Is JP Morgan a Criminal Enterprise?

By Jimmy Mengel | Monday, October 7th, 2013

Since I'm a glutton for punishment, I decided to subject myself to an hour of CNBC last week.

For once, I was actually glad I did... In between watching the talking heads squawk at one another about how high Apple is going to go, I was pleasantly surprised when Closing Bell host Maria Bartiromo had a round table discussion about whether or not Jaime Dimon should step down as the head of JP Morgan.

In the face of $920 million in fines — the largest in financial history — would one of these financial analysts actually come out and call for Dimon's head? Would they objectively cover the news that JP Morgan has been implicated in bribery, fraud, and corruption?

Of course not.

Instead, they exposed themselves as nothing more than the propaganda arm of Wall Street.

And the sad part is they really didn't even try to hide it.

Stick to the Facts

Bartiromo invited Salon author Alex Pareene to the show. Pareene had written a series of articles criticizing JP Morgan for their repeated regulatory fines, wondering how the head of a business can continue to keep his job after a horror show like the London Whale scandal, where they lost $6.2 billion.

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They were slapped with a massive fine for the London Whale scandal. But that's only the biggest one-time fine. The interesting thing is the firm been fined $11 billion and spent around $16 billion in legal fees in the last few years alone.

How in the world do you keep your job when you are regularly found to be the head of a criminal enterprise?

Pareena pointed out, "If you managed a restaurant, and it got the biggest health department fine in the history of restaurants, no one would say, 'Yeah, but the restaurant’s making a lot of money. There’s only a little bit of poison in the food.'"

But when he said the bank maybe a bit too big and too corrupt to be properly run, the rest of the panel turned him into a punching bag.

“Too corrupt is a bit hyperbolic, perhaps,” sneered one host.

“That's preposterous,” said the other empty suit. “The stock is touching a ten-year high; it's a cash-generating machine. Sure, they've had their regulatory issues... but [Dimon] is everything you'd want in a CEO.”

Hyperbolic?

If calling JP Morgan corrupt is somehow exaggeration or hyperbole, then I'd love for someone to explain why they are currently under investigation for good, old-fashioned corruption.

And we're not talking about some esoteric financial instruments or toxic assets here — we're talking about bribing government officials.

You read that right. They've allegedly been caught hiring the children of prominent Chinese officials in order to get access to massive business contracts in China.

From DealBook:

In one instance, the bank hired the son of a former Chinese banking regulator who is now the chairman of the China Everbright Group, a state-controlled financial conglomerate, according to the document, which was reviewed by The New York Times, as well as public records. After the chairman’s son came on board, JPMorgan secured multiple coveted assignments from the Chinese conglomerate, including advising a subsidiary of the company on a stock offering, records show.

The Hong Kong office of JPMorgan also hired the daughter of a Chinese railway official. That official was later detained on accusations of doling out government contracts in exchange for cash bribes, the government document and public records show.

The former official’s daughter came to JPMorgan at an opportune time for the New York-based bank: The China Railway Group, a state-controlled construction company that builds railways for the Chinese government, was in the process of selecting JPMorgan to advise on its plans to become a public company, a common move in China for businesses affiliated with the government. With JPMorgan’s help, China Railway raised more than $5 billion when it went public in 2007.

If that isn't corruption, I really need to get my vision checked.

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“Sure, they've had their regulatory issues...”

In the Closing Bell discussion, this phrase came up more times than I can count: “Sure, they've had their regulatory issues, but they are raking in so much money!”

That's like saying, “Sure he held up a few liquor stores, but his bottom line has never been better!”

And it's not hard to make the petty theft analogy. There's a reason JPM was fined $410 million for manipulating electricity markets earlier this year...

They were bilking California and Michigan residents out of their hard-earned cash by bidding up the price of electricity and passing the bill onto regular folks like you and me!

JP Morgan Venture Energy Corporation was accused of raising electricity rates through "manipulative bidding strategies," according to the Federal Energy Regulatory Commission.

From CNN:

FERC alleged that the bank's bidding strategies in the power markets led to JPMorgan getting "tens of millions of dollars at rates far above market prices."

The strategies allegedly worked like this: In California, for example, the bank would bid to deliver electricity to a utility the next day at a low price of $30 per megawatt hour. When the next day came, JPMorgan would change its offer to a much higher price of $999 per megawatt hour, assuring the power did not get bought, according to the notice.

I have to agree that “regulatory issue” sounds a whole lot better than “grand larceny.”

"Everything You Want in a CEO"?

So if you aren't convinced by the bribery and manipulations, let's see what else is brewing for the CEO that has everything...

Right now, the Justice Department has at least seven other probes into JP Morgan's shenanigans.

Here's a small sampling:

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·Mortgage-backed Securities Fraud

JP Morgan is being investigated for misrepresenting the quality of the home loans in mortgage bonds. Taxpayers lost over $33 billion from the Fannie and Freddie bailouts associated with these toxic assets.

·Obstruction of Justice

Investigators suspect that JP Morgan employees withheld information during the investigation of their energy manipulation scheme.

·Involvement in the LIBOR scandal

JP Morgan was among 13 banks just named in a lawsuit for manipulating LIBOR rates.

Despite all of these “regulatory issues,” guess who was the president's guest at the White House last Wednesday?

None other than Jaime Dimon himself. I guess crime really does pay...

The fines for these criminal activities are just the cost of doing business. JP Morgan is essentially paying hush money to the regulators in order to keep conducting business as usual. There's a reason they've been able to reap monster profits year after year.

Perhaps if they tossed at least one of these white-collar criminals in state prison for a while, they would be a bit more cautious the next time they hatch an illegal plot to rip us off.

And the shills at CNBC are complicit in pulling the wool over the public's eyes, while JP Morgan and friends make off with billions in ill-gotten gains...

Just a little something to think about next time you turn on the financial news.

Godspeed,

Jimmy Mengel