By Pam Martens: November 18, 2014 For at least the past 20 years, the Government Accountability Office (GAO) has been telling the Securities and Exchange Commission to clean up its act when it comes to the proper handling, collection, disbursement and financial reporting of penalties and disgorgements it is supposed to be collecting from violators of securities laws. Yesterday, the GAO filed yet another report on the subject, this time finding that “during our fiscal year 2014 audit, we identified continuing and new deficiencies in SEC’s internal control over disgorgement and penalty transactions that constituted a significant deficiency in SEC’s internal control over financial reporting.” Unfortunately, the GAO’s own opaque presentation on this subject leaves the public in the dark about just how bad the situation is at the SEC. As part of the SEC’s enforcement responsibilities, ostensibly to catch and punish securities law violators, it is also frequently assigned … Continue reading →

By Pam Martens: November 17, 2014 It’s called the Dracula fraud case against JPMorgan because no matter how many times JPMorgan’s lawyers try to kill it, the case rises up from the dead to find new life. Now, with former JPMorgan insider Alayne Fleischmann revealed by Matt Taibbi in Rolling Stone as someone who has critical firsthand evidence that a jury needs to hear in this case, a potential $1.6 billion jury award against JPMorgan is looking winnable – if the case can ever get in front of a jury. The lawsuit was filed by affiliates of the Belgian-French bank Dexia, which received multiple bailouts by the two governments during the financial crisis. Dexia’s original complaint that was filed on January 19, 2012 in New York State Supreme Court, alleged widespread fraud in the sale of Residential Mortgage Backed Securities (RMBS) by JPMorgan, its direct affiliates and two firms it … Continue reading →

By Pam Martens: November 13, 2014 On November 6, Bloomberg News reporter, Matthew Boesler, set off a flurry of comments with an article headlined: “Fed Concern With Repeat of 1937 Blunder Echoed by Markets.” The reference to 1937 relates to the fact that as the U.S. economy was showing signs of improvement from the conditions of the Great Depression of the 1930s, the Federal government and the Federal Reserve overreacted to inflationary concerns with contractive measures in 1937, sending the economy into a sharp slump in late 1937 and 1938. The chief worrier at the Fed about it making the same mistake today is Charles Evans, President of the Federal Reserve Bank of Chicago. Evans’ background is that of a long-term researcher. Prior to becoming President of the Chicago Fed, he served as its Director of Research, and earlier, its Senior Economist in charge of the Macroeconomics Research Group. In … Continue reading →

By Pam Martens: November 12, 2014 Two U.S. and three foreign banks have been charged with rigging the foreign exchange market where $5.3 trillion changes hands daily and have settled civil claims for $3.3 billion. (The charges are very similar to those in the rigging of the international interest rate benchmark known as Libor.) Additional charges and settlements by other regulators are expected to follow before the end of the year. The U.S.-based Commodity Futures Trading Commission (CFTC) levied a total of over $1.4 billion in fines against JPMorgan, Citigroup, UBS, HSBC and RBS. The same five banks were fined $1.7 billion by the U.K.’s Financial Conduct Authority (FCA). Swiss regulator FINMA charged only UBS with a fine of $139 million and included rigging of precious metals trading along with rigging foreign exchange. While the details that were released are skimpy and the Financial Conduct Authority is already being criticized … Continue reading →

By Pam Martens: November 11, 2014 Apparently, not one of the global regulators pushing the latest plan to prevent another taxpayer bailout of the over-leveraged, globe-trotting banking behemoths that crashed the financial system in 2008 ever worked a day on Wall Street or sat behind a trading terminal during the crisis. If one had, he would have exposed this plan immediately as an exercise in illusory thinking – effectively, the same framework on which global banking currently exists. Yesterday, the Financial Stability Board, established in 2009 to coordinate financial regulatory proposals on behalf of the Group of 20 major economies (G-20), released a proposal that is being promoted as a means of ending taxpayer bailouts of too-big-to-fail banks. These 30 banks are known as G-SIBs, or Global Systemically Important Banks. But the proposal does nothing to address the “systemic” danger of these banks, thus the proposal is nothing more than … Continue reading →

By Pam Martens: November 10, 2014 Two years after attorney Alayne Fleischmann was downsized out of her job as a Transaction Manager at JPMorgan Chase, her boss, William Buell, was hauled before the Financial Crisis Inquiry Commission (FCIC) for interrogation on just how culpable the bank was in packaging and selling toxic mortgage backed securities. Buell is the same man that Fleischmann exposed in a Rolling Stone feature article by Matt Taibbi last week as the recipient of her detailed, internal letter in early 2007, warning him that the mortgage pools her group was reviewing contained poor quality mortgage loans unfit for purchase or securitization. Despite the written warning, Fleischmann would later learn that JPMorgan, in a drive to boost market share and profits, went forward and purchased the pool, securitized many of the loans, then sold them to unsuspecting investors. But when Buell was asked directly during his questioning … Continue reading →

By Pam Martens: November 6, 2014  Remember the Senate hearing on June 18 when Senator Elizabeth Warren talked about the high frequency trading firm, Virtu, reporting in its IPO prospectus that it had been trading for 1,238 days and made money on 1,237 of those days. Last week three futures traders told a Federal court in Chicago that it’s not just the high frequency trading firms that are reaping a windfall but the exchanges who are engaged in a conspiracy with them to create “guaranteed winners and guaranteed losers.” The original lawsuit was filed on April 11 against the CME Group and four of its officials in the U.S. District Court for the Northern District of Illinois. The CME Group owns the Chicago Mercantile Exchange (CME), the largest futures exchange in the world. Terrence (Terry) Duffy, the Executive Chairman and President of the CME Group, a man who has testified … Continue reading →

By Pam Martens and Russ Martens: November 5, 2014 On January 6 of this year, JPMorgan Chase entered into a two-year probation agreement known as a “deferred prosecution” agreement with the U.S. Justice Department. The deal allowed JPMorgan to avoid prosecution for two felony counts related to its failures in serving as Bernard Madoff’s bank as tens of billions of dollars were laundered between accounts while it made none of the required suspicious activity reports – except one to the United Kingdom. The deferred prosecution agreement, signed on January 6, 2014, required that for the next two years, JPMorgan had to bring to the attention of Federal prosecutors any knowledge of wrongdoing inside the bank, cooperate fully and in good faith, and agree to “commit no crimes under the federal laws of the United States subsequent to the execution of this agreement…” If JPMorgan broke its end of the bargain, … Continue reading →

By Pam Martens and Russ Martens: November 4, 2014  Economist and New York Times columnist Paul Krugman has been showering praise on the current administration for shrinking the budget deficit while scolding the press for failure to adequately report it: “where are the front-page news reports?” he writes on October 9. The media has been duly pressed into action with Bloomberg News reporting a big headline today on its digital front page: “U.S. Deficit Decline to 2.8% of GDP Is Unprecedented Turn.” But here’s a missing detail that carries a dark side: Over the past six years, $400 billion of deficit reduction has had nothing to do with Congress or the President and everything to do with those savvy traders sitting behind their Bloomberg terminals with their speed dials to Wall Street at the New York Fed. Like every other regional Federal Reserve Bank, the New York Fed, by law, … Continue reading →

By Pam Martens and Russ Martens: November 3, 2014 The Federal Reserve Board of Governors in Washington, D.C., which functions as the central bank of the United States, has farmed out much of its Quantitative Easing (QE) programs to the Federal Reserve Bank of New York since the financial crisis of 2008. The Federal Reserve Bank of New York has, in turn, contractually farmed out a hefty chunk of the logistics of that work to JPMorgan Chase in the last six years. Sitting quietly on the Federal Reserve Bank of New York’s web site is a vendor agreement and other documents indicating that JPMorgan Chase holds all of the Mortgage Backed Securities (MBS) that the New York Fed has purchased under its various Quantitative Easing programs. As of last Wednesday, that figure was $1.7 trillion dollars. (The New York Fed has confirmed that JPMorgan is custodian for these assets.) In … Continue reading →