"Too Big To Regulate" JP Morgan "Lied" And "Deceived" Regulators, Investors And Public, Senate Finds

Tyler Durden's picture




 

Moments ago, ahead of tomorrow's 9:30 am Senate hearing on JP Morgan's 2012 attempt to corner the IG9 market through its London-based CIO office using depositor cash which as everyone now knows went horribly wrong, titled "JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses,” the Permanent Subcommittee on Investigations has released its comprehensive 300 pages review of the London Whale fiasco. The report, in a nutshell, finds that both Jamie Dimon and JP Morgan lied and misled investors, regulators and Congress, that it forced its traders to hide growing losses, that it hid trades banned by the Volcker rule (just as we first said in April 2012 in "Why JPM's "Chief Investment Office" Is The World's Largest Prop Trading Desk: Fact And Fiction") and that JP Morgan may, by extension, be "too big to manage" or "too big to regulate" as Carl "Shitty Deal" Levin summarized.

From the FT:

Mr Dimon had initially played down the significance of credit derivatives trading activity in the bank’s London chief investment office during an earnings call in April last year, saying it was “a tempest in a teapot”.

 

However, the Senate report found that he was “already in possession of information about the . . . complex and sizeable portfolio, its sustained losses for three straight months, the exponential increase in those losses during March and the difficulty of exiting the . . . positions”.

 

Additional disclosures from Mr Braunstein, now a vice-chairman at the bank – including that regulators were given “information on those positions on a regular and recurring basis” – are described in the report as “inaccurate at best, and deceptive at worst”.

 

The panel said Mr Braunstein may have misled investors and, overall, “the written and verbal representations made by the bank were incomplete, contained numerous inaccuracies, and misinformed investors, regulators, and the public”.

It gets worse as the accusations of lying are very much direct:

Mr McCain accused the bank of lying when it told Senate investigators it had been fully transparent with regulators.

 

The report quotes an examiner at the Office of Comptroller of the Currency, JPMorgan’s regulator, saying he felt the bank had “lied to” and “deceived” the agency over the question of whether the bank had mismarked its books to hide the extent of losses. It also reveals that the OCC lowered its “CAMELS” measure of bank strength, a key and usually secret metric, due to concerns over management and internal “oversight deficiencies”.

 

The bank’s chief risk officer John Hogan told the OCC that there was no mismarking of asset valuations but the bank later acknowledged that there had been mismarking. Mr Hogan said he had not been aware of this when he gave his answer to the OCC, the report said. However, the panel said the bank mismarked to hide losses. It also criticised the OCC for insufficient oversight.

Some more from MarketWatch:

The report does have one example showing that Dimon intentionally sought to cut off regulators from critical daily profit and loss trading data at a time that it could have started to provide damaging information about trading losses at the firm.

 

Specifically, in late January, 2012, as losses were increasing, the report said Dimon ordered the bank to stop providing a daily investment bank profit and loss report to the Office of the Comptroller of the Currency, the institution’s chief regulator, because he believed it was too much information to provide to the OCC.

 

However, Douglas Braunstein, J.P. Morgan Chase’s chief financial officer at the time, restored the daily report soon afterward at the OCC’s request. But, according to the investigation, “Dimon reportedly raised his voice in anger” at Braunstein and disclosed that he had ordered the halt to the reports. Dimon said the OCC didn't need daily profit and loss figures for the investment bank, according to the report. 

...

Meanwhile, there were many examples of trader warnings going unheeded. In one recorded conversation from March, Iksil, the “London whale,” told Julien Grout, a junior trader, that their supervisor, Javier Martin-Artajo, was expecting a reworking of their calculation of losses. In the email Iksil said “I can’t keep this going …. I think what he’s [Javier Martin-Artajo] expecting is a re-marking at the end of the month …. I don’t know where he wants to stop, but it’s getting idiotic.”

 

At one point in March, Iksil characterized the huge losses as “hopeless” and he predicted that “they are going to trash/destroy us” and “you don’t lose 500 million without consequences.”

Finally, Carl Levin who is known to bluster a lot, if act not so much, said that "there’s a lot of evidence" that JPMorgan may be "too big to manage" or "too big to regulate". The bank has $2.4tn in total assets and Mr Levin’s statement adds to an intensifying Washington debate over whether the government should forcibly restructure large financial groups. As Marthwatch reports: "Levin told reporters that he will decide after a hearing scheduled for Friday, where top regulators and J.P. Morgan executives are scheduled to testify, whether it will push the Justice Department to investigate the firm. Dimon was not called to testify on Friday and Levin defended the decision, arguing that he plans to hear from the individuals with the most knowledge of the trades."

Of course, nothing will ever happen to JPM, and no TBTF banks in the US will ever be split up. Why? Because doing so would reveal the 1000-to-1 exposure of outstanding derivative notional to collateral, and would necessitate an immediate collapse in the $600 trillion OTC derivative market, leading to fare more catastrophic consequences than the Lehman bankruptcy. And a loss of DC's indulgence collection from Wall Street of course. Because what is D.C. if not the bought and paid for muppets of the very firm that is the subject of this article?

Either way, tomorrow's senatorial theater, which we will cover, where Jamie Dimon and his presidential handcuffs will be absent, promises to be quite entertaining, and JPM's sacrificial pig, Ina Drew will be summarily crucified, even if her boss - the man who made it all happen, will be comfortably hundreds of miles away.

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Thu, 03/14/2013 - 17:28 | 3330780 Bay of Pigs
Bay of Pigs's picture

FREE Ina Drew!

Thu, 03/14/2013 - 17:36 | 3330813 gmrpeabody
gmrpeabody's picture

Perhaps Mr Holder will now reconsider his position..., NOT!

Thu, 03/14/2013 - 17:41 | 3330820 Ahmeexnal
Ahmeexnal's picture

Where is this scumbag Dimon hiding? Seems like no one is able to locate the bastard.
We all knew this was coming. An arrogant prick like Dimon was setup to fall on the sword and take one for the team.
We all know what comes next. G-S buys up JPig.
"doing G-d's work."

Thu, 03/14/2013 - 17:45 | 3330838 chumbawamba
chumbawamba's picture

Wow, whoever it is at JP Morgan that's responsible for sending out the monthly bribe checks to the Senate is fucked.

I am Chumbawamba

Thu, 03/14/2013 - 17:55 | 3330862 sunaJ
sunaJ's picture

Really? They lied??  I'll be damned, I guess self-regulation isn't such a good idea.  I guess we shouldn't just take their word for it.  JFC, let's move to a different paradigm, already: full disclosure or rot in jail. 

Thu, 03/14/2013 - 18:03 | 3330903 James_Cole
James_Cole's picture

I think what he’s [Javier Martin-Artajo] expecting is a re-marking at the end of the month …. I don’t know where he wants to stop, but it’s getting idiotic.

I thought it was all just the rogue traders going... rogue..?

Ina will set the record straight!

Thu, 03/14/2013 - 18:07 | 3330922 Ahmeexnal
Ahmeexnal's picture

Too Big to Regurgitate

Thu, 03/14/2013 - 18:08 | 3330930 NotApplicable
NotApplicable's picture

I bet the MSM will be too busy tomorrow going on about the assault weapons ban to care.

Thu, 03/14/2013 - 18:15 | 3330950 whotookmyalias
whotookmyalias's picture

I'm shocked, shocked to find that lying is going on in here:

http://www.youtube.com/watch?v=SjbPi00k_ME

 

Thu, 03/14/2013 - 19:21 | 3331127 NoDebt
NoDebt's picture

Remember, it's not a lie if YOU believe it.  (George Costanza)

Thu, 03/14/2013 - 21:30 | 3331422 espirit
espirit's picture

There's a new boss in town now, and many CEO's have been too greedy.

Expect some changes soon, like early retirements, mysterious dissappearances, or suicides from high places.

Fri, 03/15/2013 - 00:13 | 3331634 prains
prains's picture

Jamie Dimon looks like he's spent his entire life puckered up so tight he could hit a thirteen minute long treble C on a trombone

 

 

 

I am Miles Davis and I approve this message

Fri, 03/15/2013 - 12:01 | 3332633 icanhasbailout
icanhasbailout's picture

Let the pro forma wrist slapping ceremony commence!

Thu, 03/14/2013 - 18:15 | 3330954 nope-1004
nope-1004's picture

JPig is insolvent.  Dimon is a fraud and a liar.  But, lets keep this theater going "so we don't have an economic problem"..... lol.  Joke.

 

Thu, 03/14/2013 - 18:15 | 3330957 Ahmeexnal
Ahmeexnal's picture

Now we know why JPM crashed tomorrow.  Naked shorting never seemed so fun.

Thu, 03/14/2013 - 18:04 | 3330907 eatthebanksters
eatthebanksters's picture

How fucking smart are you now Mr. Dimon?  

Fri, 03/15/2013 - 09:28 | 3332087 mobey
mobey's picture

Haven't you heard?

 

Dimon's picture is next to the word "leader" in the dictionary.

 

Bloomberg told me so.

Thu, 03/14/2013 - 17:40 | 3330825 Cult_of_Reason
Cult_of_Reason's picture

WTF?

Cufflinks with the gold eagle surrounded by "Seal of the President of the United States"

Thu, 03/14/2013 - 17:44 | 3330840 ebworthen
ebworthen's picture

It's like when a kids buys cufflinks for his Dad, because Dad gives the weekly allowance - and the keys to the BMW on prom night.

Thu, 03/14/2013 - 17:49 | 3330842 Cult_of_Reason
Thu, 03/14/2013 - 18:33 | 3331015 newworldorder
newworldorder's picture

Mr Holder is not in office to reconsider his positions. He is in office to cover the back of his president as well as the wishers of his financial clients.

Thu, 03/14/2013 - 20:30 | 3331282 gmrpeabody
gmrpeabody's picture

Yes..., we all know. He is only the head of a clean-up crew.

Thu, 03/14/2013 - 19:17 | 3331118 californiagirl
californiagirl's picture

Someone needs to start a petition on https://petitions.whitehouse.gov/ for a law that requires the AG to start a criminal investigation whenever a $1 billion goes missing or is rapidly lost.

Thu, 03/14/2013 - 21:07 | 3331368 zorba THE GREEK
zorba THE GREEK's picture

What a shame and a waste.....Mr Dimon is such a handsome fellow.

He will have many friends in prison. 

Fri, 03/15/2013 - 08:01 | 3331909 de3de8
de3de8's picture

Why not, he's white.

Thu, 03/14/2013 - 17:40 | 3330830 JPM Hater001
JPM Hater001's picture

Know that every person free man or slave is responsible for their words.

What news do you bring banker?

Cue pit.

Thu, 03/14/2013 - 17:59 | 3330890 Wile-E-Coyote
Wile-E-Coyote's picture

I've had enough of this shit.

Thu, 03/14/2013 - 18:24 | 3330991 gmrpeabody
gmrpeabody's picture

+1000

Thu, 03/14/2013 - 18:02 | 3330898 Wile-E-Coyote
Wile-E-Coyote's picture

REVOLUTION:There I have said it.

What's that buzzing above my house.................. oh shit

Thu, 03/14/2013 - 19:19 | 3331121 Alpo for Granny
Alpo for Granny's picture

But I am SURE Blythe is telling the truth about them not manipulating the price of silver.....

.

.

.

.

.

PSYCH!

Thu, 03/14/2013 - 17:28 | 3330781 SeverinSlade
SeverinSlade's picture

So to summarize: Nothing has changed since 2008 regarding too big too fail.  The ONLY thing that has happened is we now have WTMFBTF: Way too mother fucking big too fail.

Thu, 03/14/2013 - 17:38 | 3330817 McMolotov
McMolotov's picture

This is why he's richer than us...

Thu, 03/14/2013 - 18:21 | 3330974 nope-1004
nope-1004's picture

"TBTF" was coined by those either in the firm or those that have a vested interest that it be kept alive.  May have been coined by the Fed, so they use JPig to keep interest rates low by showing fake demand through IRSwaps and to keep a lid on PM's.  Of course, I have no proof, and to think in such fairy tale terms would be ridiculous, so silly me.

 

Thu, 03/14/2013 - 17:29 | 3330782 optimator
optimator's picture

The correct prase is "He misspoke".

Thu, 03/14/2013 - 17:48 | 3330850 GolfHatesMe
GolfHatesMe's picture

Mis-remembered

Thu, 03/14/2013 - 17:29 | 3330787 LongSoupLine
LongSoupLine's picture

Well, well, well...

Fucking execute those fuckers. Fucking period! Take them all out to the fucking public square, led by chief fucker Dimon and fucking put them feet fucking first through a fucking woodchipper. Fucking hot shit eating fuckers. Die.

Thu, 03/14/2013 - 17:32 | 3330801 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

You sir put the fuck in catharfuckingsis.

Thu, 03/14/2013 - 17:40 | 3330823 McMolotov
McMolotov's picture

It's possible you outpace Deadwood when it comes to F-bombs, an impressive feat.

Thu, 03/14/2013 - 18:05 | 3330915 Wile-E-Coyote
Wile-E-Coyote's picture

You forgot the drugs to keep them concious.

Fri, 03/15/2013 - 02:03 | 3331741 Rogue Trooper
Rogue Trooper's picture

Understandable, in 'his' justifiable 'rage'... still it's noted now and an easy fix.  I would add these will be live streamed free to anyone.  Send the bill for any associated cost to the families.

Rogue

Thu, 03/14/2013 - 19:24 | 3331135 Alpo for Granny
Alpo for Granny's picture

Again, LSL with an always impressive 10/40,  fuck/word ratio.

*golf clap*

Thu, 03/14/2013 - 19:52 | 3331178 gould's fisker
gould's fisker's picture

It's about time LSL that you made your return--people were in withdrawals around here.

Fri, 03/15/2013 - 11:08 | 3332451 awakening
awakening's picture

Now that is impressive :)

Thu, 03/14/2013 - 17:29 | 3330790 Longtermnotreally
Longtermnotreally's picture

Too big to be, or not to be

Thu, 03/14/2013 - 17:30 | 3330791 Rainman
Rainman's picture

We know how this ends. Wristslap fine, Jamie forfeits his made up million dollar bonus and cartel life goes on.

Thu, 03/14/2013 - 17:30 | 3330792 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Any way to zoom in that picture of the wrist cuff on the article some more?

Thu, 03/14/2013 - 17:47 | 3330848 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Thank you sir. I'd say the symbolism is clear and the message he is trying to project is clear also. His hubris is going to get him a stray bullet in his head or ass raping by bubba at club fed if someone grows a pair finally. One way or the other it always catches up to you.

Thu, 03/14/2013 - 17:57 | 3330863 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Also as an aside on that article and shows how sloppy MSM has become.

"As JP Morgan CEO Jamie Dimon sat before a congressional committee answering questions about his institution's two billion dollar-plus loss, an accessory to his expensive-looking navy blue suit and white collard-shirt was of interest: his cufflinks..."

 

You think someone over there would take 30 seconds to run the article through a spell check before publishing. You expect that stuff from commenters or fringe blog and news sites. CBS is one of the highest standards of journalistic news. /sarc

Thu, 03/14/2013 - 18:06 | 3330923 NotApplicable
NotApplicable's picture

First (I didn't junk you), but I wanted to point out the futility of spell-check to point out properly spelled words.

Besides, who knows, maybe his shirt was made from bleached hite collard greens?

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