Archive for the ‘Jamie Dimon’ tag
One year after the infamous Jamie Dimon “tempest in a teapot” fiasco, which promptly turned out to be the biggest TBTF prop-trading desk debacle in history, things were going well for JPMorgan.
On one hand, the chairman of the TBAC (and thus US Treasury advisor and policy administrator), and former LTCM trader, Matt Zames, was just recently promoted to the sole second in command post at the biggest US bank (and 2nd biggest in the world) by assets, and first in line to take over from Jamie Dimon. On the other hand, one of Mary Jo White’s former co-workers, and a JPM defense attorney from Debevoise just became head of the SEC’s enforcement division, in theory guaranteeing that the US government would never do more than slap the wrist of JPM in perpetuity.
And then, when everything seemed like smooth sailing ahead, the Federal Energy Regulatory Commission (FERC) showed up on March 13, the day before Carl Levin’s committee released its latest report on JPM’s prop trading blunder, and according to the NYT, alleged that JPM in the past several years, quietly became nothing short than the next Enron.
Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath. The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.
Another “tempest in a teapot”… Or is JPM reprising the role of the most hated company from the early 2000s, Enron, now that absolutely everyone’s attention is focused on its purportedly criminal activity, potentially a problematic development? It very well might be.
The JPMorgan case arose, according to the document, after the bank’s 2008 takeover of Bear Stearns gave the bank the rights to sell electricity from power plants in California and Michigan. It was a losing business that relied on “inefficient” and outdated technology, or as JPMorgan called it, “an unprofitable asset.”
Funny: another “case” that has arisen, so far at mostly in the tinfoil hat periphery of the blogosphere is that JPM also inherited some massive precious metal shorts when it was handed over Bears Stearns on a Fed-subsidized silver platter, and it is the legacy of these short positions that has encouraged various JPM employees, such as Blythe Masters for example, to not only do everything in their power to push the price of gold and silver lower, but to align directly with the Fed, which wants nothing more than to destroy every single last believer in real, not paper-based, “quality-collateral.”
For now, however, let’s get back to what was previously conspiracy theory, and is now fact:
Under “pressure to generate large profits,” the agency’s investigators said, traders in Houston devised a workaround. Adopting eight different “schemes” between September 2010 and June 2011, the traders offered the energy at prices “calculated to falsely appear attractive” to state energy authorities. The effort prompted authorities in California and Michigan to dole out about $83 million in “excessive” payments to JPMorgan, the investigators said. The behavior had “harmful effects” on the markets, according to the document.
Uh-oh. Sounds suspiciously close to what a certain Houston firm, once upon a time called Enron (advised by none other than one Paul Krugman) was doing to the California electricity market. And where the FERC and legacy ENRON instances arise, sparks are sure to fly.
But what is worst for JPM, and its brilliant (abovementioned) employee, often times credited with creating the Credit Default Swap product and market (simply an instrument to trade credit with negligible upfront collateral and thus allow equity option-like speculation in the credit realm), is that FERC may be seeking to throw the book at none other than Blythe Masters.
In the energy market investigation, the enforcement staff of the Federal Energy Regulatory Commission, or FERC, intends to recommend that the agency pursue an action against JPMorgan over its trading in California and Michigan electric markets.
The 70-page document also took aim at a top bank executive, Blythe Masters.
Blythe did a bad, bad thing. So bad she lied about it under oath.
The regulatory document cites her supposed “knowledge and approval of schemes” carried out by a group of energy traders in Houston. The agency’s investigators claimed that Ms. Masters had “falsely” denied under oath her awareness of the problems and said that JPMorgan had made “scores of false and misleading statements and material omissions” to authorities, the document shows.
Oops. And it’s only downhill from here, because what follows, are the two scariest words a banker can hear in the context of a potential enforcement decision: “individually liable“
For now, according to the document, the enforcement officials plan to recommend that the commission hold the traders and Ms. Masters “individually liable.” While Ms. Masters was “less involved in the day-to-day decisions,” investigators nonetheless noted that she received PowerPoint presentations and e-mails outlining the energy trading strategies.
And some more scary words: “systematic cover-up“
The bank, investigators said, then “planned and executed a systematic cover-up” of documents that exposed the strategy, including profit and loss statements.
In the March document, the government investigators also complained about what they said was obstruction by Ms. Masters. After the state authorities began to object to the strategy, Ms. Masters “personally participated in JPMorgan’s efforts to block” the state authorities “from understanding the reasons behind JPMorgan’s bidding schemes,” the document said.
The investigators also referenced an April 2011 e-mail in which Ms. Masters ordered a “rewrite” of an internal document that raised questions about whether the bank had run afoul of the law. The new wording stated that “JPMorgan does not believe that it violated FERC’s policies.”
Looks like the FERC disagreed. But how could it? It was only a year ago that Blythe was on CNBC promising that not only she, but JPMorgan would and could never do anything wrong in the commodities, or any other, arena. Who can possibly forget her unforgettable platitude: “What is commonly out there is that JPMorgan is manipulating the metals market. It’s not part of our business model. it would be wrong and we don’t do it.”
But… if she fabricated data, blocked regulatory investigations, and lied under oath could she possibly also have… lied to CNBC? No… that is unpossible.
So what happens next?
Well, JPM can hope that its guy at the SEC, Andrew Ceresney, who happens to be in charge of the porn-addicted agency’s “enforcement” division, has just enough clout to make that other regulator, the FERC forget all about its inquiry, and its factually-justified allegations.
Or, failing that, and should justice finally prevail in this banana republic for one of the TBTF banks, what may just happen is that Blythe may end up in prison. Minimum security, of course, and for a very brief period of time, with all of her (allegedly) ill-gotten and accumulated wealth waiting for her upon reentry into society. And that’s fine.
But what we hope for is that there is at least a brief period of time when Blythe’s finger is not be on the gold “sell” button. Not because we want to be deprived of the opportunity to buy physical gold and silver at far cheaper than fair value prices (which, by the way, are meaningless when expressed in dying fiat), but because we are simply curious how high gold may go should JPM’s commodity queen finally be put away temporarily… or permanently.
Even for a total banana republic, this does not seem like such a far-fetched request.
AgainstCronyCapitalism.org by Nick Sorrentino
Jamie Dimon in Davos Switzerland today explaining why people don’t need to know what’s going on in the banking world. It’s too “complex.” Just know that their fee comes from managing this ball of financial confusion. And that’s all you need to know. There, don’t you feel better? I mean it’s …
JPMorgan Chase CEO Jamie Dimon, who made approximately $23 million last year, apparently doesn’t like the press picking on the salaries at big banks like his. So, he’s telling them that they’re the ones who are overpaid. To be fair, the context is that he’s mocking reporters for focusing on the compensation ratio statistic that some have brought up in questioning how much banks pay their employees, by noting that the same ratio — which he rightfully calls a “stupid ratio” — doesn’t necessarily look good for the newspaper industry either. Of course, most journalists just buzz right by that context and point out how ridiculous it looks for Dimon to complain about how much journalists make, coming from where he’s sitting:
Dimon himself took home roughly $23 million in 2011, about the same as the year before, according to Bloomberg. Compare that to newspaper reporters, who earn an average salary of $43,780 according to the Bureau of Labor Statistics, or between $20,000 and $60,000 per year according to Payscale.
For fun, let’s just compare a bit more. The average reporter at The New York Times earns about $93,000 per year, according to Glassdoor.com. The New York Times Company reported an operating profit of $56.7 million in 2011.
Dimon’s salary not only dwarfs that of us media-folk; he’s also making millions more than most of his employees. The average JPMorgan employee made $341,552 last year, according to Bloomberg News.
The key point, here, is really that if you’re trying to convince the press to stop focusing on stories about reasonable employee pay, you probably should not then directly state that their pay is “just damned outrageous,” while then defending bank employee payments by saying, “We are going to pay competitively…. We need top talent, you cannot run this business on second-rate talent.” The implication that the press gets from that — perhaps on purpose — is that the media shouldn’t pay competitively, doesn’t need top talent, and can run its business on second-rate talent. Some might argue that’s already the case… but it’s unlikely to get those “second-rate” reporters to drop the issue . . .
Things are getting hairier than hairy. Two days ago we reported that Blythe is taking over for Deutsche Bank’s Michele Faissola as head of the GFMA, and will also retain her role as Head of Commodities at JPMorgan.
After deeper research and a reader tip, we have uncovered that Michele Faissola is the Vice Chairman of ISDA. Prior to the Blythe’s insertion into the GFMA Chair, effective Feb 1, Michele Faissola was both the head of the GFMA and the Vice Chairman of the ISDA. As you can see from GFMA’s mission statement below, they might as well just be combined into one organization.
“The Global Financial Markets Association (GFMA) was established as a way to join together the common interests of financial institutions across the globe in response to the increasingly global nature of financial market regulation. GFMA’s mission is to develop policies and strategies for global policy issues in the financial markets that encourage sound regulation and effectively functioning markets, thereby promoting coordinated advocacy efforts across its partner associations. The Association for Financial Markets in Europe (AFME), based in London and Brussels, is the European regional member of GFMA. The Asia Securities Industry & Financial Markets Association (ASIFMA), based in Hong Kong, is the Asian regional member of GFMA. The Securities Industry and Financial Markets Association (SIFMA), with offices in New York and Washington, D.C., is the U.S. regional member of GFMA.”
The real story appears to be that we needed to put one of our banksters onto one of these banking oversight committees to smooth over the haircuts which are going to take place with the European Debt Crisis soon and make sure they are carried out exactly according to the wishes of Mr. Dimon and Mr. Blankfien. Michele Faissola with his stellar reputation of working with Italian tycoons/money laundering, must have been told that he was now only going to be responsible for “oversight” of one of the two organizations. Meanwhile, The Morgue puts Asset Number 1 in place to carry out the dirty work.
The Keiser Report – January 18, 2011
In this episode, Max Keiser and co-host, Stacy Herbert, discuss 419 scams and Tim Geithner’s gimp. In the second half of the show, Max talks to financial blogger and semi-retired Wall Street executive Warren E. Pollock about MF Global, wealth confiscation and bank holidays.
JP Morgan wanted a ‘get out of jail free’ card from the Fed. Guess what? That doesn’t fly with me. Thier hubris is so severe. They think we don’t know the industry, like we’re Occupy Wall Street radicals or something and don’t have a clue or message.
– James Koutoulas
In recent testimony before a Congressional committee, MF Global’s former chief Jon Corzine as well as other MF Global executives said repeatedly the didn’t know where the failed brokerage firm’s $1.2 billion of missing client money was. In fact, MF Global executives knew exactly what happened to the money, as do the regulators who oversaw the firm’s bankruptcy. The so-called segregated customer funds were repeatedly, and legally (through re-hypothication), used as collateral for MF Global loans for 100:1 leveraged bets on European sovereign debt.
A substantial portion of MF Global’s commodity clients cleared their transactions through the Chicago Mercantile Exchange and Comex, owned by CME Group (ticker: CME). The question now looming over CME’s stock is whether the company will be liable for customer losses, as the Commodity Customer Coalition, a group that says it represents some 8,000 investors—including many hedge funds–with exposure to MF Global are not going down without a fight.
Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts “disappeared”. In a brokerage firm bankruptcy, the customers get their money first, while in an equities firm bankruptcy, the customers are at the end of the line, meaning MF Global’s creditors, namely J.P. Morgan and other trading counterparties, got their money first, just as AIG’s CDS (credit default swap) counterparties (mainly Goldman Sachs) got their money first when the U.S. government bailed out AIG.
To add further insult to injury for MF Global clients, the firm reportedly unloaded hundreds of millions of dollars’ worth of securities to Goldman Sachs, and others, who then reportedly flipped these securities within a day to George Soros funds.
What the debacle implies is that nothing has really been learned from the 2008 financial crisis, and that there really is no safety in any paper investment when push comes to shove. Brokers and investment banks are effectively running leveraged ponzi schemes running in the trillions of USD with your collateral then refuse to offer you liquidity on the collapse of the trade because they won’t face a brokerage This has very wealthy individuals as well as non-too-big-to-fail market participants seriously reconsidering the risks of regulatory malfeasance during such systemic “black swan” events. In such cases, be prepared for commodities and equity brokers, investment and commercial banks to “freeze” your funds, enforced by central banks or other regulatory authorities–i.e., a de facto banking holiday, while not only will your purchasing power be reduced by currency devaluations, but you will also be asked to again bail out the banksters with your tax money.