Category Archives: Uncategorized

By Pam Martens: October 30, 2013 The trial of five former employees of Bernard Madoff’s Ponzi operation is currently playing out in Manhattan as the U.S. Justice Department weighs bringing charges against JPMorgan Chase, where Madoff had his primary business banking account, for ignoring flashing red lights that a fraud was taking place. According to lawsuits filed by Irving Picard, the Trustee handling the Madoff recovery fund, JPMorgan knew that Madoff was supposed to be engaged in managing stock portfolios for hundreds of clients. JPMorgan even created structured investments that allowed investors to make leveraged bets on the returns achieved by Madoff. But the Madoff business bank account that JPMorgan Chase oversaw, showed billions of dollars in cash being wired in and out but no payments ever going to any party engaged in processing or clearing a stock trade. Under Wall Street’s Know Your Customer Rule, the activity in the … Continue reading →

By Pam Martens: October 29, 2013 There are five words that neatly sum up JPMorgan Chase’s dilemma in its efforts to avoid a deferred prosecution agreement or a more serious outcome over its handling of Bernard Madoff’s business account for more than two decades: the “Know Your Customer Rule” and recidivism. The Know Your Customer Rule is ingrained in every banker and broker on Wall Street by the legions of compliance officers who send out terrifying memorandums depicting recent examples in the news or the courts of what happens to unwitting financial reps who didn’t know their customers. The memos are backed up with equally terrifying compliance meetings and compliance handbooks that one must acknowledge receiving in writing. Some firms now require brokers to take computer-based continuing education classes which further enshrine the mandates of the Know Your Customer Rule. The object of this rule is to make the banker … Continue reading →

By Pam Martens: October 28, 2013 Last week the business press reported that the U.S. Department of Justice may assert charges against JPMorgan Chase for its role in perpetuating the Bernard Madoff Ponzi scheme which defrauded investors out of $17 billion in actual funds and $64 billion in paper losses based on the falsified values shown on client statements. Unnamed sources said the Justice Department may agree to a deferred prosecution agreement in exchange for an outside monitor or, in the alternative, charge JPMorgan’s banking division with violations of the Bank Secrecy Act for failing to report its Madoff suspicions to Federal authorities. Interestingly, JPMorgan did report its suspicions to a government regulator – in the United Kingdom, not in the U.S. Such a development would also raise serious new questions about how the Board of Trustees of NYU handles conflicts of interest. The Board is already under withering criticism … Continue reading →

By Pam Martens: October 24, 2013 When Martin Sorrell speaks about America’s brand, important people listen. Sorrell is CEO of the monster advertising and marketing company, WPP, a brand unremarkable to the average worker around the world. Sorrell took recognized advertising brands like J. Walter Thompson, Ogilvy & Mather, Young & Rubicam, and Grey, bundled them with mega public relations firms like Hill & Knowlton and Burson-Marsteller to sit atop the image makers of the new world order. WPP – the parent brand – stands for Wire and Plastics Products Plc, a name which likely 9 out of 10 people around the world could not identify. But don’t question the brand masters of the universe. Earlier this month, Sorrell was quoted in the U.K.’s Telegraph newspaper on the potential for a shutdown of the U.S. government. Sorrell said, “If you were running a company like this, and stopped paying your … Continue reading →

By Pam Martens: October 23, 2013 Yesterday, the Bureau of Labor Statistics reported a very weak jobs number: just 148,000 new nonfarm jobs had been added by employers in September. To the rational mind, an appropriate reaction in the stock market would have been to sell off on the basis that the economy remains weak. Instead, the Standard and Poor’s 500 hit a new record, closing at an all time high of 1,754.67. The general thesis to explain this reaction is that today’s Wall Street is running a racket similar to Lance Armstrong. It’s on a heavy doping regimen in the form of the $85 billion a month that the Federal Reserve is funneling into the markets through the purchase from Wall Street of U.S. Treasurys and mortgage-backed securities. When the Fed buys those instruments, it forces $85 billion of cash each month into the hands of traders to deploy … Continue reading →

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 … Continue reading →

By Pam Martens: October 21, 2013 As the U.S. sinks to a rank of 19 on Transparency International’s list of the least corrupt countries, President Obama has issued a proclamation declaring this to be the week that we come together as a Nation to reflect on our moral values.  The President’s Proclamation reads in part: “…During National Character Counts Week, we reflect on the ways we support one another, the ways we come together and seek common ground, and the lessons we teach our children about what citizenship means in the United States of America…The children we raise today are surrounded by proud examples of integrity, and moral courage, but it is our task as parents, community members, and leaders to teach them not only the skills they need to succeed, but also the values that keep our country strong…” Yes, our children are surrounded by wonderful, wholesome role models … Continue reading →

By Pam Martens: October 18, 2013 The Wall Street Journal is running a titillating headline this morning, “Prosecutors and SAC Head Toward a Possible Record-Breaking Settlement.” CounterPunch is running my cheerless headline this morning, “It’s Now Official: New York is Drowning in Bribes and Corruption.” There’s an intellectual junction between the two stories. The Obama Justice Department, ensconced with partners from the law firm, Covington & Burling, which helped Big Tobacco hide the dangers of smoking for decades, believes in this formula: money = justice. Thus, SAC Capital Advisors LP, the hedge fund charged with securities fraud and encouraging a culture of insider trading, is rumored to be about to offer up more than $1 billion to settle its charges. That follows on the heels of the $1 billion and counting that JPMorgan Chase has recently paid to settle a mountain of charges of wrongdoing. There’s said to be many … Continue reading →

By Pam Martens: October 17, 2013 Five employees of Bernard Madoff are currently on trial for assisting in the perpetration of the largest Ponzi scheme in history; a multi-decade fraud that has resulted in suicides, destroyed retirement dreams, and increased skepticism about the thoroughness of regulators when a Wall Street crony is involved. Madoff was formerly Chairman of the Nasdaq stock market. Both Madoff, and his brother, Peter, who worked together for more than 40 years, are serving prison terms. Two of those currently on trial are Jerome O’Hara and George Perez, former computer programmers who worked at the firm from the early 90s. Both the Securities and Exchange Commission and the U.S. Attorney’s office describe in their respective complaints the intricate level of programming that O’Hara and Perez had to perform to keep the fraud alive. That included programming to generate highly sophisticated account statements, showing stock and option … Continue reading →

By Pam Martens: October 16, 2013 The People’s House, the U.S. House of Representatives, is now the Obstructionists’ House. Many have forgotten whom and what they represent – the American people and the interests of the United States. As major financial institutions dump more and more U.S. Treasury bills, once considered the absolute bedrock of safety, the damage the so-called conservatives are doing to confidence in the U.S. is growing exponentially daily. Yesterday, Fitch Ratings placed the United States sovereign debt on Ratings Watch Negative, meaning it is contemplating a credit downgrade from its current AAA rating on U.S. debt. In 2011, when Congress showed similar dysfunction in raising the debt ceiling, Standard & Poor’s downgraded U.S. debt from its AAA rating to AA+. A country lacking an unblemished AAA credit pays more in interest when it brings its debt to market. And market participants remember which countries have always had … Continue reading →