After last week -- when JP Morgan Chase settled charges by the SEC that it engaged in rigged bidding -- its CEO Jamie Dimon has even more explaining to do.
Dimon has been famously complaining for the past two years about anti-Wall Street rhetoric that has unfairly branded all banks as greedy and corrupt. "It's unfair to talk about us as one," he said in 2009. "Not every company was responsible." Dimon has repeatedly said or implied that JP Morgan is one of the good guys and shouldn't be lumped in with the likes of Lehman Brothers or AIG.
But the facts never quite supported Dimon's noble vision of JP Morgan, and those facts have become ever more damming in recent weeks, as I've described here earlier. In late June, JP Morgan agreed to pay $153.6 million to settle charges that it misled investors about a financial product stuffed with toxic mortgage-backed securities -- the exact sort of hanky panky that helped blow up the economy.
In the case settled last week, the SEC charged the JP Morgan's securities unit, JPMS, with "fraudulently rigging at least 93 municipal bond reinvestment transactions in 31 states, generating millions of dollars in ill-gotten gains."
According to the suit, JP Morgan effectively got local governments to pay higher higher prices for certain securities and pocketed the extra profits -- yet another example of Wall Street bankers directly siphoning money away from taxpayers.
The SEC alleges that from 1997 through 2005, JPMS’s fraudulent practices, misrepresentations and omissions undermined the competitive bidding process, affected the prices that municipalities paid for reinvestment products, and deprived certain municipalities of a conclusive presumption that the reinvestment instruments had been purchased at fair market value. JPMS’s fraudulent conduct also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted.
All of this is illegal, of course, but guess what: Not a single individual executive has been charged with any crime, or even named, and JP Morgan didn't explicitly acknowledge wrongdoing in agreeing to pay $228 million to settle the SEC's charges.
Crimes occurred -- big enough crimes to warrant nearly a quarter billion dollar penalty -- but apparently no one actually committed those crimes.
None of this is very surprising. The government routinely settles serious cases of fraud or corruption with large corporations without holding anyone responsible and there is a reason for this: successfully trying complex white collar cases can take years and millions of dollars. So federal authorities just settle instead -- even if such settlements do little to deter future crimes.
Meanwhile, Congress is trying to cut the budget of the SEC -- which will make it even harder to do justice in these cases. No wonder there is an ongoing corporate crime wave. For all the trauma of the past few years, major frauds are all but inevitable in the years ahead given the lax response of federal authorities.