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Worth watching/listening to the whole thing, but excerpt:
AMY GOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report.
I’m Amy Goodman, as we turn to part two right now of what’s being
touted as the biggest banking settlement in U.S. history. JPMorgan is
set to pay a record $13 billion fine to settle investigations into its
mortgage-backed securities. Five years ago, the bank’s risky behavior
helped trigger the financial meltdown, including manipulating mortgages
and sending millions of Americans into bankruptcy or foreclosure.
JPMorgan said in a statement that its latest settlement is an "important
step." However, many in the media have portrayed the deal as unfair to
the bank.
We’re going to turn right now to Yves Smith. She is a well-known financial analyst, and she is the founder of Naked Capitalism, the blog. She’s also author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
If you could talk about—how did JPMorgan Chase violate the law?
YVES SMITH:
The violated the law part, we’re not—we’re not completely clear on
JPMorgan proper. It’s important to understand there are three legal
entities involved. One is Bear Stearns, which they acquired during the
crisis. One is Washington Mutual, which they acquired during the crisis.
Jamie [Dimon] was delighted to buy those both at the time. And we may
get into that detail. These are still financially extremely attractive
deals to him. So the idea that Dimon was in any way, shape or form a
victim in doing these acquisitions is really overstated.
But the key part of this deal is that this is about liability to
investors. So, the government—the government is representing, in this
case, a whole bunch of states that have claims against JPMorgan and the
different entities, as well as the FHFA,
which—sorry, Federal Housing Finance Agency, the regulator of Fannie Mae
and Freddie Mac, which entered into its own deal. But basically, the
bank sold—these different banking entities sold bonds to investors that
they said would be of a certain quality, and they were way short of
that. And then, it was because they were, you know, lousy borrowers.
They basically would say that it had a higher loan-to-value ratio; that
the fellow had income, and he didn’t; that it was a primary resident,
and it wasn’t—those sort of misrepresentations.
AMY GOODMAN: Is this evidence that the Obama administration is getting tough on Wall Street?
YVES SMITH:
I don’t really buy that theory, because the thing that brought Jamie
Dimon to the table was actually a criminal investigation which was
initiated in 2007 under the Bush administration. It takes a long time to
develop these prosecutions of these complex criminal frauds. So that’s
why it’s been such a long lead time. And this settlement has been under
negotiation for some time. There have been various investors, private
investors, as well as the government, that has been pursuing these
investor claims. So this has been sort of cycling through on all kinds
of fronts. These suits—you know, for example, different other banks,
Bank of America and, I believe, HSBC has
settled their investor claims with the government. So those
claims—they’re just cycling through those kind of settlements right now.
AMY GOODMAN:
Yves Smith, can you talk about the pain that was caused by this? It’s
always talked about in these sort of very un-understandable financial
terms, macro terms, so it’s hard to really understand, though millions
of people felt what JPMorgan did.
YVES SMITH:
Well, there—again, this part of the settlement actually doesn’t get to
the pain. That was a settlement we had last year. The settlement last
year was the part—there was a huge federal-state settlement last year
that was supposed to be about the homeowners. But in this case,
this—these settlements are all about the investors. And so, you know, to
your point, what JPMorgan is going to pay in this settlement is larger
than what it paid in the settlement last year to homeowners. I mean,
that just intuitively seems extremely unjust, you know, the fact that
investors are basically going to get a bigger dollar compensation out of
all these banking entities than homeowners got last year. I mean,
that’s crazy by anybody’s standards.
A must-read and grimly amusing piece:
WASHINGTON –– To Wall Street, this town might seem like enemy
territory. But even as federal regulators and prosecutors extract
multibillion-dollar penalties from the nation’s biggest banks, Wall
Street can rely on at least one ally here: the House of Representatives. The House is scheduled to vote on two bills this week that would undercut new financial regulations
and hand Wall Street a victory. The legislation has garnered broad
bipartisan support in the House, even after lawmakers learned that Citigroup lobbyists helped write one of the bills, which would exempt a wide array of derivatives trading from new regulation. The bills are part of a broader campaign in the House, among
Republicans and business-friendly Democrats, to roll back elements of
the 2010 Dodd-Frank Act, the most comprehensive regulatory overhaul
since the Depression. Of 10 recent bills that alter Dodd-Frank or other
financial regulation, six have passed the House this year. This week, if
the House approves Citigroup’s legislation and another bill that would
delay heightened standards for firms that offer investment advice to
retirees, the tally would rise to eight.
Both the Treasury Department
and consumer groups have urged lawmakers to reject the bills, warning
that they could leave the nation vulnerable again to excessive financial
risk taking. The House proposals stand little chance of becoming law,
having received a much chillier reception in the Senate and at the White
House, which on Monday threatened to veto the bill on investment advice
for retirees.
But simply voting on the bills generates benefits
for both House lawmakers and Wall Street lobbyists, critics say. For
lawmakers, it comes in the form of hundreds of thousands of dollars in
campaign contributions. The banks, meanwhile, welcome the bills as a
warning to regulatory agencies that they should tread carefully when
drawing up new rules.
In other corners of the nation’s capital,
Wall Street has received a decidedly less cordial reception. The Justice
Department recently struck a tentative $13 billion settlement with JPMorgan Chase
over the bank’s mortgage practices. Federal regulators are also
increasingly demanding that JPMorgan and other financial firms admit to
wrongdoing when settling enforcement actions.
“The House is the
odd man out in terms of doing Wall Street’s bidding,” said Marcus
Stanley, policy director of Americans for Financial Reform, a nonprofit
group critical of the financial industry. “They’re letting Wall Street
write the law to its own benefit in ways that harm the public.” The lawmakers who support the bills say the legislation is good for the nation, not just the bank’s bottom lines.
Still,
in the case of the derivatives trading bill, Citigroup’s lobbyists
redrafted the proposal, striking out certain phrases and inserting
others, according to documents reviewed by The New York Times. The House Financial Services Committee, a magnet for Wall Street campaign donations, adopted the bank’s recommendations in 2012 and again this May.
Wall
Street’s support from the House extends beyond favorable votes. When
bank executives are called to testify before Congress, industry
lobbyists distribute proposed questions to lawmakers and their staff,
seeking to exert some control over the debate, according to emails
written by staff members on the House Financial Services Committee that
were reviewed by The Times.
One House aide, in an email exchange
among House Financial Services staff members last year, warned that
lawmakers should not mimic the talking points from lobbyists.
“I know that some of our members are inclined to whore, but we cannot be apes,” the Republican aide said.
