William Black on JP Morgan and the Failure to Regulate Wall Street Fraud

ilene's picture


William Black on JP Morgan and the Failure to Regulate Wall Street Fraud

Courtesy of Jesse's Cafe Americain 

"It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud. The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident...And yet none of this conduct has been punished in any significant way." 

~ Charles Ferguson, Inside Job

"I know that my retirement will make no difference in its [my newspaper's] cardinal principles, that it will always fight for progress and reform, never tolerate injustice or corruption, always fight demagogues of all parties, never belong to any party, always oppose privileged classes and public plunderers, never lack sympathy with the poor, always remain devoted to the public welfare, never be satisfied with merely printing news, always be drastically independent, never be afraid to attack wrong, whether by predatory plutocracy or predatory poverty."    

~ Joseph Pulitzer

"We are not left to conjecture how the moneyed power, thus organized and with such a weapon in its hands, would be likely to use it. The distress and alarm which pervaded and agitated the whole country when the Bank of the United States waged war upon the people in order to compel them to submit to its demands can not yet be forgotten. 

The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, and a scene of cheerful prosperity suddenly changed into one of gloom and despondency ought to be indelibly impressed on the memory of the people of the United States. If such was its power in a time of peace, what would it not have been in a season of war, with an enemy at your doors? 

No nation but the freemen of the United States could have come out victorious from such a contest; yet, if you had not conquered, the Government would have passed from the hands of the many to the hands of the few, and this organized money power from its secret conclave would have dictated the choice of your highest officers and compelled you to make peace or war, as best suited their own wishes. The forms of your Government might for a time have remained, but its living spirit would have departed from it." 

~ Andrew Jackson

Here are two pieces by William K. Black on JPMorgan and the rampant and ongoing fraud and speculation on Wall Street. It tells the backstory of the subversion of the democratic process and how it is being rationalized by the corporate media.

A colleague and I were remarking the other day at the effectiveness of the Wall Street machine to spin the media, both at MF Global and JPM most recently. William K. Black strikes to the heart of it.

If you can do nothing else, if you do not have the means or the vocation for speaking out, you can at least offer some moral support and encouragement to those who do, and help to pass the message along to others. 

JPMorgan's Addiction To Gambling on Derivatives
By William K. Black

JPMorgan’s flacks and apologists have, unintentionally, exposed the fact that their cover story – hedging gone bad – is false. JPMorgan runs the world’s largest gambling operation in financial derivatives. The New York Times reported the key facts, but not the analytics, in an article entitled “Discord at Key JPMorgan Unit is Faulted in Loss.” The analytics suggest that the latest JPMorgan cover story – it was JPMorgan’s “Achilles the heel” (based in the UK) who caused the loss – is misleading.

The thrust of the story is that in the beginning JPMorgan’s Chief Investment Office (CIO) was run by a fair princess (Ina Drew) and all was fabulous. Sadly, Ms. Drew contracted Lyme’s Disease and was unable to ensure peace and prosperity in her land. The evil Achilles Macris, based in the UK, became disloyal and mean. He made massive, bad purchases of financial derivatives that caused major losses. CIO senior officers based in the U.S. (and women to boot) tried to warn Achilles but he screamed at them and refused to listen and learn. The just king, Jamie Dimon, did not act promptly to save his kingdom from loss because of his great confidence in Princess Drew.

The personal story of Achilles acting like a heel makes compelling journalism, but it obscures rather than clarifies the analysis as to why JPMorgan poses a clear and present danger to the global economy.

We need to begin with context. It was toxic financial derivatives (not) backed by fraudulent liar’s loan mortgages (“green slime”) that drove the U.S. crisis. Paul Volcker urged the administration and Congress to bar any entity that received federal deposit insurance from investing in financial derivatives. The Dodd-Frank Act did so in a provision called “the Volcker rule.” Treasury Secretary Geithner and Federal Reserve Chairman Bernanke, who exist to serve the interests of CEOs of the largest banks, oppose the Volcker rule. Jamie Dimon leads the banking industry’s opposition to the Volcker rule. 


Dimon has a three-part strategy: stall the Volcker rule, gut its effectiveness by creating a massive loophole, and get the rule repealed by a future Congress. The loophole takes advantage of the fact that the Volcker rule was not intended to prevent banks from using derivatives to create (true) hedges. The current draft of the rule, however, renders the rule useless because it allows banks to call non-hedges “hedges” – it adopts a standard I call “hedginess.” A systemically dangerous institution (SDI) like JPMorgan has vast amounts of financial derivatives and it can (and does) call any speculative bet it takes in financial derivatives a “hedge.”

The NYT article demonstrates that JPMorgan is speculating, not hedging, and that the current draft of the Volcker rule would render us defenseless against the next financial crisis. The article misses these analytics and presents a misleading portrayal of the purportedly good years of CIO under Princess Drew. It turns out that CIO’s profits and losses come from the same practice – gambling on massive amounts of financial derivatives – not hedging. The NYT misses this key analytical point...

Read the rest here at The Big Picture.

Additionally below is an interview that William K. Black has done with Lauren Lyster at Russia Today.
As always, one does not find this type of insightful discussion at the mainstream media which tends to present fake arguments and discussion between paid consultants and flacks from the major parties, both of whom are obtaining record amounts of money from corporations. The latest estimates are that Obama and Romney will gather in $1.5 Billion in campaign 'donations' for this November.
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Fri, 05/25/2012 - 12:53 | 2462883 ebworthen
ebworthen's picture

The banks are our government now.

Andrew Jackson had it right, he would no doubt be a Ron Paul supporter.

Fri, 05/25/2012 - 13:37 | 2463053 sgt_doom
sgt_doom's picture

Well said, ebworthen, well stated!

If You Understand Just One Thing, Please Understand This

Our economy is not consumer-based or consumer-driven, it was dismantled and what remains has been restructured to only serve their fantasy financial sector.

There is no ideological struggle, nothing other than typical political theater as a smoke screen for the final wealth transfer.

No political lackey actually believes their drivel and bilge about debt, deficits, and austerity.

Snarky comments about austerity programs serve no one other than the super-rich from which they further profit!

Please understand this:  we no longer live in a consumer-based economy; we exist in the quickly dissipating remains of a once consumer-driven economy, but which is in reality simple a fantasy finance sector which serves that upper percentage of the top 1 percent; the American portion of the Transnational Capitalist Class.

This is why everything they say or claim or do makes no sense whatsoever to the rational citizen.

Reasoning is not an option --- austerity programs serve bond valuations, attacks on their debt and their deficit spending serve only to allow them to continue their process to further enrichment, further economic warfare.

This is exactly why a complete fraudster and farce like Paul Krugman sounds so misleading as he’s always acting on behalf of the central bankers and speculator class.

We live in a fantasy finance sector, where the overlords control trillions of worthless derivatives which they claim as their plutocratic weapons.


Fri, 05/25/2012 - 12:44 | 2462840 Whoa Dammit
Whoa Dammit's picture

+ 100 to Bill Black for "Green Slime".

Fri, 05/25/2012 - 12:49 | 2462862 HarryM
HarryM's picture

LOL - Exactly WHO is going to regulate them ?

Fri, 05/25/2012 - 12:50 | 2462861 HarryM
HarryM's picture


Fri, 05/25/2012 - 12:15 | 2462696 Winston Smith 2009
Winston Smith 2009's picture

"Additionally below is an interview that William K. Black has done with Lauren Lyster at Russia Today."

Where?  No link.

Fri, 05/25/2012 - 12:13 | 2462683 Winston Smith 2009
Winston Smith 2009's picture

"I know that my retirement will make no difference in its [my newspaper's] cardinal principles, that it will always fight for progress and reform, never tolerate injustice or corruption, always fight demagogues of all parties, never belong to any party, always oppose privileged classes and public plunderers, never lack sympathy with the poor, always remain devoted to the public welfare, never be satisfied with merely printing news, always be drastically independent, never be afraid to attack wrong, whether by predatory plutocracy or predatory poverty."  - Joseph Pulitzer

Sure doesn't seem to be anything remotely like that any more...

Fri, 05/25/2012 - 10:58 | 2462301 NEOSERF
NEOSERF's picture

It isn't gambling when you control the game...you think zero trading day losses in a quarter is luck?...concerted effort to recoup that $2b right now and you watch it every day with the plunge-ramp efforts...

Fri, 05/25/2012 - 10:12 | 2462086 slewie the pi-rat
slewie the pi-rat's picture

jim willie: USTBond Tower of Babel Teeters

this is about the jpMorgue, tyler & zH, and turdF gets some love too:  for being capable of independent thought, basically, and knowing shit from shinola...

Fri, 05/25/2012 - 09:29 | 2461917 rufusbird
rufusbird's picture

Good read, Articulate, clear and concise.

Fri, 05/25/2012 - 09:26 | 2461913 blindman
blindman's picture

the capture of the treasury is complete, now
counterfeiting is legal by appointment.
all legitimacy is now destroyed and you are
on your own among the many who have no idea
who they are, where they are or what is
happening. i suggest you make it your first
priority to educate those around you as to
what money is and how this first understanding
will determine the fate of billions of people,
us all.
ps. you see how the backing of the derivative
market by the "taxpayer" is just a license to
kill and steal? yes? turns fraud into an asset.
obviously this will lead to .....
much more fraud. then what?

Fri, 05/25/2012 - 08:48 | 2461773 blindman
blindman's picture

25 May 2012
US Decides to Backstop the Anglo-American Derivatives Exchanges with Fed Dollars - 'Too
Big To Fail'

It sounds like the principle of keeping AIG whole on its obligations so that it can pay
off to the banks at 100 cents on the dollar. This should make Jamie feel a little better
about his bad derivatives trades.

And Blythe should rest easy knowing that Benny has her back on those massive metals

Sounds like they even plan to have the Fed backstop the derivatives trade in London.

Heads the banks win, tails those holding US dollars lose.

How will they support the next bailout? Austerity!

Wall Street Journal
A Mess the 45th President Will Inherit
Thursday, May 24, 2012

Taxpayers Now Stand Behind Derivatives Clearinghouses
the end

Fri, 05/25/2012 - 05:18 | 2461555 theprofromdover
theprofromdover's picture


Fri, 05/25/2012 - 07:00 | 2461598 eclectic syncretist
eclectic syncretist's picture

Bill Black will be vindicated.  We have only a little over five months to the presidential election, and it will likely prove very difficult to distract the public with abortions and homosexuals this time.


The economy and deficit will be front and center.


JPM has just put a big nail in the coffin of public sentiment regarding the cozy relationship between government and big banks. 

Fri, 05/25/2012 - 10:24 | 2462142 SeanJKerrigan
SeanJKerrigan's picture

That's awfully optimistic.

Fri, 05/25/2012 - 05:18 | 2461553 falak pema
falak pema's picture

Here is an article in French that should interest the ZH forum. Ever heard of Dennis Meadows and club of Rome report of 1972?

Here is his take on current world trends. He hasn't changed ONE iota of his conclusions that he presented to the club of Rome in 1972.

40 ans plus tard, Dennis Meadows toujours convaincu des limites de la croissance

Fri, 05/25/2012 - 07:09 | 2461600 Setarcos
Setarcos's picture

Je pense. That is all that can, but seldom does, differentiate our species from all others.

Rene Descartes should be required reading for everyone wanting public office, or merely offering an opinion in such as ZH.

Sorry falak, but virtually no one has the slightest interest in Dennis Meadows, let alone Rene Descartes.

And if this Meadows person had read Platos "Republic", then he would have known that nothing has changed, one iota, for at least 2,300 years, in any substantial way, e.g. we continue to war and argue about 'democracy'.

I happen to like Descartes and even latter-day French politics, since about 200 years ago, BUT it is all false, e.g. the "Statue of Liberty" donated by the French government of the time.

Neither French, nor US governments, have ever been interested in liberty, fraternity and equality.  It is all as much a farce as Farcebook.

Fri, 05/25/2012 - 05:16 | 2461549 theprofromdover
theprofromdover's picture

It is just stunning that the mainstream media and the legislature have been captured and castrated by these gangsters.

All of these financial shenanigans have been intentionally developed by money-worshipping organised crime; this is straightforward Al Capone stuff, the only difference is that the protagonists are by snap-suited pickpockets, who hide their most violent tendencies.

The history books will never understand how the people let it happen, but who is going to write the history?


Fri, 05/25/2012 - 13:53 | 2463104 De minimus
De minimus's picture

It's actually quite simple and not shocking at all. Those in the media who are not flat-out Marxists, are protecting their investments through constant manipulation via propaganda. The Marxists on the other hand know that the system will eventually collapse because they've done everything they could manage to make it so. When it does they will come riding to the rescue with Marxist, accusations, intimidations, manipulations and solutions. A very small part of truth will be used to justify "reforms" which will be they're way of saying that they are instituting Marxists policies of the past, which have never worked except to empower them, while dis-empowering and enslaving everyone who is, not them....

Fri, 05/25/2012 - 04:42 | 2461535 falak pema
falak pema's picture

Its like asking the Pope to regulate simony or the king to regulate his own sons and feudals; a system is what it has become. Lets face it, not live in hopium. Power is what runs the world and the people have to take that power back from the Oligarchs. 

Fri, 05/25/2012 - 15:06 | 2463377 AnAnonymous
AnAnonymous's picture

the king to regulate his own sons and feudals;


The king did that.

Never heard of Friedrich Wilhelm aka der soldatenkonig?

He did regulate his own son. Was two fingers close to execute his own son for desertion as he left a mansion without proper authorization.

The court had to pressure the king to surrender the idea in order to preserve the dynasty. This said, the best friend of the king's son was executed properly for helping a desertion project. He was a noble and a feudal.

Fri, 05/25/2012 - 04:36 | 2461533 bigwavedave
bigwavedave's picture

the  answer is, of course, Mitt Romney

Fri, 05/25/2012 - 09:56 | 2462015 marathonman
marathonman's picture

bigwavedave shoots.... he scores!!!

Fri, 05/25/2012 - 02:29 | 2461452 AnAnonymous
AnAnonymous's picture

whether by predatory plutocracy or predatory poverty.


Yes, yes, nice omission.

What about predator well at easeness?

Quite good to point at predatory lower class, predatory upper class, but what about predatory middle class?

It is a nice omission here because most predatory acts performed by US citizen societies are committed to sustain their US citizen middle class.

Rich have grown so rich thanks to US citizenism, they could be satisfied by letting the wealth concentrate to them by inertia, poor are so devoid of any future they have given up.

Remains the middle class, which happens to the class of so many US citizen journalists.

Not a surprise a blind spot exists here.

Fri, 05/25/2012 - 09:04 | 2461832 WTFx10
WTFx10's picture


Fri, 05/25/2012 - 01:07 | 2461370 Zero Govt
Zero Govt's picture

Riiiight, so changing a rule at the poker table will make the gambling junkies angels???

No rule-based system has ever prevented anything. No Law has ever succeeded. It's just re-arranging the deckchairs on the Titanic.

The only regulatory system that has ever worked is the free market where shit goes down the sewer

The Govt/Regulatory/Juducial systems have all supported the cancerous criminality of WS banking, and indeed made it even larger. That's a fact. As they did in 1945 as well as 2000 as well as 2008. Those are the facts.

What part of reality don't these 'Volcker Rule' retards get?!!

Fri, 05/25/2012 - 02:32 | 2461455 AnAnonymous
AnAnonymous's picture

Riiiight, so changing a rule at the poker table will make the gambling junkies angels???

No rule-based system has ever prevented anything. No Law has ever succeeded. It's just re-arranging the deckchairs on the Titanic.

The only regulatory system that has ever worked is the free market where shit goes down the sewer

Hey, I know that english is a bastardized language which keep losing its native speakers, but right, I suppose you know that regula (tory) and rule means the same?

Your drivel makes no sense on paper and you want it to make it sense in reality?

Stick to trallalaland, Your State pampering you allows that. Enjoy the comfort, reality will be too harsh for US citizens.

Fri, 05/25/2012 - 01:03 | 2461363 All Out Of Bubblegum
All Out Of Bubblegum's picture

What're the Feds gonna do, stop them? Then how do they all get paid? The Feds regulating Wall St. is like asking a 16 year old spoiled brat to regulate their coke-whore mom and cock-smoking dad. 

Fri, 05/25/2012 - 01:26 | 2461387 delacroix
delacroix's picture

is malia 16 already?

Fri, 05/25/2012 - 00:53 | 2461352 Bunga Bunga
Bunga Bunga's picture

Get over it, it's simply fraud never get caught for.

Fri, 05/25/2012 - 01:11 | 2461372 Zero Govt
Zero Govt's picture

They got caught in 2008, they were going to the wall..

Then Govt stepped in and propped the garbage up

Govt is the exact opposite of the free market, so is its Juducial and Regulatory systems

Fri, 05/25/2012 - 01:57 | 2461420 Widowmaker
Widowmaker's picture

Your "free" govt should match the market model you preach.

Sadly govt works for money,inc. both are cancer.

Fri, 05/25/2012 - 00:48 | 2461346 CustomersMan
CustomersMan's picture


The crisis of 2008 must have had converting the "Brokerage Firms" to Bank Holding Companies as one of its main objectives, so what we are seeing today was exactly what they had in mind.


Make gigantic gambles, with untold leverage, then accept the profits when the trades go right, have enough money to buy out any competitors, and if it goes bust, pass it to the FDIC and then the American Taxpayer/citizen.


Or better yet, work out a plot to destroy a mega corporation or country, then have all the bets placed in the derivatives markets worldwide, then destroy the company or country, then collect on the bet. A nice final touch is holding the International Swaps and Derivatives Association in check so that the definition can be changed to effect the payouts.


I would like to see all the hidden derivative payouts on Bear Sterns, Lehman, and more recently Japan.


Everything is by design. Where do they see the end game? Do they really think they will acquire all the wealth and power, bankrupt the rest of us, and escape to where? Or do they think they will get to define what reality is and enforce it on the rest of us?

Fri, 05/25/2012 - 00:04 | 2461292 palmereldritch
palmereldritch's picture

Great quote by Jackson. Thanks for the reminder.

Thu, 05/24/2012 - 23:58 | 2461280 pissing_excellence
pissing_excellence's picture

they are thinking "hand or sleeve" for you and its still early.


Muppetz and bitchez sayonara

Thu, 05/24/2012 - 22:23 | 2461107 HowardBeale
HowardBeale's picture

All these fucking Wall Street criminals are about to die heinouse fucking deaths: think burned alive, hands and feet cut off while watching, beheading with an ice pick... 


You know this criminal behavior can't go on much longer before it attracts some serious fucking seiral killers who have nothing left to lose--or patriots...

Fri, 05/25/2012 - 07:56 | 2461651 falak pema
falak pema's picture

so patriots are serial killers too; I'm sure GWB would buy that for justifying Abou Ghraib and Guantanamo, doing God's work abroad. You put your finger in THAT pie and you end up like Savonarole or Robespierre or worse : Heil Hitler or Uncle Joe S. 

Fri, 05/25/2012 - 02:29 | 2461453 moldygoat
moldygoat's picture

"calling all serial killers..., I repeat, calling all serial killers!.....!"

I can't remember who said that.

Fri, 05/25/2012 - 02:00 | 2461426 Widowmaker
Widowmaker's picture

You gonna cut off a corporations " feet?"

Kill them with their fraud money. Replace it, end the fed, prosecute everyone top to MF Bottom.

Thu, 05/24/2012 - 22:08 | 2461060 Colonel
Colonel's picture

Oops might as well put this in here. Anybody seen this Deep Capture the Movie: By Patrick Byrne?

Thu, 05/24/2012 - 21:53 | 2461050 tom a taxpayer
tom a taxpayer's picture

William Black for Special Prosecutor.

Fri, 05/25/2012 - 11:03 | 2462331 Vegamma
Vegamma's picture


He actually sent people to jail over the S&L crisis. Remember how congress tried to stop him and circle the wagons? Keating 5!

Better yet, Black for President (may be our last hope)

Thu, 05/24/2012 - 19:24 | 2460692 Freewheelin Franklin
Freewheelin Franklin's picture

Paul Volcker urged the administration and Congress to bar any entity that received federal deposit insurance from investing in financial derivatives.

Hmmmm. I think that there is more than one option here.


a) receives federal deposit insurance.

b) invests in derivatives.

I think the problem (and solution) is glaringly obvious.

Thu, 05/24/2012 - 20:33 | 2460859 LawsofPhysics
LawsofPhysics's picture

How about barring any entity that receives federal monies from lobbying, period. Kill these fuckers already.

Thu, 05/24/2012 - 21:27 | 2460996 cranky-old-geezer
cranky-old-geezer's picture



Just stop the federal monies.

Thu, 05/24/2012 - 19:21 | 2460687 lasvegaspersona
lasvegaspersona's picture

Every week I send a letter to my senators reminding them they have a criminal in their alumni organization...Corzine must be prosecuted before any faith in the marketplace can return.

Thu, 05/24/2012 - 19:06 | 2460641 bankruptcylawyer
bankruptcylawyer's picture

william black is going to die of a 'heart attack' or other natural causes soon. so too would elizabeth warren if she even does succeed in becoming a senator.

Fri, 05/25/2012 - 02:25 | 2461449 moldygoat
moldygoat's picture

Elizabeth might be cold enough that the pellet does not melt.

Thu, 05/24/2012 - 18:54 | 2460611 Westcoastliberal
Westcoastliberal's picture

We are soooo screwwwwweeeddd!

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