By Pam Martens: September 17, 2013

Since last evening, corporate media has been in a fierce competition to spin another toothless settlement on Wall Street as a win for the new tough cop on the beat, Securities and Exchange Commission Chair, Mary Jo White. It takes quite the creative imagination to frame this as anything more than the continuance of Wall Street’s business model of looting billions and paying back millions. Crime is still the best profit center Wall Street has going for it — having thoroughly dissuaded its customers against trusting its advice on investments.

According to leaks, the settlement tab to JPMorgan Chase to make most of its civil regulatory problems disappear regarding the London Whale trades will be $700 to $800 million. (There still may be open criminal probes by the U.S. Justice Department and FBI. The Commodity Futures Trading Commission may bring its own civil enforcement action.) Using the Washington Post’s projection of $750 million, that represents 3.5 percent of the global banking behemoth’s profits from last year. A drop in the bucket.

The Washington Post attempts to salvage the pittance with this artful phrase: “The bank may make a rare declaration of wrongdoing in its agreement with the Securities and Exchange Commission, which recently introduced a policy demanding admissions of misconduct in certain types of civil settlements, according to a person familiar with the negotiations.”

The Wall Street Journal spins it like this: “An acknowledgment of wrongdoing by the company in the London whale matter would be a high-profile win for the Securities and Exchange Commission, which under Chairman Mary Jo White has begun pushing for settlements that include such admissions.” The SEC has no criminal powers; only civil.

“Rare declaration of wrongdoing,” “high profile win”? Or first class sellout?

Both White and the new co-director of SEC enforcement that she named upon securing her confirmation, Andrew Ceresney, worked as lawyers for JPMorgan Chase within the past year – Ceresney as recently as four months ago. As we reported in April 23 of this year:

“Yesterday, Mary Jo White, the new Chair of the Securities and Exchange Commission, announced that a law partner from the firm she just left, Debevoise & Plimpton LLP, would become the new Co-Director of the SEC’s Division of Enforcement – the unit that decides who gets prosecuted and who gets a pass.

“In making the announcement that Andrew Ceresney of Debevoise & Plimpton will share the post with the Acting Director, George Canellos, White called Ceresney a ‘former prosecutor.’ That hardly does justice to the cozy ties between Ceresney and Wall Street. (Ceresney worked for the U.S. Attorney’s office in the Southern District of New York in a prior career but has been employed at Debevoise since 2003.)

“This time last year, Ceresney was basking in the glow of a herculean accomplishment for JPMorgan Chase, Citigroup, Wells Fargo, Bank of America and Ally. While directly employed as counsel to JPMorgan Chase, Ceresney had played a pivotal role in directing the negotiations between the U.S. Justice Department, 49 state attorneys general and an array of Federal regulators to tie up with a neat little red ribbon charges of mortgage, foreclosure and servicing fraud into the infamous National Mortgage Settlement – a deal big on promises and short on cash.”

Of course, White and Ceresney have recused themselves from the London Whale settlement negotiations, leaving George Canellos, Co-Director of Enforcement, to craft a settlement that doesn’t displease his boss or Co-Director.

News of the proposed settlement had readers at the New York Times brandishing digital pitch forks: A commenter under the name “An Observer” from Atlanta, Georgia wrote: “These articles about JPM are way too sympathetic to the bank…The losses ‘were a rare misstep,’ we are told. How can a $6 billion loss be a ‘misstep?’ The line between misdeanor (sic) and felony is usually set at just a few hundred dollars. The overall tenor of these article continues to be: ‘Poor JPM. Another hit for the good guys.’”

Another comment came from “Retired Northern CA teacher,” who wondered out loud: “For God’s sake, will somebody somewhere actually take these guys to court?”

As we have repeatedly pointed out here at Wall Street On Parade, what has been lost in the sensationalism about $6 billion in losses and traders hiding out in London (London Whale) cornering the market in a thinly traded derivatives index, and Jamie Dimon wearing Presidential cufflinks to the Senate hearings on the matter, is the core element of the crime: JPMorgan was gambling with deposits of an insured FDIC bank (Chase), ultimately backed by the U.S. taxpayer, when it lost $6.2 billion dollars – a fact conceded to by JPMorgan. It was not, as most people continue to assume, gambling with corporate funds.

Apparently, screaming this from the rooftops will do no good in getting corporate media to properly frame this crime. It’s now all about making Mary Jo White look like she’s a real cop on the beat who has somehow elevated the bar by getting Wall Street firms to admit to civil wrongdoing while executives avoid criminal prosecution.

Two traders involved in the London Whale matter have been criminally indicted. But the U.S. Senate’s Permanent Subcommittee on Investigations’ report on the London Whale matter found that both Jamie Dimon, Chairman and CEO of JPMorgan, and Douglas Braunstein, CFO, “misinformed investors, regulators, and the public about the nature, activities, and riskiness of the CIO’s [Chief Investment Office’s] credit derivatives during the first quarter of 2012.”

As just two instances out of numerous ones cited in the report:

“In the April 13 earnings call, in response to a question, Mr. Dimon dismissed media reports about the SCP [Synthetic Credit Portfolio] as a ‘complete tempest in a teapot.’  While he later apologized for that comment, his judgment likely was of importance to investors in the immediate aftermath of those media reports.  The evidence also indicates that, when he made that statement, Mr. Dimon was already in possession of information about the SCP’s complex and sizeable portfolio, its sustained losses for three straight months, the exponential increase in those losses during March, and the difficulty of exiting the SCP’s positions…

“Mr. Braunstein stated on the April 13 earnings call that ‘all of those positions are put on pursuant to the risk management at the firm-wide level.’  The evidence indicates, however, that in 2012, JPMorgan Chase’s firmwide risk managers knew little about the SCP and had no role in putting on its positions.  JPMorgan Chase’s Chief Risk Officer John Hogan told the Subcommittee, for example, that, prior to the April press reports, he had been unaware of the size and nature of the SCP, much less its mounting losses. Virtually no evidence indicates that he, his predecessor, or any other firmwide risk manager played any role in designing or approving the SCP positions acquired in 2012, until well after the April 13 earnings call when the bank’s risk managers effectively took over management of the SCP.  In addition, Mr. Braunstein’s statement omitted any mention of the across-the-board risk limit breaches triggered by the SCP during the first quarter of 2012, even though those breaches would likely have been of interest to investors.”

As long as the Obama administration continues to put highly conflicted personnel in charge of Wall Street’s regulatory bodies, the public should refuse to play in this rigged casino.