JPMorgan Chase admitted wrongdoing and was fined roughly $920 million
Thursday for its "London whale" trading debacle as the U.S.-based
global bank settled investigations by four oversight agencies.
The
settlements stopped short of assessing blame against any top executives
at the nation's largest bank — and JPMorgan still faces at least two
continuing investigations.
The rare admission of fault and one of
the largest bank fines in history focus on an early 2012 episode in
which the bank's London-based traders amassed large and risky investment
positions in an effort to avoid losses in a credit portfolio. The
positions were so big they drew attention from other firms' traders, who
dubbed Bruno Iksil, the chief JPMorgan trader involved, "the London
whale."
The bank initially asserted that the trades, which
ultimately racked up an estimated $6.2 billion in losses, had been a
hedge against risk. But the strategy instead morphed into proprietary
trading for the bank's benefit — partly funded with federally insured
deposits.
In trying to move past the incident, JPMorgan publicly
acknowledged that it had violated federal securities laws and conceded
that the losses occurred against a backdrop of deficient accounting
controls. The bank also acknowledged that senior management knew that
London traders were using a valuation system designed to minimize the
size of the losses.
The settlements require improvements in internal oversight by the
bank's board of directors, steps to remedy "unsafe and unsound" banking
practices, plus upgraded audit functions.
"JPMorgan failed to keep
watch over its traders as they overvalued a very complex portfolio to
hide massive losses,"said George Canellos, co-director of the
enforcement division at the Securities and Exchange Commission, one of
the regulators involved in the settlements. "While grappling with how to
fix its internal control breakdowns, JPMorgan's senior management broke
a cardinal rule of corporate governance and deprived its board of
critical information it needed to fully assess the company's problems
and determine whether accurate and reliable information was being
disclosed to investors and regulators."
Investigators echoed a
scathing Senate report that earlier this year concluded JPMorgan had
kept bank regulators in the dark about the losses by withholding
important information.
"Bank management must also ensure open and
effective communication with supervisors so that we can effectively do
our jobs," said Comptroller of the Currency Thomas Curry in a statement
issued with his agency's settlement filing. "Anything less is
unacceptable and will not be tolerated."
The Federal Reserve, and Financial Conduct Authority in Great Britain also settled their investigations with the bank.
"We
have accepted responsibility and acknowledged our mistakes from the
start, and we have learned from them and worked to fix them," said
JPMorgan CEO Jamie Dimon in a statement issued by the bank. "We will
continue to strive towards being considered the best bank — across all
measures — not only by our shareholders and customers, but also by our
regulators."
In an unrelated issue, the Comptroller of the
Currency announced enforcement actions against the bank Thursday for
unfair billing practices related to identity-theft protection and for
problems in connection with efforts to ensure that service members
receive credit protection for their non-home loans. The bank said it had
moved to redesign its practices.
The Consumer Financial
Protection Bureau also ordered JPMorgan and its consumer and commercial
division to pay $309 million in refunds for improper credit card
practices. The bank said it had already issued credits or refunds to
customers who were affected.
JPMorgan shares closed down 1.2% at $52.75 in Thursday trading.
Despite
the new London whale settlements, JPMorgan still faces a criminal
investigation of the trading episode by federal prosecutors and a
separate civil probe by the Commodity Futures Trading Commission.
Iksil,
who no longer works for the bank, is cooperating with the criminal
investigation by the Manhattan U.S. Attorney's office in New York. In a
federal affidavit filed last month, two other former JPMorgan Chase
employees directly involved in the London whale trades were charged with
conspiracy, falsifying books and records, wire fraud and making false
filings with the SEC.
The two, Javier Martin-Artajo and Julien
Grout, were formally indicted Monday on charges they manipulated and
inflated the value of the trading positions to cover up the true size of
the deepening losses.
London-based lawyers for Martin-Artajo have
said they were confident he would be cleared of any wrongdoing. New
York defense attorney Edward Little this week said Grout "was a junior
trader's assistant acting under the direct instructions of his managers
and has been unjustly used as a pawn in the government's attempt to
settle its highly politicized case against JPMorgan Chase."
In
announcing the charges against the two traders, Manhattan U.S. Attorney
Preet Bharara signaled that senior bank officials had been aware of what
the London traders had been doing. While declining to discuss the
continuing investigation, he said, "They definitely knew they (bank
traders) were cooking the books."
Sen. Carl Levin, D.Mich., whose
Senate subcommittee issued the report critical of JPMorgan, said the
issue of misinforming investors and the public was "conspicuously
absent" from the SEC's part of the settlement.
John Coffee, a
securities law expert at Columbia University Law School in New York,
questioned why regulators imposed fines that would ultimately be borne
by JPMorgan shareholders without finding any top bank officials at
fault. "It is not a triumph without being able to identify who is
responsible above the level of low-ranking officers," Coffee said.
Dan
Marchon, a senior equity research associate at Raymond James & Co.,
said he was not surprised by the relatively muted stock market reaction
to the settlement because JPMorgan CFO Marianne Lake recently disclosed
a more than $1.5 billion third-quarter increase in the bank's reserves
for litigation costs.
Marchon said he did "not necessarily expect
to see a dramatic move," in the price of JPMorgan shares unless
something unexpected arose from the settlement.
usatoday.com 19 Sep 2013
The current banking system is a fraudulent based system, which apparently is legal, to which the 'authorities turn a blind eye.
This current so called fine in the large scheme of things is irrelevant, as the monies will be recuperated from the customers in other ways
JP Morgan was just one of the banks that funded Hitler Nazi party, and continued to do so.
JP Morgan are part of the criminal banking elite.
