October 21st, 2013
Gordon Kerr, founder of Cobden Partners, has an interesting take on the $13 billion settlement that JPMorgan Chase is due to agree with the U.S. authorities to end civil claims over its sales of deceptive mortgage bonds. Speaking to Bloomberg TV’s Guy Johnson on “The Pulse” Kerr makes some interesting points.
(1) He suggests that Jamie Dimon, chief executive of JPMorgan, entered into this deal in order to draw a veil over “a far greater level of wrongdoing at the bank”.
(2) Given the fact that the wrongdoing for which JPMorgan is being penalised emanated from the two banks it rescued at the US government’s behest during the financial crisis — Washington Mutual and Bear Stearns — “in order to help the taxpayer” why else would it be settling in this hugely expensive way?
(3) In JPMorgan’s discussions with the U.S. Department of Justice and the attorney general’s office, its objective has been to “try to limit the scope of the criminal investigation”.
(4) “Banking has become so bad — the laundry list we can easily go through — bankers simply didn’t really realise that what they were doing was wrong any more”
(5) The $13bn mortgage bonds settlement kind of proves that the banking bailouts of autumn 2008 were misguided. “If the bailouts had been intended to, in any sense, reform banking behaviour, they haven’t worked”.
(6) Not even a five-year-old child would buy JPMorgan’s original line about the London ‘whale’s’ trading losses. The claim was that these losses stemmed from failed attempts to hedge its own position and not from proprietary trading.
By the way Kerr, a reformed City of London trader who advises sovereign states on how overcome fundamental problems with their financial system, knows his stuff about modern finance and the financial markets. He is author of How Europe’s IFRS accounting rules are destroying its banks. (which can also be read on Bloomberg) and The Law of Opposites: Illusory Profits in the Financial Sector.