Matt Taibbi and Yves Smith: How the Wall Street Mafia Holds America -- and the World -- Hostage
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Bill Moyers: A very curious thing happened when the House hearings opened. Some members of that committee felt that Dimon should be sworn in. But the chairman of the committee, a Republican from Alabama, Spencer Bachus, said, no, that wasn't necessary. Am I making too much out of that?
Matt Taibbi: I thought that was an incredible moment for a couple of reasons. Obviously, the reason there was a hullabaloo over that was because of what happened when Lloyd Blankfein, the CEO of Goldman Sachs, came and testified before the Senate a couple of years ago. There later was a controversy over whether or not he had perjured himself in those hearings.
So the question was if, you know, Jamie Dimon is going to be sworn in, whether he would have to tell the truth, would be obligated, or whether it would just be a friendly conversation. But what was amazing about that, was that it Spencer Bachus who came to Jamie Dimon's defense. Spencer Bachus is the congressman for the Birmingham, Alabama, region which has been decimated by the Jefferson County swap disaster, which was caused by Chase, which was fined $700 million by the SEC.
So here's a guy who represents the county that has been most affected by Chase's bad behavior, and he comes to Chase's defense in the hearing, which I thought was-- it set the tone for the whole thing.
Yves Smith: Matt mentioned the toxic swaps. Jefferson County isn't the only example.
There have been a whole series of, you know, since Jefferson County and other municipalities blew up by deals they did before the crisis, there have been a series of swaps done after the crisis with transit authorities, where they are losing a tremendous amount of money. You can look at the way JPMorgan has serviced mortgage loans.
You know, they had to get up and admit that they had been basically breaking the law, and there were criminal penalties associated with this law, by foreclosing on servicemen in Iraq and not giving them rate breaks that they were entitled to. And there are some egregious cases.
Matt Taibbi: There's $228 million fine that they paid last year for municipal bond bid rigging. There was another $153 million fine that they paid for failure to, for fraud in CDO trades. I mean, there are case after case after case that involve these criminal charges. And what I thought was amazing about these hearings is that nobody brought any of those things up.
Bill Moyers: Both of you have mentioned the Jefferson County story. Give me a quick summary of what JPMorgan did in Jefferson County, Alabama.
Matt Taibbi: Well, Jefferson County had to build a new sewer system. And they had to borrow a bunch of money to do that. And it was originally a $300 million project. But they got into a series of swap deals with JPMorgan Chase to basically push their financing into the future. But the deals were heavily mispriced in Chase's favor. And Chase actually bribed another bank to stay away from Chase because they wanted that business. They wanted to give the--
Bill Moyers: Bribed them?
Matt Taibbi: They bribed them.
Bill Moyers: That's against the law, isn't it?
Matt Taibbi: Yes, yes.
Yves Smith: Yeah.
Matt Taibbi: And they were caught for it. A couple of their executives were caught for it, and they were heavily fined by the SEC for doing it. And this resulted in this disaster where Jefferson County's going to be bankrupt for a generation. It ended up costing them $3 billion out of what was originally, what, $300 million?