By Pam Martens and Russ Martens: October 14, 2021 ~
Yesterday was the last day that Randal Quarles served in the post as Vice Chair for Supervision at the Federal Reserve. Senator Sherrod Brown, the Chair of the Senate Banking Committee that oversees the Federal Reserve, used the occasion to send a scorching letter to Fed Chair Jerome Powell assessing Quarles’ performance in the job, which began on October 13, 2017. Brown wrote:
“When Vice Chair Quarles was confirmed to his position, banking lobbyists cheered. Not only did he immediately set out a plan to shift post-crisis rules to benefitting industry interests over protecting working families, he dutifully continued his deregulatory efforts even as the economy was shaken by a global pandemic. I am deeply concerned about these efforts during a global economic crisis.”
But it’s not just deregulation that has been a problem with Quarles and Powell at the helm of the Fed. The mega banks that Quarles was supposed to be supervising have grown exponentially more corrupt under this Vice Chair for Supervision.
On September 16, 2019, the U.S. Department of Justice brought racketeering charges against three precious metals traders at JPMorgan Chase. It was the first time that Wall Street veterans could remember that traders of a major U.S. bank were charged under the RICO statute.
One year later, on September 29, 2020, JPMorgan Chase agreed to pay criminal fines and admit to two felony counts of wire fraud for manipulating (spoofing) trading in the precious metals and U.S. Treasury markets. The charging document indicated that traders had engaged in “tens of thousands of instances of unlawful trading in gold, silver, platinum, and palladium…as well as thousands of instances of unlawful trading in U.S. Treasury futures contracts and in U.S. Treasury notes and bonds….”
Those additional two felony counts brought JPMorgan Chase’s felony count to a total of five in the span of six years – all occurring under the tenure of Chairman and CEO, Jamie Dimon. Should the Federal Reserve have demanded that Dimon be removed from a leadership role at the bank?
Not only should Quarles have demanded the removal of Dimon in 2020 but the Federal Reserve should have demanded his removal on March 15, 2013 when the U.S. Senate’s Permanent Subcommittee on Investigations released a 300-page report on how Dimon had presided over the “London Whale” scandal. The bank had used more than $100 billion of depositors’ money at its federally-insured bank to make wild gambles in derivatives in London, losing $6.2 billion along the way.
On January 14, 2013, the Office of the Comptroller of the Currency (OCC) issued a Cease and Desist order in response to the London Whale scandal at JPMorgan Chase. The OCC wrote that its findings “establish that the Bank has deficiencies in its internal controls and has engaged in unsafe or unsound banking practices….”
JPMorgan Chase is the largest federally-insured bank in the United States with more than $2 trillion in deposits. It is also the only U.S. bank with five felony counts; the only U.S. bank to have gambled in derivatives with depositors’ money and lost $6.2 billion; the only bank to have its precious metals trading desk labeled a racketeering enterprise by the U.S. Department of Justice; and the only U.S. bank that has allowed the same Chairman and CEO to continue to preside over this unprecedented crime spree. (See JPMorgan Chase’s rap sheet here.)
Clearly, the simple fact that Dimon and his crony Board of Directors are still in place at this bank is an indictment against both Quarles and Powell.
Powell doesn’t seem to have a problem with Dimon. At a February 11, 2020 House Financial Services Committee hearing, Congresswoman Katie Porter held up a photo of Fed Chair Powell in black tie outside the mansion of billionaire Jeff Bezos, then CEO of Amazon. Porter said this:
“Can you imagine how attending a lavish party at Jeff Bezos’ $23 million home, along with Jared and Ivanka and the CEO of JPMorgan Chase, Jamie Dimon, might give off the sense to the public that you are not in fact immune from external pressures.”
Both Quarles and Powell got rich at the Carlyle Group, a private equity fund with a string of bankruptcies and job losses.
Both Quarles and Powell have millions of dollars managed by BlackRock in its iShares Exchange Traded Funds, according to their financial disclosure reports. But that conflict did not stop the Fed from giving a no-bid contract to BlackRock to manage its emergency corporate bond buying facilities, in which BlackRock was allowed to buy up its own ETFs. (See our report: Fed Chair Powell Had 4 Private Phone Calls with BlackRock’s CEO Since March as BlackRock Manages Upwards of $25 Million of Powell’s Personal Money and Lands 3 No-Bid Deals with the Fed.)
Unfortunately, the suggestion in Senator Brown’s letter that things will get better when President Biden appoints new members to the Board of Governors of the Federal Reserve is a pipe dream. Nothing is going to get materially better in the banking system of the United States until the Glass-Steagall Act is restored, making federally-insured banks completely separate from the crony trading casino on Wall Street that is variously shilled for, and bailed out by, the Fed. And nothing is going to get better in terms of bank supervision until the Fed is stripped of its bank supervisory powers and focuses on restoring its credibility as the central bank of the United States.