After Trading with the Enemy, JP Morgan Chase Whines for Regulators to Fight “Anti-American” Regulations

Two and a half weeks ago, JP Morgan Chase signed an $88.3 million settlement with the government. JPMC traded with Iran, Sudan, Liberia, and Cuba, all in violation of Treasury’s various trade restrictions. When subpoenaed on the Sudan transfer, JPMC at first denied it had the documents in question. While I think many of these sanctions (particularly the Cuban ones) are silly, the settlement revealed that JPMC thought it was above rules designed to serve America’s self-interest.

Which is why I find MOTU Jamie Dimon’s wail for help fighting “anti-American” regulations so distasteful.

The United States should consider pulling out of the Basel group of global regulators, Jamie Dimon, chief executive of JPMorgan Chase, said in an interview with the Financial Times.


“I’m very close to thinking the U.S. shouldn’t be in Basel anymore. I would not have agreed to rules that are blatantly anti-American,” he said in the interview.

“Our regulators should go there and say: ‘If it’s not in the interests of the U.S., we’re not doing it’.”

Dimon is complaining because Basel’s rules require more reserves from the very largest banks–including JPMC–to hold 9.5% of reserves, as opposed to the 7% required from smaller banks. Just three of the eight banks with higher reserve requirements are from the US. The Basel rules also treat “covered bonds”–a European product–differently from mortgage backed securities with a GSE guarantee.

I’m particularly amused with the way Dimon describes “global financial firms” to be in the best interest of the US.

“I think any American president, secretary of Treasury, regulator or other leader would want strong, healthy global financial firms and not think that somehow we should give up that position in the world and that would be good for your country.”

Bank of America’s global status right now risks putting the US at great risk, because the bank is insolvent but regulators have a tough time unwinding it because of that global reach. We know that because a bunch of global financial firms crashed the economy just a few years ago.

There’s one more ugly irony about Dimon’s wail. His concern, he says, is that because of these rules, Asian banks will pick up market share in the US.

He’s saying this, of course, at a time when Obama is about to push through a trade deal with Korea–one that will ultimately cause American manufacturers to lose market share in the US–in significant part so JPMC and Goldman Sachs can spread their toxic finance to Korea. That is, he’s whining about competing on an uneven playing field with Asian banks at the same time as the government is helping his company get preferential access to Korea’s finance market.

Jamie Dimon wants to pretend he is both a free market capitalist and a good American. But his whining and the actions his bank have taken suggest he’s neither of those things.

Update: In the longer account of this interview, Dimon whines even more about how poor American banks won’t be able to compete against Asian and European banks.

In his office, looking relaxed in white shirt with two buttons undone, Mr Dimon is still exercised about what he sees as a “miscarriage of justice”. US policymakers, he says, have sold their banks down the river – the Yangtze river. “There are plenty of countries out there that are happy with the changes being implemented in the US. They realise that they can be huge beneficiaries of this. I’m talking about China, India, Singapore, Japan. I wouldn’t want to see, 20 years from now, the US asking, ‘what happened? How come the winners in the marketplace are all outside the US?’”


Derivatives dealt off exchanges will need to use clearing houses – which Mr Dimon supports – and will be subject to margin rules governing how much collateral they have to supply.

These he does not like, particularly if, as currently framed, they apply to JPMorgan’s overseas businesses too. He fears British, French and German competitors might not be subject to the same standards and will gain market share.

Update: Yves Smith debunks Dimon’s jingoism.

Dimon manages to play yet another jingoistic card, acting as if Basel III singles out US banks when a majority of the financial firms subject to the most stringent rules are outside the US. And he raises the truly bizarre specter of “Asian” hordes invading the US. Huh? Does he mean HSBC? I presume not, that’s a UK bank. The only Asian bank in the top 10 is Mitsubishi UFJ, and the Japanese are not likely to be in aggressive expansion mode (they’ve never gotten the knack institutionally of hiring and managing good top level foreigners; I know of a very few Japanese executives who have figured it out and did a good job when they were posted in the US, but as soon as they were rotated back to Japan, their successors made a hash of what they had put in place).

The Chinese are even less likely to move in near term (long term is a completely different matter). First, the Chinese were apparently interested in investing in US players in the crisis and were rebuffed. But having worked repeatedly with foreign banks in the US, building a denovo operation (or using small acquisitions as a platform) is a completely different kettle of fish. And going from the Chinese market of heavy state control and limited product scope to the US is like saying a drayage company can operate a supersonic plane because both are in the transportation business. I’ve seen what a hard time foreign banks have had in the US with a vastly lesser skill gap (one they closed over a period of decades). The Chinese are too far behind skill-wise to constitute a threat in the US until they can acquire the skills via a major acquisition (and that was not the scenario Dimon was hinting at).

And it goes without saying that Dimon made clear that he believe that what is good for banks is good for the US, when that has been demonstrably false for at least the last decade.

What’s striking about Dimon’s comments is how brazen they are. He’s not making clever, narrowly accurate but substantively misleading comments. Much of what he says and implies is unadulterated bunk. The fact that he peddles this tripe shows how confident he is that his message will go unchallenged. And that in turn reveals that he is secure in his belief that the banks have won the war; all he is caviling about is the speed of the mop-up operation.

Jamie Dimon’s Company Fined $88.3 Million for Trading with the Enemy

That’s not the technical term for violating economic sanctions against Cuba, Sudan, Iran, and Liberia (and FWIW I think the sanctions against Cuba are stupid).

Nevertheless, that’s basically what the sanctions JP Morgan Chase just admitted to violating amount to.

The big dollar amounts involve $178.5 million in wire transfers with Cubans.

JPMC processed 1,711 wire transfers totaling approximately $178.5 million between December 12, 2005, and March 31, 2006, involving Cuban persons in apparent violation of the CACR.

But the more interesting violation came when JPMC refused to turn over some documents relating to Khartoum until the government told the bank they knew JPMC had the documents.

The apparent violation of the RPPR occurred between November 8, 2010, and March 1, 2011. On October 13, 2010, OFAC issued JPMC an administrative subpoena pursuant to section 501.602 of the RPPR directing JPMC to provide certain specified documents related to a specific wire transfer referencing “Khartoum.” In response to this subpoena and a subsequent communication, JPMC compliance management failed to produce several responsive documents in JPMC’s possession, and repeatedly stated that JPMC had no additional responsive documents. OFAC ultimately provided JPMC with a list of multiple responsive documents that OFAC had reason to believe were in JPMC’s possession based on communications with a third-party financial institution. This prompted JPMC to correct its prior statements that the bank possessed no additional responsive documents and to produce more than 20 responsive documents. JPMC did not voluntarily self-disclose the apparent violation of the RPPR to OFAC. The base penalty for this apparent violation was $250,000.

And in spite of that apparent obstruction, TurboTax Timmeh Geithner’s agency still treated Jamie Dimon’s disloyal company leniently because of what they called JPMC’s “substantial cooperation.”

OFAC mitigated the total potential penalty based on JPMC’s substantial cooperation,

According to Bloomberg’s count, the Fed lent this disloyal company $68.6B after banksters like Jamie Dimon crashed the economy.

During and after the period JPMC took that money, it financed trade with Iran, tried to hide the Khartoum deal, and financed more trade with Sudan (though it sent money to Cuba and sent Iran 32,000 ounces of gold, now worth $55 million, before taking our money, in 2006). Some of this trading with the enemy was reported internally to “JPMC management and supervisory personnel;” at least some of this wasn’t the work of rogue employees.

This is the kind of MOTU that Obama considers an ally.

Even as the Costs Become Apparent, Big Business Pushes to Legalize Bribery

Last night, Jefferson County, AL delayed their decision for a month whether to declare bankruptcy or accept a settlement with their creditors and the state. At issue is $3.2 billion in debt, much of it for a sewer upgrade, that got dragged into the financial crash. The current deal would have creditors forgo a third of the debt in exchange for rate increases and the creation of an independent authotiry to run the sewer. County commissioners balked, though, arguing the deal relied on too many contingencies from the state–none of which are guaranteed–and took away any control at the county level. In short, it’s a mess, one that is costing the people of Jefferson County in increased rates and diminished services as the county struggled to find funding mechanisms to pay for the debt.

Yesterday, Reuters did a report summarizing all the bribery that went into the original sewer deal–and noting that JP Morgan hasn’t paid any reputational damage or loss of business for it, largely because it has blamed the deal on corrupt local officials.

JPMorgan Chase & Co. (JPM)’s Charles LeCroy said the key to landing bond deals in Jefferson County, Alabama, was finding out whom to pay off. In one example, that meant a $2.6 million payment to Bill Blount, a local banker and longtime friend of County Commissioner Larry Langford.

“It’s a lot of money, but in the end it’s worth it on a billion-dollar deal,” LeCroy told a colleague in 2003, according to a complaint filed by the Securities and Exchange Commission.


Just 21 months ago, JPMorgan agreed to a $722 million SEC settlement to end a case over secret payments to friends of Jefferson County commissioners. The financings arranged by JPMorgan, a package of floating-rate debt and derivatives, exposed taxpayers to the 2008 credit crisis and dealt a blow that may lead the county to approve the biggest U.S. municipal bankruptcy as soon as today.

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The Chief of Staff from JP Morgan

Joe Subday has a post focusing on Bill Daley’s role in the serial capitulation Obama is making to the debt hostage-takers.

Politico’s David Rogers and Carrie Budoff Brown report on the $3 trillion deal under discussion between Obama and Boehner. And, despite denials, it appears that Obama and Boehner are negotiating and the number is $3 trillion, mostly in spending cuts. Towards the end of the article is this nugget:

At the same time, the White House’s tactics in this situation most infuriate Senate Democrats, who complain that the president’s chief of staff, Bill Daley, is too quick to make concessions to Boehner, even at the party’s expense.

Yes, they are quick to make concessions at the White House. Like everyone, I’ve been trying to figure out what’s really going on. One trusted source told me that one problem is definitely Daley:

Bill Daley is behind the White House’s capitulation. He’s the Democrat’s Neville Chamberlain. It’s dominoes of caving — one cave leads to another. They are so desperate for a deal that they’ll take anything at any price. They won’t fight for anything.

Now, of course, Daley works for Obama. He hired Daley, who used to be on the Board of Third Way, the group always willing to sell out on Democratic principle. And, that’s what Daley is doing on Obama’s behalf.

Now, Joe’s right: Daley ostensibly works for Obama, and so Obama is ultimately responsible for those capitulations.

But is Obama the only one Daley’s working for?

Daley was hired, after all, because the banksters had convinced Obama that seemingly endless supplies of free money wasn’t enough for them; they also needed a bankster in the White House.

And so here we have an unelected bankster in a key role at a moment of crisis. And every time Boehner asks, Daley reportedly offers up yet more austerity in the hopes that he can prevent uncertainty in Jamie Dimon’s world.

It’s funny. Unlike Obama, Daley men aren’t exactly known for their poor negotiating skills. But this one sure seems to be acting helpless in the face of a bunch of demands for more. And ultimately, it won’t be the TeaPartiers who benefit from that process. It will be Jamie Dimon.

JP Morgan Chase Nickel and Diming the Last Nickels and Dimes from the Unemployed

The National Consumer Law Center just released a report on something that’s been a pet peeve of mine for some years: states’ increasing reliance on pre-paid cards to distribute unemployment compensation, rather than checks. (h/t Susie) As the report explains, issuing funds via a card is much cheaper for the states. But what’s really happening is that unemployment recipients end up paying for the cards out of series of fees the banks issuing the cards charge (which violates the law that says administrative costs should not come out of benefits).

The report spells out in detail how banks are screwing unemployment recipients in which state:

  • US Bank refusing to let AR post its fee schedule
  • PNC requiring recipients to work with customer service to transfer fees to their own bank account in IN
  • Chase charging $1 for the very first in-network ATM withdrawal in TN
  • Chase charging $2.75 for out-of-network ATM withdrawals in WV, even in areas without convenient access to a Chase branch
  • Chase charging $.25 for cash back with a purchase in TN and RI
  • Chase charging $.10 for every point-of-service use after the second one in CO
  • Chase charging $.25 for PIN transactions in ME and TN
  • US Bank charging $20 overdraft fees (on pre-paid cards!) in AR
  • Chase charging $1.50 for denied transactions in MI and WV
  • Chase charging $.50 to check a balance and $1 for insufficient funds in RI
  • Regions Bank charging a $2.50 90-day inactivity fee in AL
  • Chase charging $12.50 to issue a check to close out an account in CO and CT

Check out this state-by-state summary to see what your state’s card charges and how that compares with other states.

This list, of course, demonstrates another thing: Chase’s significant role in the market (it serves 13 of the 40 states that use pre-paid cards) and–aside from US Bank’s egregious overdraft fees–its use of the most abusive practices.

That’s notable because Chase’s parent company–and its CEO, Jamie Dimon–is also taking the lead in threatening to cut off poorer consumers because the government wants to limit what debit card issuers like Chase can charge merchants.

Bank executives have said they will raise their fees to compensate for losing debit card processing revenues.They predict that some people will be unable to afford the fees, forcing them out of the banking system into the realm of check cashers and payday lenders.

The term that the banks use for this is “unbanked.” The rules “will have the adverse consequences of making a portion of current bank clients unbanked.

You will not be able to profitably serve them,” Dimon told analysts during the bank’s fourth-quarter earnings conference call Friday.

About 5 percent of today’s banking customers “may be pushed out of the banking system,” he said.

You see the nice trap Dimon is setting for those who don’t profit mightily by sucking at the federal teat, like his bank does? Unbanked consumers are precisely those who, if they receive unemployment, will rely on these cards and have to pay their usurious fees. So after forcing them out of the banking system because JP Morgan refuses to cut its escalating profits in response to Dodd-Frank, JP Morgan will still profit off these people by nickel and diming them at the time they can least afford to be nickel and dimed.

Corporate Fairy Tales in Afghanistan

It’s a corporate fairy tale: working class boy joins the military, goes into banking, brings the joys of mineral exploitation to exotic locales.

From Congo to Colombia, from Iraq to Sierra Leone, [Ian] Hannam [the JP Morgan banker overseeing the development of a gold mine in Afghanistan] and his small team of soldiers-turned-bankers and advisers did business with oligarchs, gem dealers, and former mercenaries. He could be bracingly direct. When he landed in Baghdad for a meeting with Iraq’s oil minister, the minister asked, “What are you here for?”

“I’m here to make five new Iraqi billionaires every year for the next 10 years,” Hannam said with a twinkle in his eyes.

And it ends, I guess, as corporate fairy tales do: with the mineral riches finally being liberated from the oppressive soil.

But at least someone will have begun releasing the wealth trapped in Afghanistan’s stones.

It’s all the bits in between that raise eyebrows about the viability of our little project in Afghanistan and the structure of our empire. While the story focuses on Hannam, the JP Morgan banker, it’s as much a story about General Petraeus.

Then, in 2009, mining in Afghanistan got the push it needed — from the U.S. military. Petraeus had been appointed commander of U.S. Central Command, which had ultimate authority over Afghanistan. He realized that a U.S. exit from Afghanistan depended on getting the country’s economy running.


Realizing that conventional foreign-aid organizations weren’t getting the job done, Petraeus moved a crack economic stabilization team from Iraq into Afghanistan. That team quickly realized that mining would be key.

And Deputy Under Secretary for Defense Paul Brinkley.

Hannam was at the banquet hall for a reception thrown by the Trade Bank of Iraq to honor J.P. Morgan. Also at the reception was Paul Brinkley, a deputy under secretary of defense charged with jump-starting Iraq’s stalled economy. A former tech company executive, Brinkley served as a matchmaker of sorts between Iraqi entrepreneurs and foreign businessmen. With the blessing of Defense Secretary Robert Gates, he operated outside normal bureaucratic channels, eschewing the bulletproof vests and helmets his civilian colleagues wore in combat zones. In three years he had secured some $8 billion in private investment contracts for Iraq, helping start textile mills, cement factories, and electronics companies. Hannam and Brinkley had heard about each other’s work. J.P. Morgan had been one of the first Western companies to plant the flag in Iraq, overseeing the country’s currency and setting up a big oil project in Iraqi Kurdistan. Hannam and Brinkley fell into conversation about Afghanistan, which was to be Brinkley’s next posting.

These men, of course, were prominently seen last June pushing James Risen to report a breathless story on Afghanistan’s $1 trillion mineral riches the night before Petraeus would testify to Congress.

[Risen] explained that he based his report on the work of a Pentagon team led by Paul Brinkley, a deputy undersecretary of defense charged with rebuilding the Afghan economy. Using geological data from the Soviet era and USGS surveys conducted in 2006, Brinkley dispatched teams to Afghanistan last year to search for minerals on the ground. The data they’ve come back with, combined with internal Pentagon assessments that value the deposits at more than $900 billion, constitute news, according to Risen. (Those surveys are still under way, according to a briefing Brinkley gave yesterday.)


So was the story a Pentagon plant, designed to show the American public a shiny metallic light at the end of the long tunnel that is the Afghan war, as skeptics allege? Risen said he heard about the Pentagon’s efforts from Milt Bearden, a retired CIA officer who was active in Afghanistan in the 1980s. The men co-authored a book, “The Main Enemy,” in 2003, and Bearden is now a consultant working with Brinkley’s survey team.

“Several months ago, Milt started telling me about what they were finding,” Risen said. “At the beginning of the year, I said I wanted to do a story on it.” At first both Bearden and Brinkley resisted, Risen said, but he eventually wore them down. “Milt convinced Brinkley to talk to me,” he said, “and Brinkley convinced other Pentagon officials to go on the record. I think Milt realized that things were going so badly in Afghanistan that people would be willing to talk about this.” In other words, according to Risen, he wasn’t handed the story in a calculated leak. Calls and emails to Brinkley and to Eric Clark, a Pentagon public relations contractor who works with him, were not immediately returned.

All of which makes you wonder about the provenance of this story…

And of course, in addition to Hannam, Petraeus, and Brinkley, there is JP Morgan itself, which seems to be investing a lot of time in a project they don’t expect to be profitable and won’t put their own money into.

In late September, J.P. Morgan CEO Jamie Dimon, Brinkley, and Mining Minister Wahidullah Shahrani met at J.P. Morgan’s headquarters in Manhattan. Dimon pledged J.P. Morgan’s support. On the way down in the elevator, Dimon told Shahrani, “You’re in good hands with Ian. He’s eccentric, but he gets things done.”But soon Brinkley’s team was wondering. On the day the deal signing was to take place, Hannam’s team stopped acting like former warriors and began behaving like, well, nervous investment bankers. Hannam, after talking about how rich he was going to make his clients, suddenly began to complain that there was no way to make a profit. The 26% royalty rate for the mine, his team claimed, was way too high. Mining Minister Shahrani was bewildered — the rate had been agreed upon years before, when the Naderi family had first bid for the mine. Nothing had changed.

Brinkley’s Pentagon team was deeply frustrated. They felt the bankers had pulled a fast one. Had Hannam’s group not done its homework? Or were they just being bankers, trying to squeeze more money out of the deal with some 11th-hour brinkmanship?

Brinkley lit into the J.P. Morgan group: “When are you going to get this done? You’ve told people you’re going to do it!” The bankers, in turn, felt they were being unfairly pressured by the government, which seemed desperate to get the deal done even if it was uneconomical.


J.P. Morgan says it isn’t putting any of its own money into the project. Hannam secured $40 million from investors in the U.S., Asia, and Europe. They included Enso Capital founder Joshua Fink, son of BlackRock’s Larry Fink; British mining titan Peter Hambro; and Thai businessman Pairoj Piempongsant. Hannam created an investment vehicle, Central Asian Resources, to enter into a joint venture with Naderi’s new mining company, Afghan Gold.

Which in turn makes you wonder about the off-and-on relationship between the President and Jamie Dimon, particularly in the months leading up to JP Morgan playing hardball on the gold mine in Afghanistan. Have there been other considerations involved in the government’s relationship with JP Morgan? When Dimon boasts about JP Morgan being a good bank–in spite of the fact that they practice some of the same reprehensible policies as their rivals–is he saying something more?

Mind you, it’s not that Petraeus is wrong: Afghanistan needs something besides poppies if it’s ever going to become a viable nation-state.

I’d just like a bit more transparency about the public-private endeavors our government builds to make that happen. And I’d like a lot more information about all the favors being exchanged to make that happen.

Goldman’s Lies and Jamie Dimon’s Piggy Bank

After a drawn out battle to liberate the records of the Fed’s discount window lending, they’ve finally been released. Bloomberg (who led the legal fight to liberate them) has made the records available here.

While it’s going to take a while for those who understand this stuff to collate the data–the Fed released individual PDFs–thus far there are two stories. First, when Goldman Sachs President Gary Cohn testified to the FCIC that Goldman had only accessed the window once–and that at the request of the Fed–he appears to have not been telling the truth.

Goldman Sachs Bank USA, a unit of the company, took overnight loans from the Federal Reserve on Sept. 23, Oct. 1, and Oct. 23 in 2008 as well as on Sept. 9, 2009, and Jan. 11, 2010, according to the data released today. The largest loan was $50 million on Sept. 23 and the smallest was $1 million on the most recent two occasions.

Goldman Sachs President and Chief Operating Officer Gary D. Cohn told the Financial Crisis Inquiry Commission June 30 that “we used it one night at the request of the Fed to make sure our systems were linked with their systems, and it was for a de minimis amount of money.” Peter J. Wallison, a member of the Financial Crisis Inquiry Commission, then asked, “you never had to use it after that?”

“No, and as I said, we used it on the Fed’s request,” Cohn replied.

Maybe now that we’ve established the principle that people should go to jail for lying like this, we can finally send a bankster to jail?

Bernie Sanders, meanwhile, observes that Jamie Dimon was serving on the Board of the NY Fed at the same time as sucking at its teat.

Under court order, the Federal Reserve today identified more banks that took loans during the financial crisis using a once-secret system that Sen. Bernie Sanders (I-Vt.) called “welfare for the rich and powerful.”A Sanders provision in the Wall Street reform law already had forced the Fed last Dec. 1 to name banks that took trillions of dollars in emergency loans during the crisis.

“The Federal Reserve bailout was welfare for the rich and powerful and you-are-on-your-own rugged individualism for everyone else,” Sanders said. “The information released by the Fed today should never have been kept secret.  This money does not belong to the Federal Reserve; it belongs to the American people.  I applaud Bloomberg News, Fox News and others for their success in lifting another veil of secrecy at the Fed.”

Sanders said the latest disclosure raises questions about conflicts of interest. While Jamie Dimon, the CEO of JPMorgan Chase, served on the board of directors of the New York Fed, in one month alone, April of 2008, JPMorgan Chase received a combined $313 billion in Fed loans.

“This is an obvious conflict of interest on its face that must be investigated as part of the independent audit that my amendment requires to be completed this summer.  When JPMorgan Chase was telling the world about their great financial success, it seems like they were using the Fed’s discount window as a giant piggy bank.”

I guess this is the kind of information about the banksters about which we little people are supposed to remain ignorant?

Or Maybe Your Profit Levels and Bonuses Are Simply Obscene?

Jamie Dimon says they’re going to have to chase 5% of their customers away in response to limits Dodd-Frank put on the usurious rates banks charge merchants for each debit card transaction.

Federal limits on debit card processing fees will force banks to charge customers more for services, making accounts too expensive for as many as 5 percent of customers, JPMorgan Chase’s chief executive Jamie Dimon said Friday.

The rules, proposed as part of the Dodd-Frank financial reform law, would cap the fees that merchants pay banks for processing debit card transactions at 12 cents each.

That is almost 75 percent less than the average 44 cents per transaction that banks get now.

U.S. banks could lose about $13 billion of their annual industry debit processing revenues because of the rules, which the Federal Reserve proposed last month.

Dimon also announced today that their profit was up 47% last quarter. And that’s after the $10 billion in bonuses Dimon’s banksters will share.

In other words, JP Morgan could easily afford to keep serving its poorest customers, just by accepting reasonable profit and bonus levels instead of the positively immoral ones they’re now getting. But it has chosen, instead, to push millions into “unbanked” status, I guess because those people aren’t as worthwhile as people as JPM’s MOTUs are.

Note, too, that Chase is one of the national leaders in contracting with states to provide debit cards for state unemployment benefits. I wonder if JPM will forgo these big state contracts and captive consumers as part of its “unbanking” plans?

A Tale of Two Bailout Paybacks

As promised over the weekend before I realized I had forgotten my Toobz, I wanted to compare the behavior of two bailout recipients, the UAW and the banksters.

A number of people have pointed to this intriguing interview about the Korea Trade deal with the UAW’s President Bob King. In addition to confirming my math showing that the most the UAW could reasonably expect to get out of his deal is 75,000 additional exports–or 800 extra jobs for the UAW–King also had this to say:

It was important to endorse in order to reward the administration for its good behavior of including labor in negotiations.

While not directly an admission that UAW endorsed this NAFTA-style trade deal in thanks for the US bailout of the auto industry, it does seem to support that overall sentiment. The UAW capitulated further when it endorsed the Obama-McConnell tax deal giving 2 years of relief to the very rich, 1 year to the medium-term unemployed, and nothing to the 99ers whose Unemployment Insurance has expired (many of whom used to work for the auto companies).

Compare that to the behavior of JP Morgan Chase Vice Chairman Jimmy Lee during negotiations under the Chrysler bailout. According to Steven Rattner, Lee,

demanded to know why, if the government thought banks important enough to give them tens of billions in TARP money, it wanted to squeeze them on [the Chrysler] deal.

Mind you, JPMC wasn’t getting squeezed. Timmeh Geithner had specifically instructed Rattner not to ask for any special favors because the government had also bailed out JPMC (Timmeh apparently didn’t mention the additional support JPMC got from the Fed).

Tim had instructed me not to be taken in [by Lee’s complaints] but to maintain strict neutrality. I was not to demand anything of JPMorgan just because it had received an infusion of TARP money; nor was I to show it favor because of Bear Stearns or anything else.

And as Rattner calculates, Lee was asking for full value on their debt even while it was only worth about $.15 on the dollar.

In our phone calls, he also relentlessly reminded me that creditors deserve to be paid. “When you lend somebody $6.9 billion,” he would say, “you expect to get $6.9 billion back. And not a penny less.” I listened knowing that Jimmy’s position was patently ridiculous. Chrysler debt was trading at around 15 cents on the dollar (admittedly, infrequently), and according to Chrysler’s own analysis, the liquidation value of the company was perhaps as low as $1 billion. Clearly, Jimmy didn’t believe that the Obama administration would be willing to push back and let the banks take over Chrysler rather than cave in to their demands.

So unlike the UAW–which endorsed the kind of trade deal it has spent the last decade railing against–JP Morgan Chase responded to getting bailed out by asking for more special deals.

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Oversight and Investigation: “Why Should They Take You Seriously?”

Yves Smith has a post laying out one of the most troublesome aspects of the response to the revelation of foreclosure fraud. As she explains, to conduct an “independent review” of its PR-servicing “review” of its own servicing practices, GMAC picked the lawfirm that has been in charge of its national counsel on servicing issues.

A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).

Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:

GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….

The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.

Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.


Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.

So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.

Couple the prospect of law firms involved in the fraud conducting “independent” investigations of their own fraud with this exchange from Thursday’s House Financial Services hearing on robo-signing. Maxine Waters asks the Acting Comptroller of the Currency, John Walsh, whether or not OCC (which regulates the big banks) has imposed any penalties on the servicers for their fraud.

Waters: I asked earlier about whether or not fines had been levied from the Treasury Department [see that exchange here]. Let me turn to the OCC. Since we started experiencing the fallout from the subprime boom, has OCC taken any enforcement actions against servicers?

[long pause]

Walsh: We have certainly issued supervisory requirements on them, matters requiring attention and other things to remedy–

Waters: Have you levied any fines?

Walsh: I do not believe that we have.

Waters: Have you issued any cease and desist orders?

Walsh: I don’t believe that there have been any public actions against them.

Waters: Have you threatened to revoke any charters?

Walsh: No.

Waters: Do you think that the servicers really believe that you mean business if they don’t have to fear any consequences?

Walsh: Well, I think the consequences are quite clear and present to them. I mean that we can compel action and the threat of more serious penalties–

Waters: But you haven’t done that. You haven’t done any of that! Why should they take you seriously?

Walsh: The supervisory process is one that happens–does not mainly happen in the public spotlight. It happens in the dealings directly with the institution through the process of examination, matters requiring attention, and other things. Only when a particular problem is identified that rises to the appropriate level do we get into the area–

Waters: Let’s talk about examiners. If you have examiners onsite, can you explain how you don’t know about all the problems that have recently come to light? What do the examiners do?

Walsh: There’s, as I mentioned, our attention was focused on the modification process, it would be quite unusual for us to be in the room or present at the point where an affidavit is being signed or a notarization is taking place. We do rely on the systems and controls of the financial institution, its own internal audit, or any flags that raise the issue, like our complaint function. And unfortunately those did not raise an alarm about this process. [my emphasis]

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