JPMorgan Chase Writes Arrogant Letter to Its Swindled Forex Customers

By Pam Martens and Russ Martens: May 26, 2015

Troy Rohrbaugh, Head of Foreign Exchange Trading at JPMorgan Chase, Chairs the New York Fed's Best Practices Group for Foreign Exchange Trading

Troy Rohrbaugh, Head of Foreign Exchange Trading at JPMorgan Chase, Chairs the New York Fed’s Best Practices Group for Foreign Exchange Trading. JPMorgan Chase Just Pleaded Guilty to a Felony for Conspiring to Rig Foreign Exchange Trading.

As the U.S. Department of Labor deliberates giving JPMorgan Chase a waiver to continue business as usual after it pleaded guilty to a felony charge for engaging in a multi-bank conspiracy to rig foreign currency trading, a letter the bank sent to its foreign currency customers should become Exhibit A in the deliberations. The letter effectively tells JPMorgan’s customers, here’s how we’re going to continue to rip your face off.

Two sections of the letter stand out in particular. One section reads:

“As a market maker that manages a portfolio of positions for multiple counterparties’ competing interests, as well as JPMorgan’s own interests, JPMorgan acts as principal and may trade prior to or alongside a counterparty’s transaction to execute transactions for JPMorgan…” (Italic emphasis added.)

Most of the general public believes that proprietary trading (trading for the house) was outlawed by the Volcker Rule under the Dodd-Frank financial reform legislation. Most of the public believes that trading ahead of your client’s order is called front-running and is illegal. On both points, the public is dead wrong. First, the Volcker Rule has yet to be implemented. Its effective date continues to be pushed forward. Secondly, foreign exchange spot trading between big banks and institutions (like the folks who manage your pension money) is an unregulated market left to the non-legally-binding “best practice” agreements by the biggest banks. As we reported on May 14, the Chair of the group drawing up these best practices is Troy Rohrbaugh, the head of Foreign Exchange trading at JPMorgan Chase since 2005 – including the periods for which the bank has been charged with felony conduct.

Making this best practice committee even more specious is that it is sponsored by the Federal Reserve Bank of New York, part of the Federal Reserve which just fined JPMorgan Chase $342 million for lacking “adequate Firm-wide governance, risk management, compliance and audit policies and procedures to ensure that the Firm’s Covered FX [foreign exchange trading] Activities conducted at the FX Subsidiaries complied with safe and sound banking practices, applicable U.S. laws and regulations, including policies and procedures to prevent potential violations of the U.S. commodities, antitrust and criminal fraud laws, and applicable internal policies…”

Another section of the JPMorgan letter states:

“JPMorgan is not required to disclose to a counterparty when the counterparty attempts to leave an order that JPMorgan is handling other counterparties’ orders or JPMorgan orders ahead of, or at the same time as, or on an aggregated basis with, the counterparty’s order.  JPMorgan is under no obligation to disclose to a counterparty why JPMorgan is unable to execute the counterparty’s order in whole or in part, provided that JPMorgan will be truthful if we agree to disclose such information.” (Italic emphasis added.)

In other words, despite five of the largest banks in the world pleading guilty to felonies, JPMorgan Chase still is not required to disclose a flaming conflict of interest to a customer unless it chooses “to disclose such information.”

Welcome to the world of the still unregulated Wall Street — despite its crashing the U.S. economy in 2008, over $13 trillion in loans and bailouts, nonstop charges of plundering the little guy and violating the public trust.

According to the Bank for International Settlements, foreign-exchange trading reached an average $5.3 trillion a day in April 2013, making it the largest market in the world by far on a daily trading basis. It operates 24 hours a day across all time zones. Reuters reports that this past January 15, when Switzerland shocked markets by removing its cap on the Swiss Franc, $9.2 trillion in transactions occurred on that day alone. How could the largest trading market in the world not be regulated? The short answer is that five of the biggest banks control more than half of that trading and they are milking a cash cow while cowed Republicans in Congress obsess about the cost of too much financial regulation.

Pieces of the foreign exchange market are regulated. U.S. exchanges that trade currency futures and options are regulated by the Commodity Futures Trading Commission (CFTC). The Commodity Exchange Act gives the CFTC jurisdiction over off-exchange (also called over-the-counter or OTC) foreign currency futures and options transactions involving retail customers. Retail customers are generally defined as individuals with assets of less than $10 million and most small businesses.

But the spot Forex market where big banks, insurance companies, pension managers, and large corporations trade with each other is effectively unregulated and that has allowed this felonious bank conspiracy to persist from at least 2008 through 2013, according to global regulators. This market is called the “spot market” because it involves the exchange of currencies between two parties on a spot date, typically two business days from the trade date.

Creating an honest and effectively regulated market for foreign currency trading has never been more important to the economic well being of the United States. The dramatic climb of the U.S. dollar over the past 8 months has caused many economic dislocations: imports coming into the U.S. are cheaper causing downward pressure on inflation targets; U.S. corporations whose exports are priced in dollars are finding it tougher to compete because their products in foreign markets look pricey against the local goods priced in cheaper local currencies. The U.S. trade deficit is widening as a result and corporate earnings are being negatively impacted.

And, against this backdrop, U.S. citizens have no reason to trust that the five banks that dominate spot currency trading have any plans to change their jaded ways or that there are any regulations that will force them to.

Debating Hillary for President: Robert Reich v. Nomi Prins

By Pam Martens and Russ Martens: May 25, 2015

Robert Reich Explains How to Tame Wall Street In New MoveOn Video

Robert Reich Explains How to Tame Wall Street In New MoveOn Video

Robert Reich, former Labor Secretary in Bill Clinton’s administration and currently Professor of Public Policy at the University of California at Berkeley, is an important voice for tackling income inequality in America by bringing back the Glass-Steagall Act, busting up the too-big-to-fail banks, and imposing a securities transaction tax.

In 2013, Reich released a documentary, “Inequality for All,” that demonstrated that there is a finite equilibrium of income distribution at which the U.S. economy can grow and prosper. In 1928 and 2007, the year before each of the greatest financial crashes in our nation’s history, income inequality peaked. When workers are stripped of an adequate share of the nation’s income, they are not able to function as consumers, creating a vicious cycle of layoffs and slow economic growth – the situation the U.S. has been mired in since the Wall Street crash of 2008.

Unfortunately, Reich, an otherwise clear-eyed progressive has a deep blind spot. Her name is Hillary Clinton. In a column posted to his blog last month, Reich had this to say about Hillary:

“In declaring her candidacy for President she said ‘The deck is stacked in favor of those at the top. Everyday Americans need a champion and I want to be that champion.’

“Exactly the right words, but will she deliver?

“Some wonder about the strength of her values and ideals. I don’t. I’ve known her since she was 19 years old, and have no doubt where her heart is. For her entire career she’s been deeply committed to equal opportunity and upward mobility.”

This is more than a dangerous, rickety limb for Reich to be climbing out on when the financial stability of the nation hangs in the balance. During the primary challenge in 2008 between Barack Obama and Hillary, Reich made headlines by endorsing Obama despite his long-term friendship with the Clintons. That decision was at least partly influenced by what Reich called Hillary Rodham Clinton’s (HRC’s) “Odd Economics.” In an April 2008 post on his blog, Reich appeared to intuitively understand that the same men who deregulated Wall Street and mushroomed the derivatives gambling casino under Bill Clinton would be back in power in a Hillary presidency. Reich wrote:

“HRC’s other idea is to create a commission on foreclosures, headed by Alan Greenspan, Bob Rubin, and Paul Volcker. Yet Greenspan is more responsible for the housing mess than any other single person in Washington or on Wall Street. It was, after all, Greenspan whose Fed lowered short-term interest rates be lowered to 1 percent in 2003 – making money so cheap that every financial institution eagerly lent it to any halfway sentient human being. And it was Greenspan who argued that neither the Fed, the Commodity Futures Trading Commission, nor any other pertinent oversight agency should bother to watch whether financial institutions were behaving themselves. Bob Rubin, for his part, joined Greenspan in successfully urging Congress in the late nineties to repeal the Glass-Steagall Act, the last remaining edifice separating commercial from investment banking – enabling Citigroup, which Rubin thereafter joined, to acquire Traveler’s Insurance.”

This is the detail-lite version of what happened when Robert Rubin, Bill Clinton’s Treasury Secretary, rammed through the repeal of the Glass-Steagall Act and quickly revolved through the door of its greatest beneficiary – Citigroup – strolling out eight years later with the bank in financial ruin, Wall Street in the worst collapse since the Great Depression, the U.S. economy sinking toward depression but Robert Rubin $126 million richer from his Citigroup compensation.

Despite Rubin’s trail of unprecedented hubris, President-elect Obama quickly named him as an economic advisor to his transition team. (Citigroup executives and employees ranked seventh on Obama’s list of largest campaign donors.) Reich appeared to acknowledge the failure of the Obama administration to rein in Wall Street abuses in his column of December 8, 2014 writing: “The Dodd-Frank Act, designed to prevent another Wall Street failure, has been watered down so much it’s slush. There’s been no move to resurrect the Glass-Steagall Act separating investment banking from commercial banking.”

Actually, there have been multiple pushes since 2009 to restore the Glass-Steagall Act, including a bipartisan move in 2013 by Senators Elizabeth Warren and John McCain when they and others introduced the 21st Century Glass-Steagall Act. But Obama did not do anything to engage the public behind these efforts. He continued to pretend that the watered down Dodd-Frank Act was working.

After watching the man he endorsed for President in 2008 not tame Wall Street, why would Reich, regarded as an intelligent, reasonable man, make an even riskier gamble on Hillary, who has a closer relationship with Rubin and Wall Street. As William D. Cohan wrote in the New York Times last November:

“At 76, from his twin perches at the Council on Foreign Relations, of which he is co-chairman, and at the Brookings Institution, where he founded the Hamilton Project, he remains a crucial kingmaker in Democratic policy circles and, as an adviser to the Clintons, Mr. Rubin will play an essential role in Hillary Rodham Clinton’s campaign for president in 2016, should she decide to run.”

Hillary announced her decision to run for President last month.

There is one person in America who might be able to change Robert Reich’s mind about Hillary before he blows his otherwise stellar work on taming Wall Street with an unwise gambit of getting deeper into the Hillary camp. That person is Nomi Prins, a Wall Street veteran and meticulous researcher on the democracy-shriveling nexus between Wall Street and the Oval Office.

Prins is the author of All the Presidents’ Bankers: The Hidden Alliances That Drive American Power, released just last year. Traveling around the country digging into records entombed in Presidential libraries, Prins traces the unhealthy ties between Washington and Wall Street from the panic of 1907 to the 1929 crash, right up to the political dynamics that put the 2008 financial train wreck in motion.

A column by Prins on Hillary Clinton’s Presidential attributes was posted to Paul Craig Roberts’ web site last Friday. It is not the detail-lite version on Rubin. Prins writes:

“When Hillary Clinton video-announced her bid for the Oval Office, she claimed she wanted to be a ‘champion’ for the American people. Since then, she has attempted to recast herself as a populist and distance herself from some of the policies of her husband. But Bill Clinton did not become president without sharing the friendships, associations, and ideologies of the elite banking sect, nor will Hillary Clinton. Such relationships run too deep and are too longstanding…

“Though she may, in the heat of that campaign, raise the bad-apples or bad-situation explanation for Wall Street’s role in the financial crisis of 2007-2008, rest assured that she will not point fingers at her friends. She will not chastise the people that pay her hundreds of thousands of dollars a pop to speak or the ones that have long shared the social circles in which she and her husband move…”

Detailing how Robert Rubin steered the Bill Clinton White House to the repeal of Glass-Steagall while he served as U.S. Treasury Secretary and then was instantly rewarded with a $40 million compensation package at Citigroup, Prins writes:

“Rubin’s resignation from Treasury became effective on July 2nd [1999]. At that time, he announced, ‘This almost six and a half years has been all-consuming, and I think it is time for me to go home to New York and to do whatever I’m going to do next.’ Rubin became chairman of Citigroup’s executive committee and a member of the newly created ‘office of the chairman.’ His initial annual compensation package was worth around $40 million. It was more than worth the ‘hit’ he took when he left Goldman for the Treasury post.

“Three days after the conference committee endorsed the Gramm-Leach-Bliley bill [the bill that repealed the Glass-Steagall Act], Rubin assumed his Citigroup position…” (Read the full column here.)

On May 8, 2012, Reich effectively admitted to Amy Goodman on Democracy Now! why Hillary Clinton should not be President. Reich stated:

“We’ve got to resurrect Glass-Steagall. I mean, it seems to me one of the problems we have with Wall Street right now is that there is still no constraint. The major Wall Street banks are bigger than they were before. They have better access to lower-cost money. That is, interest rates for them are at a preferable rate over other banks, so they have a competitive advantage that is going to enable them to get even larger. They know, and everybody else knows, they will be bailed out if they get in trouble, because they have already been bailed out. Without a resurrection of Glass-Steagall, and without legislation that caps the size of the biggest banks, that breaks up the biggest banks—something that the Dallas Federal Reserve Board, you know, the Dallas branch of the Federal Reserve Board, has advocated—we are going to see a replay of what happened in 2008, and with all the damage to everybody else, all of the ancillary damage to everybody else in the economy that that entails.”

By demonstrating that the only way to save the nation from the next financial collapse is to reinstate the Glass-Steagall Act, Reich is effectively saying that Hillary Clinton should not be the next President; because Hillary can’t win without Wall Street’s campaign financing and Wall Street will not finance her campaign if she runs on reinstating the Glass-Steagall Act – the destruction of which made Wall Street titans the 1 percent oligarchy.

It’s long past the time to oust the jaded Wall Street Democrats from positions of power. Robert Reich can be the catalyst or he can demur. History and his students will remember him far more kindly if he accepts the challenge.

DOJ Calls Out UBS Rap Sheet; Ignores Homegrown Citigroup’s Rap Sheet

By Pam Martens and Russ Martens: May 22, 2015

Assistant Attorney General, Leslie Caldwell, Speaking at Press Conference May 20, 2015

Assistant Attorney General, Leslie Caldwell, Speaking at Press Conference May 20, 2015

When the U.S. Department of Justice held its press conference on Wednesday to announce that five mega banks were each pleading guilty to a felony charge, paying big fines and being put on probation for three years, Assistant U.S. Attorney General Leslie Caldwell specifically took a battering ram to the reputation of Swiss bank, UBS.

Four banks — Citicorp, a unit of Citigroup, JPMorgan Chase & Co., Royal Bank of Scotland and Barclays — pleaded guilty to an antitrust charge of conspiring to rig foreign currency trading while UBS pleaded guilty to one count of wire fraud for its earlier involvement in rigging the interest rate benchmark, Libor.

In explaining why the Justice Department was ripping up the non-prosecution agreement it had negotiated with UBS in December 2012 over its involvement in the Libor fraud and now charging it with a felony, Caldwell delivered a scathing attack on UBS, stating:

“Perhaps most significantly, UBS has a ‘rap sheet’ that cannot be ignored. Within the past six years, the department has resolved criminal investigations of UBS three times, resulting in non-prosecution or deferred prosecution agreements. UBS also has entered into civil and regulatory settlements on multiple occasions within the past few years.  Enough is enough.”

Enough is apparently not enough, however, when it comes to serial banking tyrants based in the U.S. Not only does Citigroup have a monster rap sheet that keeps growing, but it’s the bank that contributed significantly to the U.S. financial collapse in 2008 and received the largest taxpayer bailout in U.S. history: $45 billion in equity infusions, over $300 billion in asset guarantees, and over $2 trillion in low-cost loans from the Federal Reserve.

In last month’s Harper’s Magazine, Andrew Cockburn took an in-depth look at Citigroup’s history of hubris, including the crime supermarket that Sandy Weill created with the merger of Travelers Group and Citicorp to form Citigroup in 1998. Cockburn writes:

“Under Weill, however, the merged firm set new records for reckless gambles and fraud. It was Citigroup that helped to cook Enron’s books, disguising $4 billion worth of loans on the balance sheet as operating cash flow. Citigroup’s executives apparently understood what they were doing, but carried on regardless—the payoff being the $200 million in fees earned from the energy-trading firm before it collapsed amid bankruptcy and criminal charges. (As it turned out, crime did not pay, at least not for Citigroup’s stockholders, since the firm ended up shelling out $100 million in civil penalties to the SEC and $3.7 billion to settle claims by Enron investors.)

“Equally favored as a client was the WorldCom communications conglomerate. Jack Grubman, Citi’s star telecom analyst, served as an adviser to Bernard Ebbers, WorldCom’s CEO, while relentlessly touting the company’s stock to unwitting investors. For his services, Grubman received more than $67.5 million between 1999 and 2002—hardly excessive compensation, considering that he had helped Citigroup to generate almost $1.2 billion in fees from WorldCom and other communications firms. Subsequent events followed their normal course.  WorldCom declared bankruptcy, Ebbers went to jail, Grubman paid a $15 million fine and was banned from the securities industry for life, and Citigroup settled a  WorldCom investors’ suit for $2.6 billion and paid a $300 million fine to the SEC. None of Citigroup’s senior executives suffered any penalty.”

There is an exponentially growing body of evidence that Citigroup’s cozy ties to Washington and cozy deals with its regulators are enabling its continued plundering of Main Street. In 2011, nineteen professors and scholars in securities law filed a joint amicus brief with the Second Circuit Appeals Court explaining why Judge Jed Rakoff was correct to reject a $285 million settlement that the SEC had negotiated with Citigroup. Their law schools included Columbia, George Washington, Villanova, Cornell and others. They told the court:

“…the SEC’s complaint, if true, means that Citigroup engaged in serious and intentional fraud in disregard of the interests of its customers and for its own substantial gain. Yet, although the first sentence of paragraph one of the complaint labels this a ‘securities fraud action,’ the complaint charges Citigroup only with negligence…the prophylactic measures imposed for three years are relatively inexpensive measures that appear to be ‘window-dressing’…the penalties are modest, given the gravity of allegations, the investors’ losses, the harm to the public and the fact that Citigroup is a recidivist.”

On March 14 of last year, when former Citigroup executive Stanley Fischer appeared before the Senate Banking Committee for his confirmation hearing to become Vice Chairman of the Federal Reserve, Senator Elizabeth Warren raised appropriate concerns of cronyism. Warren stated:

“Many big banks are well represented in Washington but the connection between Citigroup and Democratic administrations really sticks out. Three of the last four Democratic Treasury Secretaries have Citigroup ties; the fourth was offered but turned down the CEO position at Citigroup. Former Directors of the National Economic Council and the Office of Management and Budget at the White House and our current U.S. Trade Representative also have Citigroup ties. You once served as President of Citigroup International and are now in line to be number two at the Federal Reserve…

“I also think it’s dangerous if our government falls under the grip of a tight knit group connected to one institution. Former colleagues get access through calls and meetings; economic policy can be dominated by group think; other qualified and innovative people can be crowded out of top government positions.”

And there’s one more thing this kind of political cronyism allows: it allows a bank like Citigroup to survive on the backs of taxpayers in the biggest bailout in history in 2008 and then continue to run up a rap sheet like the following without seeing one executive go to jail or the banking tyrant being ordered to be broken up by regulators.

The U.S. Justice Department really shouldn’t throw stones from its glass house.

A Sampling of Citigroup’s Rap Sheet Since 2008:

December 11, 2008: SEC forces Citigroup and UBS to buy back $30 billion in auction rate securities that were improperly sold to investors through misleading information.

February 11, 2009: Citigroup agrees to settle lawsuit brought by WorldCom investors for $2.65 billion.

July 29, 2010: SEC settles with Citigroup for $75 million over its misleading statements to investors that it had reduced its exposure to subprime mortgages to $13 billion when in fact the exposure was over $50 billion.

October 19, 2011: SEC agrees to settle with Citigroup for $285 million over claims it misled investors in a $1 billion financial product.  Citigroup had selected approximately half the assets and was betting they would decline in value.

February 9, 2012: Citigroup agrees to pay $2.2 billion as its portion of the nationwide settlement of bank foreclosure fraud.

August 29, 2012: Citigroup agrees to settle a class action lawsuit for $590 million over claims it withheld from shareholders’ knowledge that it had far greater exposure to subprime debt than it was reporting.

July 1, 2013: Citigroup agrees to pay Fannie Mae $968 million for selling it toxic mortgage loans.

September 25, 2013: Citigroup agrees to pay Freddie Mac $395 million to settle claims it sold it toxic mortgages.

December 4, 2013: Citigroup admits to participating in the Yen Libor financial derivatives cartel to the European Commission and accepts a fine of $95 million.

July 14, 2014: The U.S. Department of Justice announces a $7 billion settlement with Citigroup for selling toxic mortgages to investors. Attorney General Eric Holder called the bank’s conduct “egregious,” adding, “As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”

November 2014: Citigroup pays more than $1 billion to settle civil allegations with regulators that it manipulated foreign currency markets. Other global banks settled at the same time.

May 20, 2015: Citicorp, a unit of Citigroup becomes an admitted felon by pleading guilty to a felony charge in the matter of rigging foreign currency trading, paying a fine of $925 million to the Justice Department and $342 million to the Federal Reserve for a total of $1.267 billion.

JPMorgan’s Jamie Dimon Deals With His Bank’s Felony Charge – Badly

By Pam Martens and Russ Martens: May 21, 2015

JPMorgan Tries to Claim It's a Felon Because of  One Bad Apple

JPMorgan Tries to Claim It’s a Felon Because of One Bad Apple

After more than 200 years of operation, yesterday JPMorgan Chase became an admitted felon. That action for foreign currency rigging came less than two years after the bank was charged with two felony counts and given a deferred prosecution agreement for aiding and abetting Bernie Madoff in the largest Ponzi fraud in history. The felony counts came amid three years of non-stop charges against JPMorgan Chase for unthinkable frauds: from rigging electric markets to ripping off veterans to charging credit card customers for fictitious credit monitoring and manipulating the Libor interest rate benchmark.

Against this backdrop of a serial crime spree on the part of employees on multiple continents and coast to coast in the United States, JPMorgan released a statement yesterday regarding the bank pleading guilty to a felony charge for engaging in the rigging of foreign currency trading, calling it “principally attributable to a single trader.” In the statement, Dimon says the bank has a “historically strong culture.”

Dimon is, if nothing else, a master of the grand illusion.

In 2012, when Dimon was asked about reports in the press that one of his London traders was making massive bets in derivatives, he called the matter a “tempest in a teapot.” That tempest, dubbed the London Whale scandal, cost JPMorgan Chase at least $6.2 billion in losses, over $1 billion in fines, and a scathing 306-page report from the U.S. Senate’s Permanent Subcommittee on Investigations. Senator Carl Levin, Chair of the Subcommittee at the time, said JPMorgan “piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”

Attempting to foster the illusion that there was simply one bad apple behind JPMorgan having to finally plead guilty to a felony is not only an insult to the public, it flies in the face of five regulators’ findings in the matter. JPMorgan’s involvement in the rigging of foreign currency has now been looked at by the Commodity Futures Trading Commission (CFTC), the Office of the Comptroller of the Currency (OCC), the U.S. Justice Department, the Federal Reserve, and the U.K.’s Financial Conduct Authority. Not one of these regulators alluded to the problem as being one bad apple.

The CFTC placed the blame squarely at the feet of management, writing: “This conduct occurred at various times over the course of the Relevant Period without detection by JPMC in part because of internal controls and supervisory failures at JPMC.”

Not only was the supervisor of Foreign Exchange at JPMorgan not fired, but as we reported last week, that individual, Troy Rohrbaugh, who has been head of Foreign Exchange at JPMorgan since 2005, is now serving in the dual role as Chair of the Foreign Exchange Committee at the New York Fed, helping his regulator establish best practices in foreign exchange trading.

The U.K.’s Financial Conduct Authority (FCA) detailed a wide scale breakdown of management failures and risk controls and stated that JPMorgan’s front office was actually “involved in the misconduct.” The FCA wrote:

“Pursuant to its three lines of defence model, JPMorgan’s front office had primary responsibility for identifying, assessing and managing the risks associated with its G10 spot FX trading business. The front office failed adequately to discharge these responsibilities with regard to the risks described in this Notice. The right values and culture were not sufficiently embedded in JPMorgan’s G10 spot FX trading business, which resulted in it acting in JPMorgan’s own interests as described in this Notice, without proper regard for the interests of its clients, other market participants or the wider UK financial system. The lack of proper controls by JPMorgan over the activities of its G10 spot FX traders meant that misconduct went undetected for a number of years. Certain of those responsible for managing front office matters were aware of and/or at times involved in the misconduct.”

According to the U.S. Justice Department’s plea agreement with JPMorgan Chase, handed down yesterday, both “currency traders” and “sales staff” were involved in widespread wrongdoing. The plea agreement, to which JPMorgan consented, states:

“In addition to its participation in a conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers for, the EUR/USD currency pair exchanged in the FX Spot Market, the defendant, through its currency traders and sales staff, also engaged in other currency trading and sales practices in conducting FX Spot Market transactions with customers via telephone, email, and/or electronic chat, to wit: (i) intentionally working 17 customers’ limit orders one or more levels, or “pips,” away from the price confirmed with the customer; (ii) including sales markup, through the use of live hand signals or undisclosed prior internal arrangements or communications, to prices given to customers that communicated with sales staff on open phone lines; (iii) accepting limit orders from customers and then informing those customers that their orders could not be filled, in whole or in part, when in fact the defendant was able to fill the order but decided not to do so because the defendant expected it would be more profitable not to do so; and (iv) disclosing non-public information regarding the identity and trading activity of the defendant’s customers to other banks or other market participants, in order to generate revenue for the defendant at the expense of its customers.”

As of December 31, 2014, the commercial bank of JPMorgan Chase held $1.4 trillion in domestic and foreign deposits and $2.074 trillion in assets, making it the largest bank by assets in the United States. On February 12, the U.S. Treasury’s Office of Financial Research (OFR), released a study of the banks that posed the greatest systemic risk to the global financial system. Using systemic risk scores that evaluated size, interconnectedness, substitutability, complexity, and cross-jurisdictional activities, JPMorgan came in with the most dangerous score of 5.05 for U.S. mega banks. And here’s the scariest part of the OFR study: it didn’t evaluate criminal recidivist behavior. What would JPMorgan’s score have been if that aspect had been factored in?

Yesterday’s sobering actions by the U.S. Justice Department will be meaningless unless Congress wakes up and breaks up Wall Street’s behemoth banks by restoring the Glass-Steagall Act.

Banking Fraternity Felons

By Pam Martens and Russ Martens: May 20, 2015

Banking Fraternity FelonsThe U.S. Department of Justice held a press conference in Washington, D.C. this morning at 10 a.m. to announce that two of the largest banks in the United States, Citicorp, a unit of Citigroup, and JPMorgan Chase & Co., would plead guilty to felony charges in connection with the rigging of foreign currency trading. Two foreign banks, Barclays PLC and the Royal Bank of Scotland (RBS), also pleaded guilty to felony charges in the same matter. A fifth bank, UBS, pled guilty to rigging the interest rate benchmark known as Libor.

Today’s felony charges fall just short of the 19th anniversary of the U.S. Justice Department charging almost every major firm on Wall Street, including JPMorgan, the predecessors of Citigroup, and UBS with fixing prices on the Nasdaq stock market. No criminal charges were brought. That now looks like a serious mistake.

The Justice Department today imposed the following fines:

Citicorp, which was involved from as early as December 2007 until at least January 2013, was fined $925 million;

Barclays, which was involved from as early as December 2007 until July 2011, and then from December 2011 until August 2012, will pay a fine of $650 million;

JPMorgan, which was involved from at least as early as July 2010 until January 2013, has agreed to pay a fine of $550 million;

RBS, which was involved from at least as early as December 2007 until at least April 2010, will pay a fine of $395 million.

Barclays was found to have violated its June 2012 non-prosecution agreement involving Libor and required to pay an additional $60 million criminal penalty. UBS was also found to have violated its December 2012 non-prosecution agreement and was required to plead guilty to a one-count felony charge of wire fraud in that matter and required to pay a criminal penalty of $203 million.

All five banks were put on a 3-year probation which will be overseen by a Federal Court and ordered to cease all criminal activity.

Other regulators imposed additional fines, bringing the total today to $5.4 billion.

Related Documents Released by the Justice Department:

Download Barclays Final Plea Agreement.pdf

Download Citi Plea Agreement

Download JPM Plea Agreement.pdf

Download RBS Plea Agreement.pdf

Download UBS Plea Agreement.pdf