Dimon had tried to acquire WaMu at a higher price prior to its collapse in September 2008 but WaMu's incompetent management refused the deal. That deal also involved no FDIC indemnification and would have proved even more disastrous for JPMorgan. Similarly, Dimon was the proponent of buying Bear at a price he considered a steal -- without any FDIC indemnification provision. Nevertheless, the NYT continues to portray Dimon as a genius.
The NYT article repeats Dimon's claim that it is "unfair" to sue JPMorgan, which acquired Bear's assets and liabilities, without any indemnification agreement, for its liabilities. The article presents no contrary view or facts. If Dimon had demanded an indemnification agreement JPMorgan would have had to pay a far higher price to acquire Bear Stearns and WaMu. He cannot choose to take the lower price and then claim that it unfair to follow the normal rule that a firm's liabilities do not disappear because it is acquired by another firm.
I am, of course, kidding. Dimon can and does choose to take the lower price and claim that it is an outrage to hold JPMorgan liable. Despite the fact that Dimon's claim is the actual outrage Holder is reported to have fallen for it.
The NYT account is so delusional that it thinks that it speaks well of Dimon that he "steered JPMorgan through the crisis without a quarterly loss or major government scuffle." Hint: many of JP Morgan's frauds helped it avoid reporting "a quarterly loss." The fact that regulation had been so effectively destroyed by its anti-regulatory leaders and lobbying from the big banks, including JPMorgan, that they never even "scuffle[d]" with JPMorgan despite its thousands of felonies is why Dimon was celebrated for years for leading what was in reality a criminal enterprise instead of being denounced. Why does the NYT treat Dimon's "multifront battle" against the regulators who are (finally) trying to clean up the cesspool that is JPMorgan as valiant? Dimon needed to fight a "multifront battle" against the elite fraudsters he promoted, praised, and protected from justice rather than a "multifront battle" against the laggardly and none to tenacious regulators who finally stumbled over the frauds and sought to end them.
Dimon is trying desperately to ensure that JPMorgan's senior officers, particularly Jamie Dimon, will be able to retain their positions, power, and immense wealth that are the product of the manifold frauds the senior officers led. He is enthusiastically offering the shareholders' money -- not his -- to buy "indulgences" for him and his senior cadre. The "$9.2 billion" in legal fees that JPMorgan expects to pay is largely a device to provide free legal representation to the senior officers. These practices are disgusting, not noble.
The settlement with DOJ is a $9 billion (before taxes -- probably far less after taxes) deal, not $13 billion. The $4 billion in purported "relief for struggling homeowners" reprises the cynical misrepresentation of the foreclosure fraud settlement in which the banks and DOJ agreed to call loan workouts that the banks would have done anyway because they minimized losses to the banks "relief for struggling homeowners." The NYT reporters have seen this propaganda before, but they parrot it again as if it were indisputable fact. Nine billion dollars is a large number, but relative to the damage JPMorgan's frauds caused it is miniscule -- and that is without taking into account the fact that under normal remedies for repeated acts of fraud, and the remedies available under RICO, the DOJ could have trebled those damages. The $9 billion figure is not a testament to DOJ's toughness but a (dramatically understated) demonstration of the catastrophic damage JPMorgan, Bear's, and WaMu's senior officers caused our Nation and much of the world.
The concluding sentences of the quoted passage demonstrate again the NYT's failure to understand the role that "accounting control fraud" played in driving the crisis and the appropriate criminal justice response to elite frauds. The reporters claim that not prosecuting JPMorgan or its senior officers or clawing back their wealth will:
"represent something of a reckoning for Wall Street, whose outsize risk taking in the mortgage business nearly toppled the economy in 2008. It might also provide a measure of catharsis to the investing public, which suffered billions of dollars in losses from buying bad mortgage securities."
The DOJ indulgences deal represents the continuing non-reckoning for Wall Street's senior officers. We need to begin with the cause of the crisis, which was not "outsize risk taking in the mortgage business." Accounting control fraud represents a "sure thing" -- as Jamie Dimon explained in his March 30, 2012 letter to JPMorgan's shareholders: "Low-quality revenue is easy to produce, particularly in financial services. Poorly underwritten loans represent income today and losses tomorrow."
To be more precise, poorly underwritten loans represent fictional reported "income today and [real] losses tomorrow." George Akerlof and Paul Romer made the same point in their 1993 article ("Looting: The Economic Underworld of Bankruptcy for Profit").
"[M]any economists still [do] not understand that a combination of circumstances in the 1980s made it very easy to loot a [bank] with little risk of prosecution. Once this is clear, it becomes obvious that high-risk strategies that would pay off only in some states of the world were only for the timid. Why abuse the system to pursue a gamble that might pay off when you can exploit a sure thing with little risk of prosecution?" (Akerlof & Romer 1993: 4-5).
The reporters are correct that mortgage purchasers lost "billions" of dollars (if we clarify that to mean "hundreds of billions") -- and that their recoveries will be a small fraction of those losses because if the fraudulent mortgage originators and fraudulent sellers of mortgage products (MBS and CDOs) "backed" by those fraudulent loans were made whole for their losses dozens of the world's largest banks would fail. JPMorgan's shareholders may suffer some loss, but the elite perpetrators, the senior officers, whose frauds made them wealthy and caused the crisis will not be prosecuted and will not have their wealth "clawed-back." Why exactly the NYT believes the public should find such a result "cathartic" is beyond me.
The NYT article then asserts its meme of DOJ toughness, again as "fact."
"But the bank, one of the people briefed on the talks said, tentatively backed down from that demand [that the government not be allowed to investigate or prosecute a subset of its felonies] , a major victory for the government and one that allows the Justice Department to pursue its criminal investigation of JPMorgan."
Yes, that is how far the "Justice" Department has fallen -- it claims to reporters (who then regurgitate the meme as unassailable "facts") that DOJ has scored "a major victory" because JPMorgan is "allow[ing]" DOJ to investigate its crimes. Two news flashes to Holder and the NYT -- DOJ does not need JPMorgan's permission to investigate and prosecute JPMorgan and the necessary implication of the story is that the DOJ has only preserved the right to investigate and prosecute this one subset of JPMorgan's myriad felonies. For tens of thousands of JPMorgan felonies the deal will remove the DOJ's authority to investigate and prosecute. This passage from the article must also be read in conjunctions with this earlier segment.
"Under the terms of the preliminary deal, the people said, the bank would also have to assist prosecutors with an investigation into former employees who helped create the mortgage investments."
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