By Pam Martens: October 22, 2013
It’s difficult to take a major newspaper seriously when its editorial page lives in the land of Oz. Reading “The Morgan Shakedown” yesterday in the editorial pages of the Wall Street Journal is the latest reminder of just how detached from reality these opinion writers are. The editorial attempted revisionist history for JPMorgan by misinforming the public that “Federal law enforcers are confiscating roughly half of a company’s annual earnings for no other reason than because they can and because they want to appease their left-wing populist allies.”
It’s pretty hard for one editorial to get so many facts and the big picture so horribly wrong. First, left-wing populists will be happy with nothing less than Jamie Dimon losing his dapper worsted wools and presidential cufflinks for an orange jumpsuit. Second, JPMorgan’s earnings last year were $21.3 billion so a proposed “confiscation” of $13 billion is significantly more than (not “roughly half of”) the company’s earnings for last year. The Federal government is not doing this “for no other reason than because they can.” They’re doing it because JPMorgan is both a serial miscreant and a too-big-to-fail bank that refuses to change its jaded ways. The only language this bank understands is the pain of losing profits which translates into the pain of losing fat banker bonuses.
But not only has the Wall Street Journal’s editorial page become fact-challenged, it misses the big picture completely. That is, Jamie Dimon has no business dialing up the U.S. Attorney General Eric Holder and personally inserting himself into negotiating a deal that went from a reported $1 to $3 billion settlement to a $13 billion settlement.
Let me set the stage. On October 23, 2002, Charlie Gasparino, writing then for the Wall Street Journal, reported the following: “Attorney General Eliot Spitzer has informed Citigroup lawyers that the interests of the firm and Mr. Weill may have diverged in the investigation, the people say. The move signals that his office could be considering legal action against Mr. Weill personally, in addition to Citigroup, the people say.”
That episode involved the tainted stock research spewing out of Citigroup via its tainted telecommunications analyst, Jack Grubman. At the time, Spitzer was investigating exactly how much “nudging” Weill was doing to get Grubman to change his rating on AT&T from a hold to a strong buy, just before the company was planning a big underwriting of stock in its wireless unit. Weill’s Salomon Smith Barney won a chunk of that deal, earning $45 million. A few months after the deal, Grubman again downgraded the stock according to Gasparino’s report.
It would later emerge that Grubman bragged in an email that Weill had gotten Grubman’s twin toddlers into the prestigious 92nd Street Y nursery school in exchange for an upgrade on AT&T. Weill later admitted that the Citigroup Foundation gave a $1 million donation to the 92nd Street Y and, indeed, Grubman’s toddlers were admitted. Grubman later recounted his email, calling it an “invented” story.
Against this background, it would be well to remember that there remain open criminal investigations against JPMorgan, potentially involving mortgage deals, Libor, the London Whale and others. No one but those intimately involved in the investigations know just how far up the chain of command decisions on these tainted dealings travelled. Was there obstruction by top management? Are there incriminating emails? Were books and records falsified; was the safety and soundness of an insured depository bank put at grave risk? Was the investing public lied to?
Until there is a full accounting of Jamie Dimon’s role in each of the matters under investigation, the Wall Street Journal’s editorial page should be shaming Dimon for inserting himself into the middle of the negotiations rather than leaving the work to an arm’s length legal team working on behalf of JPMorgan’s shareholders. Calling the Justice Department settlement a “shakedown” before the final terms are even known is irresponsible and a disservice to the ethical news reporting staff at the Journal. Failing to see the inappropriateness of Dimon negotiating a $13 billion deal when he may not be fully in the clear of other Justice Department investigations is willful blindness.