By Andre Damon and Barry Grey in the USA:
JPMorgan scandal: The tip of the iceberg
17 July 2012
JPMorgan Chase, the biggest US bank by assets, announced Friday that the trading loss from derivatives bets made by its Chief Investment Office (CIO) had reached $5.8 billion, nearly three times the amount the company had revealed in May. It added that the bad bets could result in an additional $1.7 billion in losses over the rest of the year.
In its second quarter filing with the Securities and Exchange Commission (SEC), the bank admitted that it had failed to report $459 million in losses from the trades in its first quarter report, released April 13. CEO Jamie Dimon and other top executives attempted to lay the blame on “certain individuals” who “may have been seeking to avoid showing the full amount of the losses being incurred in the portfolio during the first quarter”—an allusion to several traders in the London office of the bank’s CIO who have since been forced out of the firm.
Bloomberg News reported that this explanation seemed implausible to former JPMorgan executives it interviewed, who said the company had mechanisms in place to make sure traders could not simply hide their losses. In fact, JPMorgan’s report to the SEC on Friday indicates that the bank recorded a $718 million loss from the London trades on its internal accounts, but did not report the loss in its first quarter earnings statement.
In other words, JPMorgan deliberately falsified its first quarter report to the SEC in order to conceal its massive gambling losses. This is a crime—a violation of banking laws for which Dimon, as the CEO, is responsible. That Dimon was involved in a cover-up is underscored by the proof contained in Friday’s report to the SEC that he was already aware his bank had lost hundreds of millions if not billions when he told a conference call in April that reports of major losses by the bank’s CIO were “a tempest in a teapot.”
The trading loss debacle is only one of many scandals engulfing JPMorgan Chase.
* The bank is currently under investigation for helping to manipulate the London interbank lending rate (Libor), together with other major banks, in order to conceal financial weaknesses and boost profits from speculative bets on derivatives linked to Libor, the most important global benchmark for trillions of dollars in mortgages, credit cards, student loans and other financial products.
* The SEC and other regulators are investigating allegations by current and former JPMorgan financial advisers that the company encouraged them to sell their clients JPMorgan mutual funds when it was against the clients’ interests.
* The US Federal Energy Regulatory Commission has sued JPMorgan to force it to hand over emails related to alleged price-gouging in electrical power markets in California and the Midwest by one of the bank’s subsidiaries.
* JPMorgan, together other major banks and Visa and MasterCard, last week announced a proposal to settle allegations that they colluded to fix fees on credit card transactions, ripping off billions of dollars from retailers and customers and violating antitrust laws.
Dimon has been handsomely rewarded for his role in facilitating these various schemes. He received $23.1 million in compensation last year, up 11 percent from 2010. In this he joined the heads of other major banks, who received an average 12 percent pay increase in 2011.
Credit card companies Visa and Master Card as well as several banks announced July 13 that they would agree to pay a total of $6.6 billion in settlement to retailers, bringing an end to a bitter lawsuit first brought in 2005. If the proposed settlement is agreed to in court, lawyers involved in the case claim it will represent the largest antitrust settlement in history: here.
After Libor scandal, will US officials finally crack down? What will it take for real reform? Here.
Barclays has been sailing “close to the wind” too often, the boss of Britain’s central bank said today. Bank of England governor Mervyn King told MPs the bank mired in the rate-rigging scandal had appeared to have been in a “state of denial” over regulatory concerns about the way the bank operated: here.