manipulation, shifting trading losses to client accounts, municipal bond market manipulation, obstruction of justice and the list goes on........and on !!!
This list does not include ongoing investigations such as LIBOR rigging etc
So how is it possible for such an institution to survive and thrive? The answer as always is its not what you know its who you know.
J P Morgan has the biggest financial lobbying machine in Washington, and a vast part of its income comes from State patronage either directly or indirectly. Examples include distribution of food stamps, probably America's biggest growth industry, dealing in Government securities, manipulating markets for the account of the treasury, plus direct bail outs and subsidies like the attempt at the moment to get the state to bail them out of losses arising from its acquisition of Washington Mutual.
Without the state help J P Morgan would struggle to break even, while at the same times flaunting laws, regulators, violating client and the general public interests, and taking colossal risks. This serves solely to pay the massive outrageous salaries of mediocre people whose only real talent is knowing how to hijack the system and make it work in their favour, and traffic influence with greedy and corrupt politicians to maintain the status quo.
When will the next whale surface?
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