JPM – Madoff: A Fine Would Simply Be ‘Cost of Biz’
Posted by Larry Doyle on October 24, 2013 6:24 AM |
Unlike the token fines — akin to mere parking violations — that the American public has seen imposed on Wall Street to date, the DOJ now seems to want to regain some degree of credibility by writing up the major Wall Street banks for some speeding tickets.
The widely publicized but yet consummated $13 billion fine expected to be paid by JP Morgan is proposed as a template for similar fines likely of a smaller magnitude to be paid by other banks.
An outlier in this imposition of fines as being little more than a cost of doing business occurred yesterday when a jury returned a guilty verdict in a civil case brought against Countrywide (now a division of Bank of America) for fraud in the sale of mortgages to Fannie Mae and Freddie Mac. This case is an exception rather than the rule but recall that it is a civil disposition and not a criminal proceeding.
Returning now to our regularly scheduled broadcast, we awake this morning and see that JPM is back in the news with the Feds talking about imposing a penalty on Jamie’s bank for its involvement with the Madoff scam.
Let’s navigate as Dealb%k highlights key points in this case. Will justice delayed and misdirected once again be justice denied?
Federal authorities are preparing to take action in a criminal investigation of JPMorgan Chase, suspecting that the bank turned a blind eye to Bernard L. Madoff’s Ponzi scheme.
The Madoff case, coming on the heels of a tentative $13 billion settlement over JPMorgan’s mortgage practices, poses another major threat to the reputation of the nation’s largest bank.
Reflecting the magnitude of the investigation, prosecutors and JPMorgan have held preliminary discussions about a so-called deferred prosecution agreement, people briefed on the inquiry said. Such an arrangement would suspend criminal charges against JPMorgan in exchange for a fine, certain other concessions and an acknowledgment that the bank will face charges if it fails to behave.
Did I just read that right? So rather than facing the music for past behaviors involved in what most people would believe as facilitating a fraud if not outright aiding and abetting the Madoff scam, JP Morgan is allowed to play its ‘Get Out of Jail Free’ card here based on a promise that they will be good little boys and girls going forward?
Talk about having friends in high places, but I guess this is why Jamie probably brought general counsel Stephen Cutler on board. (Cutler headed the SEC’s Enforcement Division from 2001-2005, a period during which we know the commission whiffed on the proper oversight of Bernie’s operations numerous times. Things that make you go hmmmmm. . . )
Prosecutors could demand that the unit plead guilty to a criminal violation of the Bank Secrecy Act, a federal law requiring financial institutions to report suspicious activity to the government.
Why is this even held out as little more than a mere possibility rather than a done deal? What good is it to have a Bank Secrecy Act on the books if clear cut violations of the act are not going to be properly administered?
Might the Feds care to release the transactions that Bernie ran through JPM like a wash cycle so the American public can make its own assessment as to whether these wires violated the act? Wishful thinking right?
Underscoring concerns that a guilty plea that could destabilize the bank, the people said, prosecutors have discussed the ramifications of criminal charges with one of JPMorgan’s regulators.
Here we go again.
The too big to fail model has clearly exposed these institutions as too big to regulate but also incorporates the Get Out of Jail Free card highlighting that the banks are also too big to prosecute.
What does it all mean? The imposition of fines, no matter how they are spun, is truly nothing more than a cost of doing business. The real costs, though, are the ongoing degradation of the rule of law in our nation and the accompanying erosion of trust and confidence in our system.
What is the only real solution?
Break up these banks so real accountability can be administered rather than what we see now which is that justice misdirected is truly justice denied.
Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.
I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.