
The $9B Witness: JPMorgan Chase's Worst Nightmare - winstonsmith
http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106?page=6
======
bmmayer1
This is basically a perfect example of how "capitalism" in the US is not
capitalism anymore. No corporation should be insulated from the financial
downside of its incompetence. In the real world, Chase should have gone under
or at least lost a hundred billion in market cap, but instead they are in
cahoots with government regulators to limit their downside and protect their
upside from what is their fault.

This is not capitalism! And it's painful to see how this hybrid growth-
corporatist model trump true innovation and economic progress. It's an insult
to free market economics and democracy at the same time.

Rant over. One addendum: jail time isn't the answer. Putting an executive in a
minimum security prison for 5 years just lets another one take his place. CEOs
aren't afraid of jail time, they're afraid of losing money. If you let banks
_fail_ who deserve it then creative destruction will ensure stronger, better
and safer banks in the future. Capitalism can't survive without profit _and_
loss working hand in hand.

~~~
josefresco
It's not as easy as "letting Chase bleed" to send a message. If during 2008-9
the US charged these executives with the crimes they arguable _should_ have
been charge with, it would have led to massive panic in the financial world.

So the US "pretended" that these guys were just caught by surprise because
admitting the alternative had conceivably much worse consequences.

Maintaining confidence in the markets was priority #1 for the team dealing
with the financial _collapse_ of 2008.

~~~
dragonwriter
The problem with this theory -- the "holds a position too important a role in
the popular perception of the institutional infrastructure to hold accountable
for personal misdeeds" theory, which, aside from the financial collapse was
frequently cited to justify the Ford pardon of Nixon -- is that:

1) As soon as such a principle is seen to be operating, it licenses further
and greater misdeeds from those in the positions to which it applies, and

2) It ignores the damage (which may be less severe in the short-term, but is
likely to be more lasting in the long-term) to public perceptions and
confidence that the lack of accountability itself produces, including that
resulting from the inevitably common perception (whether or not its accurate)
that "too important to charge" isn't really about protecting the public from
public harms resulting from damage to confidence in the institutional system,
but is merely one of a set of a self-serving excuses that elites use to
protect other elites from accountability to the superficially generally-
applicable rules of society that are the only thing that protects everyone
else from abuse by the elites.

~~~
josefresco
This isn't an individual case like Nixon but rather an industry-wide
_epidemic_ of sorts that would have pushed the very inter-dependent markets
into chaos.

None of the bank executives at fault were _that important_ to consider not
prosecuting. However their institutions and respective influence on the global
markets were (in their options) _that important_ to maintaining stability
(albeit a false one) that was deemed the lesser of two evils.

~~~
dragonwriter
> This isn't an individual case like Nixon but rather an industry-wide
> epidemic of sorts that would have pushed the very inter-dependent markets
> into chaos.

And in the Nixon case, it wasn't a case of leaders of private institutions,
but the President of the United States at a time of deep national division
even _aside_ from the proximate issues with which he might have been charged,
and it was perceived that charging would have thrown the whole nation into
chaos (and not merely _financial_ chaos, but actual fighting-in-the-streets
chaos.)

There's _always_ a reason why accountability for elites in powerful positions
is a special case that can be asserted to be _sui generis_ and requiring
special exceptiosn to the normal rules of accountability. But the impact of
accepting the temptation to do this is that it rapidly becomes clear that
elites _are not accountable in general_ , leading to more elite abuses and
less long-term faith and confidence in the very systems that the exceptions
are intended to protect (short-term) faith and confidence in.

To avoid the long-term erosion and destruction of this faith and confidence,
you have to accept (publicly) that the system at issue has been broken when it
has and hold people accountable, even though there are severe short-term
consequences. Otherwise, the long-term consequences are more severe.

Or, as a much better writer than I put it -- "The tree of liberty must be
refreshed from time to time with the blood of patriots and tyrants" \-- you
cannot save the integrity of the system if you are overly obsessed with
preserving the myth of the existing integrity of the system.

------
steven2012
The fact that this has been going on sickens me. The entire US infrastructure
is corrupt (actually probably the entire world's infrastructure). There was
the article a few weeks ago about how the Federal Reserve was in bed with the
likes of Goldman Sachs, and a whistleblower came out and still nothing was
done.

But what do we do as a generation of people that don't want this? The closest
thing to come was Occupy Wall Street, but that fizzled out. Is there a way to
organize ourselves and vote in blocks to get rid of these current politicians
and elect a new generation that hopefully isn't as corrupt? Yes, I know, it's
a pipe dream.

~~~
vinhboy
Speaking of Occupy, this sentence in the article got me all excited

> President Obama, giving in to pressure from the Occupy movement and other
> reformers, had formed the Residential Mortgage-Backed Securities Working
> Group.

I wonder if there is an ounce of truth to that.

Too bad Occupy never adopted a leader. If there is anything I learn from that
experience, is that there can't be a leader less movement. Someone has to
become the face of it.

~~~
mercer
While my information is probably incomplete and biased, I got the impression
Occupy 'failed', or rather is perceived to have failed, had more to do with 1)
the fact that there wasn't one concrete issue to have 'success' with, on the
whole, and 2) serious efforts by the government to crack down on Occupy in a
variety of ways that are worryingly clever.

In both cases, it's important to understand that Occupy, at least according to
prominent individuals in the movement like David Graeber, was ideologically
built on anarchist principles. He argues in his book on the issue that being
leaderless and 'horizontal' in nature was actually one reason why it did so
well, relatively.

To be clear: I'm not sure I agree with his viewpoints or his perspective on
the Occupy movement. That said, I can still strongly recommend "The Democracy
Project" as an interesting and completely different view of not only the
occupy movement, but on Democracy and society as well.

I've read a number of his books and articles and I like how they make me
question things.

------
seanv
i remember hearing about the settlement on the radio and was like Great! At
least some investors will get compensated for being scammed... then I read
this:

"Couple this with the fact that the bank's share price soared six percent on
news of the settlement, adding more than $12 billion in value to shareholders,
and one could argue Chase actually made money from the deal. What's more, to
defray the cost of this and other fines, Chase last year laid off 7,500 lower-
level employees. Meanwhile, per-employee compensation for everyone else rose
four percent, to $122,653. But no one made out better than Dimon. The board
awarded a 74 percent raise to the man who oversaw the biggest regulatory
penalty ever, upping his compensation package to about $20 million."

Just amazing

~~~
berberous
Taking a 6% pop as evidence Chase made money from the deal is ridiculous. I'm
not going to waste time pulling up charts of their share price, but if I had
to bet, their shares were depressed while the overhang of legal liability
remained. For example, the price could have been down over 6% due to news of
the possible liability, and then popped back 6% when settled. So they would
have lost on the deal.

~~~
dd36
Presumably the top executives own lots of stock. Thus, getting a criminal
probe squashed directly benefits their pocketbooks. I assume that's the
thinking.

------
pjungwir
I hate the idea of giving these banks special treatment to keep them solvent,
but if that's really necessary, fine. But there's no reason we can't lock up
all the executives and fine them personally.

~~~
javajosh
Yes, this is an important point: bailouts and jail time are not mutually
exclusive.

------
jobu
_”The kid-gloves approach that the DOJ and the SEC take with Wall Street is as
inexplicable as it is indefensible,” says Dennis Kelleher_

Well said. Here's hoping this will result in some civil suits against
individuals at Citi, if not actual jail time.

~~~
anonbanker
The solution in most of these cases is "handcuff one of the bastards publicly;
then the people put down their pitchforks and forget about all the
accomplices".

Don't believe me? Look up how many people went to jail for:

* Tycho

* Global Crossing

* Enron

* HealthSouth

* Madoff

* the S&L Scandals of the late 80's

* Washington Mutual

~~~
winstonsmith
The solution in this century's financial crisis has been "handcuff _none_ of
the bastards", but it wasn't always so. I'm surprised you cite the savings and
loan scandal as a case of criminals not going to jail because in that crisis
there were over 1000 felony convictions of high level people (usually the CEO
and CFO). Since that crisis was 1/70th the size of the recent crisis, by
strict proportionality (all things being equal, etc.) there would have been
70,000 felony convictions of high level people in this crisis. All thing are
not equal of course, but there weren't 70,000 or 7,000 or 700 or 7 convictions
of high level people in this crisis. There were none! Things really have
change dramatically for the worse.

William Black on _Moyers and Company_ [1]: Sure. The savings and loan debacle
was one-seventieth the size of the current crisis, both in terms of losses and
the amount of fraud. In that crisis, the savings and loan regulators made over
30,000 criminal referrals, and this produced over 1,000 felony convictions in
cases designated as “major” by the Department of Justice. But even that
understates the degree of prioritization, because we, the regulators, worked
very closely with the FBI and the Justice Department to create a list of the
top 100 — the 100 worst fraud schemes. They involved roughly 300 savings and
loans and 600 individuals, and virtually all of those people were prosecuted.
We had a 90 percent conviction rate, which is the greatest success against
elite white-collar crime (in terms of prosecution) in history.

[1] [http://billmoyers.com/2013/09/17/hundreds-of-wall-street-
exe...](http://billmoyers.com/2013/09/17/hundreds-of-wall-street-execs-went-
to-prison-during-the-last-fraud-fueled-bank-crisis/)

------
bhahn
Isn't there a reward for whistle blowing financial crimes? Is she not eligible
for it?

~~~
ceejayoz
Yes, and it's 10-30% of what they collect.
[http://www.sec.gov/whistleblower](http://www.sec.gov/whistleblower)

Largest thus far is $30M -
[http://www.sec.gov/News/PressRelease/Detail/PressRelease/137...](http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370543011290#.VF0O-VPF9-g)

------
omgitstom
Unfortunately, we can't do anything to fix the past. It is clear that there
was a cover up. The number of banking execs that have gone to jail can be
rounded down to zero.

I wish our politicians / president would grow a pair and do what is best for
the American public and break up the big banks and remove them from political
donations / lobbying.

------
AnimalMuppet
It's not as bad as it could be. JPMorgan spent 9 billion dollars to keep her
off the witness stand. But it seems that they never seriously tried to kill
her.

Note well: I am _not_ advocating murder! It's just that, since things didn't
go that way, things aren't yet as bad as the most cynical of us assume they
are.

~~~
tim333
>they never seriously tried to kill her.

Yeah they are not as bad as Russia. They could still aim higher though.
Transparency International has the US at 73/100 on it's corruption index,
ranking no 17. Denmark and New Zealand are the leaders at 91/100\. Come on
USA, you can improve!

[http://files.transparency.org/content/download/700/3007/file...](http://files.transparency.org/content/download/700/3007/file/2013_CPIBrochure_EN.pdf)

~~~
AnimalMuppet
Oh, I agree. "It could be worse" is a _really_ low bar. It doesn't mean we
should accept the current state of affairs.

------
shkkmo
Is there any way Holder and the people that orchestrated the cover up can be
charged with corruption and negligence?

I'm all for criminal consequences for the bank executives, but it sounds like
we also need criminal consequences for coverups by the DOJ.

------
pb8226
Someone other than the current politicians need to be in office for this to
result in any serious consequences for the banks. The banks have bought the
politicians in the U.S.

~~~
chaostheory
The problem is that no one chooses an alternative candidate who doesn't belong
to one of the major two parties. Moreover all of the money is being funneled
into those two parties.

~~~
dragonwriter
> The problem is that no one chooses an alternative candidate who doesn't
> belong to one of the major two parties.

No, the problem is that we don't have an electoral system that makes it
rational to choose such a candidate without reasonable basis to believe lots
of other people will (choose the same candidate, not just any non-major-party
candidate).

The _symptom_ of that problem is that nearly no one chooses an alternative
candidate.

~~~
drivingmenuts
The major parties (by failure to commit to a solid platform) are easier to
agree with than the odd alternate candidate who may have a solid platform, but
is only in agreement with a small percentage of voters.

More concretely, the Paul family might one or two things I agree with, but
it's the other 999 things they believe in that I can't stand, thus I can't
vote for them so much as against them.

~~~
dragonwriter
You don't really see vague umbrella parties without clear agendas as much in
systems which have more effective electoral systems than the US's FPTP system.
In an FPTP system, such parties are natural, since once you have established a
position as a major party, you can win by the other side being _disliked_ more
than you, even if you aren't people's first choice (because the incentives in
the electoral system are to vote for the least offensive of the major
parties.)

------
bradleyjg
I'm actually somewhat sympathetic to the DoJ's argument regarding criminal
convictions of the banks. The concept of corporate criminal conduct is
somewhat problematic, and the collateral consequences of conviction can be
dire for innocent third parties.

But there is absolutely no justification for their sheer and utter lack of
diligence in pursuing criminal cases against individuals. Holder, Breuer,
Bharara and those who worked with them ought to be ashamed of themselves.

~~~
mbreese
One solution is to extend the "corporations are people too" concept to the
logical conclusion. It's just harder to jail a corporation aside from fines.

A corporate death penalty would be nice to see for some of the most egregious
cases, including a "show-cause" requirement to allow executives to take
leadership positions in another public company or one in a regulated industry.

This is fraught with problems though... you could kill the corporation, shame
the executives, but tens of thousands could still be out of a job, and in the
financial industry you'd wreak havoc on the entire economy. I'm not sure if it
is worth the risk.

Realistically, I'm not optimistic that this will ever happen in a meaningful
way...

~~~
tracker1
Eliminate corporate taxes, and corporate personhood as legal concepts,
establish non-living entities as a legal class without certain rights (unable
to donate to political campaigns). Limit unused and under-used assets a
corporation can own (If a company owns property it doesn't use, or has an
excess of liquid assets they are ceased by the govt).

Do those things, and a lot of the rest would sort itself out. Companies would
need to constantly grow (Amazon) or downsize to their actual value-add
(Banks).

------
pasbesoin
I happened to click (TV remote) into the latter part of an interview with her
on Amy Goodman's program, "Democracy Now".

One of the local PBS stations has started carrying that program, recently.
After a few recent, similar surprises with it -- each one keeping me glued to
it despite the late hour, until the end -- I've made a mental note to start
catching it regularly.

As I've said before with respect to this fiasco and the Administration as well
and Congress' response, as a mantra:

No jail? You fail.

I recall an interview with one of the lead investigator's/prosecutors during
the 1980's Savings and Loan (aka S&L) scandal. Someone really in a position to
know. He expressed similar disappointment, and more so _he described in detail
how things could have been done differently_.

I also recall comments around or shortly after the peak of the recent crisis,
from Sheila Bair as well as Elizabeth Warren. Particularly from Bair -- as I
recall it, roughly: Too big to fail be damned. She/they were ready to take
those banks into receivership, if the political leadership would only give the
go ahead. And no common account holder/investor need lose their shirt as a
result of that process.

Market panic might have been another matter. But I think, now, that that would
have been a lesser cost than the one we will now end up, as a society -- or
rather, multiple societies -- paying.

As far as I'm concerned, no statute of limitation should apply to the crimes
surrounding these events. Particularly to the perversion of justice that has
initially gotten these blackguards off the hook.

Law is a social convention, and they have so flouted social convention, that I
for my part no longer deign to extend it to them. Like barbarians they acted?
Well, let them so be treated.

------
jokoon
I really wouldn't want to be in Holder's shoes. I really wonder how he managed
to get to this. I don't understand what kind of discussions holder and dimon
had, but all I can really understand is that they're only human.

After all, all of this boiled to 2 sides negotiating like in a classic
political game, and one side won, and I don't know if the good side really
won...

I just pity Holder for mismanaging this. Or maybe there are more horrific
details we haven't heard of yet. I don't know which one is the more
frightening. One only thing, it's now more than 6 years that all of this
happened, and it doesn't seem really over.

~~~
winstonsmith
> _I just pity Holder for mismanaging this. Or maybe there are more horrific
> details we haven 't heard of yet._

Your pity would be misplaced; there are horrific details. A large part of the
problem is that there is a revolving door between the DOJ and the law firms
that represent financial firms (likewise for the SEC). Holder was assistant AG
in Clinton's DOJ, then he moved to the law firm Covington and Burling where he
represented the bank UBS among other clients, now he's back at the DOJ, and
soon he will likely move back to the private sector where he will be
handsomely rewarded for his service to the finance industry while AG.

The big picture is that the Obama administration is to Finance as the Bush
administration was to Oil, but for horrific details about Obama's economic
team, read this: [http://www.vice.com/en_uk/read/larry-summers-and-the-
secret-...](http://www.vice.com/en_uk/read/larry-summers-and-the-secret-end-
game-memo) .

------
pb8226
Summary from ZeroHedge:

[http://www.zerohedge.com/news/2014-11-07/why-matt-taibbi-
thi...](http://www.zerohedge.com/news/2014-11-07/why-matt-taibbi-thinks-woman-
jpmorgans-worst-nightmare)

------
tim333
You can see 'em on video on Democracy Now! - "Bank Whistleblower Alayne
Fleischmann & Matt Taibbi on How JPMorgan Chase Helped Wreck the Economy"

[http://www.democracynow.org/2014/11/7/matt_taibbi_and_bank_w...](http://www.democracynow.org/2014/11/7/matt_taibbi_and_bank_whistleblower_on)

------
KaoruAoiShiho
To me it seems like the bug in the system is the arrangement between the
prosecutor and Chase to fake prosecuting criminal charges after settling the
civil suit. That's willful deception of the American people and should be
illegal. If you fix this it seems like this would end satisfactorily.

------
dmunoz
Slightly off-topic, but I missed this from last week: the author of this
piece, Matt Taibbi, has departed with First Look media. I wonder if he is back
at Rolling Stone for good, or just sold this piece to them.

There are two interesting notes on the matter. One, the notice of departure
[0], and then a longer piece on "The Inside Story Of Matt Taibbi's Departure
From First Look Media" [1].

The second links contains some interesting snippets:

"Taibbi’s dispute with his bosses instead centered on differences in
management style and the extent to which First Look would influence the
organizational and corporate aspects of his role as editor-in-chief. Those
conflicts were rooted in a larger and more fundamental culture clash that has
plagued the project from the start: A collision between the First Look
executives, who by and large come from a highly structured Silicon Valley
corporate environment, and the fiercely independent journalists who view
corporate cultures and management-speak with disdain."

It also notes that The Intercept had similar problems while launching.

I also found it interesting that this is the first time I have actually heard
what Taibbi was trying to do with First Look: "His vision was a hard-hitting,
satirical magazine in the style of the old Spy that would employ Taibbi’s
facility for merciless ridicule, humor, and parody to attack Wall Street and
the corporate world."

[0] [https://firstlook.org/2014/10/28/important-
announcement/](https://firstlook.org/2014/10/28/important-announcement/)

[1] [https://firstlook.org/theintercept/2014/10/30/inside-
story-m...](https://firstlook.org/theintercept/2014/10/30/inside-story-matt-
taibbis-departure-first-look-media/)

Edit: Happened upon some additional details about the conflict at NYMag [2]:

"Over the last year, however, the center of gravity of the organization has
shifted, as Omidyar and his Silicon Valley braintrust have exerted control
over budgets and vacillated over the journalistic mission. Over the summer,
Omidyar appointed a longtime confidante, John Temple — a former newspaper
editor who previously led an Omidyar-financed civic journalism venture in
Hawaii — to be the president for audience and products, putting him in a
position above Eric Bates, the former Rolling Stone editor who was brought on
as a First Look editorial director, who is close to Taibbi."

[2] [http://nymag.com/daily/intelligencer/2014/10/matt-taibbi-
dis...](http://nymag.com/daily/intelligencer/2014/10/matt-taibbi-disappears-
from-omidyars-first-look.html)

~~~
bostik
I'm (again) badly torn. When Taibbi left for First Look, he was forced to
delay publication of any of his pending articles. I knew something big was
brewing, but I also had great expectations for FLM.

Then, nothing happened. FLM kept announcing new hires, Taibbi was supposedly
neck-deep in admin, and the article never materialised. Now, with just two
weeks after his departure from FLM, we are blessed with a heavy-hitting Taibbi
piece from Rolling Stone.

So I'm torn, because on one hand I'm personally delighted to have Taibbi
writing again. But on the other hand I'm genuinely worried about FLM's future
direction. From your comment I have to assume the worry is not unwarranted.

------
rdudek
Does Statute of Limitations apply to this?

~~~
bavcyc
The article mentions the statute of limitations applies in some instances but
the time frame for wire fraud has not run out.

