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Did Wall Street Miss A Bribe Payment?

by John Rubino on July 30, 2013 · 16 comments

It’s hard to know which aspect of today’s world future historians will find most appalling. But the fact that during the greatest financial crime spree ever, not a single major Wall Street executive has gone to jail has to rank right up there.

Yes, the occasional insider trader and Ponzi scheme operator is prosecuted, but that kind of crime is just background noise in a major financial market. Someone is always doing such things and getting caught. But the systemic stuff, the selling of clearly-defective bonds to less-than-savvy municipal pension funds, the paying of rating agencies to slap “AAA” on those bonds without even looking at the underlying mortgages, the manipulation of markets in ways that would be impossible if regulators were not either paid-off or active participants — these things were (and are) rampant, and that the perps are still rich and free testifies to the completeness with which Washington is now owned by the big banks.

And yet…this year some regulators (who may have missed the memo explaining how things work) have actually accused some big banks of doing something wrong – in public.

JPMorgan to pay $410 million to settle power market case
NEW YORK (Reuters) – JPMorgan Chase & Co agreed on Tuesday to pay $410 million to settle allegations of power market manipulation in California and the Midwest, the latest in a series of high-profile inquiries by U.S. federal energy regulators.

The settlement, announced by the Federal Energy Regulatory Commission (FERC), will allow Chief Executive Jamie Dimon to close the books on one of several costly run-ins with regulators over the past year. It came days after the bank said it was quitting the physical commodities business.

JPMorgan Ventures Energy Corp, the commodity trading unit that became one of the biggest U.S. electricity traders with the 2008 acquisition of Bear Stearns, agreed to pay a civil penalty of $285 million and disgorge $125 million for “manipulative bidding strategies” from September 2010 through November 2012.

It is the second largest penalty in FERC history, and comes as the once-quiet government regulator steps up its pursuit of market malfeasance after gaining expanded powers from Congress in 2005, part of efforts to crack down on market manipulation after Enron Corp’s spectacular collapse.

The FERC deal did not cite specific traders or JPMorgan’s commodities chief Blythe Masters for any wrongdoing. Masters spent billions of dollars over the past five years to build JPMorgan’s oil, power, gas and metals business into the biggest on Wall Street.

JPMorgan had vowed in May to fight the FERC charges and disputed allegations that employees lied or acted inappropriately during the investigation. After a court battle over the disclosure over documents, the bank entered settlement discussions.

On Tuesday, FERC laid out Masters knowledge of the traders abusive bidding strategies, including spreadsheets given to her detailing a seven-year plan to churn up to $2 billion in profits from potentially loss-making power plants.

Meanwhile, Goldman Sachs’ manipulation of the aluminum market has just come to light. Here’s the clearest explanation we’re likely to see:


Goldman aluminum

There are maybe three possible explanations for this public shaming:

1) Whoever it is that moves the bribes from banks to the major political parties and regulators forgot to deliver the envelopes, and the political division of the empire decided to send the banking division a message. That’s believable. In the Sopranos there was always intra-family intrigue with messages being sent back and forth by various means.

2) The major players understand that the public is getting surly, so they’ve decided to sacrifice some businesses that the banks have milked for all they’re worth and are willing to abandon. That’s the most likely, when you consider that JP Morgan’s “settlement” amounts to less than 2% of its annual profit and no one in the organization is going to jail for what was clearly fraud. Here’s the key passage from the above article:

“On Tuesday, FERC laid out JPMorgan’s commodities chief Blythe Masters knowledge of the traders abusive bidding strategies, including spreadsheets given to her detailing a seven-year plan to churn up to $2 billion in profits from potentially loss-making power plants….The FERC deal did not cite specific traders or Blythe Masters for any wrongdoing.”

3) Washington has decided to start policing the banks and insisting that they make their money more-or-less honestly….Nah, this doesn’t even belong on the list.

  • Allen

    I vote #2. Obama this last week said he’s making a push for “the middle class”. He’s throwing main street some scraps from the bankers’ buffet. It won’t matter. Even my Fox news neighbors now understand it’s all crooked no matter who is in charge.

    • ditkofan

      Don’t denigrate Fox News by implying the people who watch it are ignorant. Fox is the only news network that is critical of Obama. All the liberal networks that you apparently watch are in bed with Obama. All the corruption that this article by Mr. Rubino points out is happening under Obama’s nose with his blessing. Why? Because J.P. Morgan, Goldman-Sachs and the other Wall Street banksters contributed millions to his election and benefit from his policies. But you would have to watch Fox News to find that out. CBS, NBC, ABC, New York Times and so forth don’t want you to know that.

      Lewis Forro

      • stuart

        You forgot one big thing. Most of the derivatives fraud occurred during the reign of baby Bush. Started by Clinton, expanded by Bush and ignored by Obama. The Fox News crowd is much more anti-democrat than anti fraud. However, even those generally ignorant viewers get it; both parties are crooks playing us for saps.

        • ditkofan

          At least the Bush Administration prosecuted the Enron crooks (who did most of their lying and stealing under liberal Clinton) and sent them to jail. Bush’s people also prosecuted Bernie Madoff. What bigshot financial crook has Obama gone after? Nobody and he never will for the reasons I stated. Obama is in bed with the crooked banksters who financed his campaigns.

          • Dan

            I guess you don’t bother fact checking or are they all liberal too? They interview any liberal with notes taken from talking points,not asking questions that relate to the topic at hand. When you are looking at people with a narrow point of view than you never explore another point of view, which is what Fox is all about, promoting their ideals of anti government pro corporate agenda, driven by people like the Kochs and their ilk. It’s not journalism.

      • Dan

        Fox news is full of Bush appointees and never, ever, stops lying about what is actually going on in the economy and politically, and I can attest to their inaccurate reporting because I have fact them and the other media and found them to be the worst. They are just a dog whistle for their base of 60 and over.

        • ditkofan

          Fox News has at least 2 liberals working for them: Juan Williams and Geraldo Rivera. You can’t name one conservative working at the liberal networks CBS, NBC, ABC, MSNBC etc. The closest you come to a conservative is Jake Tapper at ABC, maybe.

          That fact makes Fox News more “fair and balanced” than the liberal networks Aside from Fox, all the TV cable and broadcast networks are “dog whistles” for their liberal base. The same for most big city newspapers. Their main job is protecting and pampering Obama so he can complete his left wing agenda of turning America into France. Fox News does not share Obama’s socialist agenda, that’s why more people watch Fox than nearly all the other liberal networks combined. Betcha didn’t know that!

  • QEternity

    Bread and Circus. Let them eat cake.

    The looting must (and will) continue until the final collapse.

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  • Bruce C.

    Another possibility is to dilute public opposition to financial crimes in general and to inure them to feelings of helplessness and hopelessness.

    I thought the key statement in the video was in the description of the manipulation itself, “…every time they [millions of people] do it they pay a fraction of a penny more because of a shrewd maneuver…”

    And then it gets complicated, and it’s impossible to distinguish illegalities from legal opportunism and capitalism, and a fraction of a cent doesn’t seem worth getting upset over, and prosecuting something like this is a guaranteed money pit, and it’s probably the tip of an iceberg, etc.

  • http://pulse.yahoo.com/_KTGVSXMZJD4U57OZ5ALH6JZ2IQ Edward Cate

    Fines are just absolution payments to the regulatory agencies; none of the money goes back to the consumers from which it was pilfered. When rats consume the seed corn in the silo, they’re usually “disappeared.”

  • Sueychop

    Bet on Goldman Sucks because JPM’s goin’ down, man. Kinda like this:


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  • 2

    the reason nobody went to jail is because the government itself with the public as it’s accomplice is to blame for the crisis. if someone offers you a mortgage with no money down, 103% financing, no principal payments etc.etc.etc. you’re a FOOL to take it.

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  • Ziad Abdelnour

    The financial sector and the banks are truly the walking dead. The debt
    of these non-financials equals 50% of GDP, another record. Over the past
    six months we have seen a large inventory buildup, which means the cash
    figure could be considerably lower now. That inventory has to be sold
    over the next six months in a slowing economy. Of course, there is $1.5
    trillion sitting in the Cayman Islands, but if that is brought home a
    35% tax has to be paid, or 39.5% if the previous tax cuts are abandoned.
    That is almost $600 billion in taxes, which would go a long way to
    reducing the budget deficit. We should have legislation to bring those
    funds home. The tax avoidance is anti-America. This advantage, if ended,
    would in part cause transnational conglomerates to bring production and
    jobs back to our country. The entire concept of non-financial
    corporations have lots of cash is a scam. There are few healthy balance
    sheets. This situation has nothing to do with politics and everything to
    do with lying and greed.
    Ziad K Abdelnour

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