JPMorgan: If This Is a Financial Fortress, Run For the Bunkers
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The U.S. Senate Banking Committee spent over two hours on Wednesday proving to the American people that any shred of confidence they might still have in our financial markets is misplaced. Just as with the six recent hearings on the collapse of MF Global and its $1.6 billion of missing customer funds, five different regulators could not, or would not, reveal anything useful to the public on how JPMorgan, the largest bank by assets in the U.S., was permitted to blow up billions in depositor funds in an outpost in London.
Thomas Curry, head of the Office of the Comptroller of the Currency (OCC) since April 9 of this year, did confirm one important detail during the hearing: the reckless derivative trading at JPMorgan’s London office occurred in a unit of the national bank (not the broker-dealer), using insured deposits of bank customers, while 65 of the OCC’s examiners sat in offices of JPMorgan in New York, where they are permanently stationed.
The OCC oversees all national banks, including those deemed systemically important. From 2005 through 2010, when banks built up reckless derivative trades that eventually collapsed the financial system, the OCC was headed by a former bank lobbyist, John C. Dugan, a partner of the law firm Covington and Burling. JPMorgan Chase was a client of the firm. Dugan has returned to that law firm and chairs the firm’s Financial Institutions Group.
The U.S. Attorney General, Eric Holder, who has been widely criticized for not bringing any criminal prosecutions against those responsible for the financial crisis on Wall Street, spent the prior eight years as a partner at Covington and Burling.
Jamie Dimon, chairman and CEO of JPMorgan Chase, sits on the board of his primary regulator and open purse for bank screw-ups, the Federal Reserve Bank of New York, which offered zero insight into how the losses occurred at today’s hearing.
Elizabeth Friedrich, a member of Occupy the SEC, offered the following insight into these dangerous conflicts of interest:
“During the savings and loan crisis of the 1980s, there were 1,110 cases referred to prosecutors, resulting in more than 800 bank officials going to jail…Last month, a $3 billion trading loss took place and that is just one example of the fraudulent misconduct embedded in our financial system. Today, we cannot indict one single CEO/CFO with more money lost and corruption committed than in the 1980s. The reason: the regulators are not stepping up. This is due to the regulatory revolving door from Wall Street. We are seeing these white-collar hustlers get a slap on the wrist and business continue as usual. It is the public's job to make these people and institutions accountable.”
In anticipation that we would learn nothing useful from the keepers of the public trust, this report was prepared over the past month.
To browse the cover of JPMorgan Chase’s 2011 annual report, one would think they are witnessing a blend of Mother Teresa and the Pyramids. Capitalized words dance around the page: STABILITY, CHARACTER, FORTRESS BALANCE SHEET.
“Fortress balance sheet” is the phrase JPMorgan Chairman and CEO, Jamie Dimon, inserts into media interviews and conference calls with analysts and sprinkles throughout his letters to shareholders. His folksy style and that phrase, together with some serious spending on public relations, have elevated Dimon to the new age Wizard of Oz. No one has bothered to pull back the curtain and have a real look at that so-called fortress balance sheet. I can see why. The actual fortress at JPMorgan is the impenetrable opacity of its balance sheet.
Dimon tells us in his letter to shareholders in his 2011 annual report that post reform “…the whole system is stronger. Accounting and disclosure are better, most off-balance sheet vehicles are gone…” But looking intensely at the firm’s financial filings with the SEC and the Federal Reserve, we learn the following about JPMorgan’s off-balance sheet assets: