The JP Morgan Fine Is a Joke -- Wall Street Crooks Must Really Be Punished or They'll Keep Screwing Us
The “biggest fine in history” that is soon to be levied on JPMorgan Chase, the notorious usury and fraud organization, will not be as big as the headlines claim. Alan Pyke andDavid Dayen have made that clear. The tentative deal includes a fine of a mere $9 billion, with the bank on the hook for another $4 billion in “relief for struggling homeowners,” which often includes actions banks would’ve undertaken anyway.
But it is a big fine. It is decidedly bigger than JPMorgan wanted it to be, which we know because CEO Jamie Dimon recently traveled to Washington to ask that it be smaller. Most important, it will not indemnify JPMorgan from ongoing and potential future criminal investigations, which is good, because there should be criminal investigations into crimes, even when banks commit them. Because of prior fines, and because the firm is lawyering up and spending a small (for them) fortune on “compliance,” JPMorgan just announced its first quarterly loss in nearly a decade.
It is still not remotely enough, and, more important, there isn’t a dollar sign that would be “enough.” Or, to put it another way, any dollar sign that would approach “enough” would actually destroy the banking industry entirely. (See, for example, Yves Smith citing Andrew Haldane, who argues that the levy needed to recoup the costs of financial crises “would be in excess of $1.5 trillion per year,” which would bankrupt the entire international finance industry.)
Obviously “bankrupt the international finance industry and run banks as civic-directed utilities” is an outcome I’d be perfectly fine with, but it’s not one the Justice Department is prepared or able to bring about at the moment. Still, penalties large enough to look good in headlines but small enough not to cause actual damage to megabanks with the power to destroy the world economy aren’t going to address what should be the No. 1 priority of securities law enforcement, which is to stop criminal and fraudulent behavior from happening to begin with. As much as I’d love to see some misbehaving bankers sent to banker jail, sending them to banker jail isn’t the goal in and of itself. Preventing future crises and fraud is.
Like all bleeding-heart soft-on-crime liberals, I believe the criminal justice system should be more concerned with rehabilitation than punishment. I don’t want to see bankers in jail merely to see them suffer. I’d much rather see bankers required to perform community service — pro bono accounting and financial advising for struggling families, helping to settle the homeless in bank-owned properties, that sort of thing — than merely sitting in Rikers. But part of the point of punishment is deterrence, and everyone should be deterred from becoming a banker. No one should want to be the next Jamie Dimon. That’s the only way to ensure that there aren’t any more Jamie Dimons. And actually breaking up JPMorgan Chase is the way to ensure that there won’t be another JPMorgan Chase.
In the Wall Street bubble, and in the business and finance press and much of elite Washington, every call to prosecute banks is seen as a call for revenge. This is the take of Charlie Gasparino, the former CNBC showman and current Fox Business host, who recently wrote a piece in the New York Post arguing that the feds are shaking down Jamie Dimon for the crime of criticizing the president. The Obama administration, Gasparino tells us, is “brutally determined and efficient when it comes to squashing those who oppose their policies,” which is why Gasparino had to smuggle this column out of his prison cell, whereupon samizdat copies were published and disseminated among the Resistance.