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Will JP Morgan Crooks Finally See the Inside of a Jail Cell? 7 Things You Need to Know About Banker Arrests

Ironically enough, politicians and pundits insisted JPMorgan Chase was the “good bank” after the financial crisis hit in 2008.
 
 
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Four years after Wall Street’s malfeasance dealt a telling blow to the economy, and long after tens of billions of dollars have been paid out for banker fraud,  reports say that we’re about to see the first arrests of Wall Street bank employees. What’s more, the suspects work at JPMorgan Chase – a bank which, ironically enough, politicians and pundits insisted was the “good bank” after the financial crisis hit in 2008.

In fact, Chase CEO Jamie Dimon spent years speaking out forcefully against additional bank regulation. (Lately, not so much …)

Financial cases can seem complicated. What should we think about these recent announcements in the “London Whale” case?

1. It’s good that they’re finally making arrests.

Despite the overwhelming evidence of criminal behavior in a large number of cases, this will have been the first time since the financial crisis that a banker’s been arrested on criminal charges (assuming the arrests take place as planned, of course.)

Let’s be clear: These arrests are a good thing. Justice demands that anyone, no matter who they are, be made to answer for their deeds. What’s more, bankers at “too big to fail” institutions have the power to shatter, and even bring down, the global economy. The lack of arrests up to this point means there’s been no deterrent effect – no reason for them not to keep committing fraud.

But unless these arrests lead to further action – action that’s decisive and effective – they won’t nearly be enough.

2. This case doesn’t involve the events that led up to the crisis of 2008.

The “London Whale” case involves potential fraud in the London office of JPMorgan Chase in 2012.  It doesn’t involve the large-scale fraud which contributed to the 2008 financial crisis, which until now has been the subject of settlements involving the SEC, the Justice Department, and (in the case of foreclosure fraud) most of the states as well.

Many of these settlements freed bank employees from the threat of criminal prosecution. The foreclosure fraud settlement left open the possibility of criminal indictments, but the President’s Mortgage Fraud Task Force has shown no sign of pursuing them – and time is running out.

3. These announced arrests involve low-level employees.

It’s reasonable to ask the question: Where are the “Big Fish” in the London Whale case? The “Whale” himself was a London employee of JPM named Bruno Iksil, who has been turned and is now working with authorities. The arrests involve someone who worked with him, and his immediate superior.

There is no word of any further investigation of the bank’s Chief Investment Officer, Ina Drew, who was forced to resign when the scandal broke. Nor has there been any discussion of CEO Jamie Dimon, who told investors on a conference call that the Whale case was a “tempest in a teapot” even while reportedly knowing that losses ran into the billions.

Smart and aggressive prosecutors typically arrest low-level figures in order to “turn” them and lead their investigation further up the organizational chain. While it would be reasonable for the Justice Department to remain silent on plans like these – if it has them – it will need to take that approach if these arrests are to produce any serious results or restore its credibility regarding Wall Street crime.

4. This was an outrageous and massive case involving the entire organization, from the top down.

The question of “turning” low-level employees is important in this case, since there is evidence pointing to the senior levels of the organization. The Senate Permanent Subcommittee on Investigations issued a  report on this case which found damning up and down the Chase organization, all the way to the top.

 
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