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Thursday, 21 November 2013 06:13

Revolving Door Sham: JPMorgan CFO Admits $7 Billion of DOJ Settlement is Tax-Deductible

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chase11 21To hear the number $13 billion dollars as a fine in the much-leaked-but-finally-announced Department of Justice (DOJ) settlement with JPMorgan Chase is meant to imply that the DOJ is getting tough on Wall Street. After all, $13 billion dollars is a jaw-dropping pile of money.

In reality, it is, according to The New York Times only "half the bank’s annual profit." As BuzzFlash at Truthout has pointed out in the past, that still means roughly $6.5 billion dollars in profit for the behemoth financial institution, no apparent cut in the oligarchical compensation of the likes of JPMorgan's chief executive, Jamie Dimon, and no major changes in the salaries or composition of Dimon's executive team.

Furthermore, the NYT reports that "Marianne Lake, JPMorgan’s chief financial officer, emphasized that $7 billion of the settlement was tax-deductible." In addition, as BuzzFlash reported in an earlier commentary, JPMorgan may -- if you can believe this -- may receive several billions of dollars in FDIC coverage that would offset as much as a third of the $13 billion fine.

But then we get down to the basic fact that the DOJ still cannot answer.  How can a bank-too-bit-to-fail commit $13 billion worth of fraud and yet no one committed a crime? Yes, the agreement allows for a Sacramento US prosecutor to pursue some relatively minor criminal charges in California, but that looks like about it.

As the NYT also reports:

Still, some critics of Wall Street are seeking harsher penalties. They question why the Justice Department’s has pursued civil penalties, rather than criminal charges, against the nation’s biggest banks.

“Unless you hold the executives accountable, it really is just the cost of doing business,” said Bart Naylor, a policy advocate at Public Citizen, who noted that the settlements hurt shareholders more than executives.

The answer to that may lie in the fact that there is very little separating Wall Street from the DOJ and other regulators other than a revolving door.

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Journalist Kevin Connor connects many of the dots and collegial interrelationships: "It is quickly becoming clear that JPMorgan’s tentative $13 billion settlement with the Department of Justice is not the massive, overly-punitive sanction that some press reports have made it out to be. The weaknesses in the deal may be explained in part by the fact that in arranging the settlement, JPMorgan was negotiating through the revolving door."

Connor further notes (and provides a damning graphic showing the incestuous relationships between the regulators and regulated -- click here to see):

We have the names of the key players involved, thanks to the New York Times: attorney general Eric Holder, associate attorney general Tony West, and deputy attorney general James Cole at the Justice Department, and JPMorgan CEO Jamie Dimon, general counsel Stephen Cutler, and outside counsel H. Rodgin Cohen on the other side of the negotiating table.

Stephen Cutler, JPMorgan’s general counsel, is the former director of the SEC’s enforcement division, a job which gave him experience and contacts that likely serve him well as he fends off legal challenges to the bank. His new position, of course, is much more financially lucrative: he earned over $5 million from JPMorgan in stock awards alone in 2012 (this excludes all cash compensation).

On the other side of the negotiating table (if there are two sides), Holder, Cole, and West are all former white collar defense attorneys. Holder was a partner at Covington & Burling, where his clients included Bank of America and UBS. Cole was a partner at Bryan Cave, where he was appointed as an independent consultant overseeing AIG’s disclosure and compliance practices (and appears to have failed spectacularly in this task).

And lastly, West was a partner at Morrison & Foerster, where his clients in 2008 included none other than Washington Mutual. WaMu, of course, was acquired by JPMorgan Chase in 2008, and its mortgage lending practices are one major reason JPMorgan has such significant legal exposure. West’s disclosure form lists WaMu as a client in 2008, but does not shed light on the nature of the services that he provided.

Yes, $13 billion dollars in fines sounds gargantuan, but it's really just another public relations stunt to give the appearance of cracking down on epic financial crime.  Jamie Dimon is still running JPMorgan Chase, surrounded by former government regulators and DOJ officials -- and Eric Holder and his crew are doing the resume polishing necessary to return to multi-million dollar legal partnerships defending clients, well ones like Jamie Damon and JPMorgan Chase.

It's all so nice and cozy: you blow up an economy and get a big parking ticket, paid for by the shareholders not the culpable staff of the financial firm.

As the journalist Connor sardonically observes as to the larger issue of unfathomable financial crime going unpunished, "unfortunately, democracy is footing the bill."

(Photo: javacolleen)