Sunday, October 20, 2013

Selling Souls for $13 Billion

Word on the street is that the price of justice has just been auctioned at $13 billion.  Reportedly this past Friday afternoon, JPMorgan Chase Chairman, President, and CEO (can anyone say too many titles?) Jamie Dimon connected with the indulgences-minting Attorney General Eric Holder to see what the going rate for crime is these days.  There’s no question that JPMorgan defrauded investors.  There’s no question that they were not acting in isolation.  There’s no question that the actions they initiated were in violation of numerous laws designed to protect investors and the general public from misdeeds that triggered the Great Depression.  And there’s no question that the U.S. government has sold integrity before and has every intention of selling it again.  The part of the about-to-be-settled complaint that I find priceless is claim 686 on page 260 where the government alleges that, “GSEs justifiably relied on false representations and misleading omissions of J.P. Morgan Acquisition,” (et al) and Claim 687 on the following page, “would not have purchased the GSE certificates,” had they been exposed to the true facts.

Now grab your box of tissues because, according to the civil and criminal complaint, the “immediate victims” were Fannie Mae and Freddie Mac – two dignified, upstanding government sponsored entities whose mission is to provide “affordable housing to millions of Americans.”  The SHAME!  These poor, helpless co-conspirators (oops, how did that get in there?) were too dull minded to know that they were being duped and they – not the ignorant public – were the victims.  The Federal Housing Finance Agency’s (FHFA) September 2, 2011 complaint identifies over $30 billion in securitizations that were subject to the alleged frauds enumerated in the over 260 pages of Quinn Emanuel billable hours.  Over 50 persons and corporations listed as defendants created over 100 “investments” that turned out to be gross misrepresentations of Americans’ ability to live within their means.  Uh oh!  Who is the victim now?  Oh, and the Securities and Exchange Commission (not named as a co-defendant) reviewed the Prospectus for each of the securities and no one there is culpable?  Seriously?

Just when you thought the criminality of the system couldn’t get more outlandish, Warren Buffett dismissed crimes against investors with the pandering statement that, “If a cop follows you for 500 miles, you’re going to get a ticket.”  Well Oracle of Omaha, thank you for punctuating the indictment on the market and any sense of propriety.  “You can’t be active in a big business without making some mistakes, and sometimes they may be big ones,” he clarified. 

Mistakes?  Getting a ticket?  Warren, get a grip, man!  These are not misdemeanors and accidental oversights.  These are crimes perpetrated against millions of people for billions of dollars of damage.  And when the public is told to just look the other way courtesy of $100 million here and $13 billion there, the contempt for justice and the rule of law actually goes up.

In his testimony in January 2010, Jamie Dimon blamed most of his firm’s troubles on “some unscrupulous mortgage salesmen and mortgage brokers.”  He also stated that, “you know, that home prices don’t go up forever and that it’s not sufficient to have stated income in home [loans].”

Now before you go off and conclude that I find Jamie and the JPMorgan gang unique in their behavior, think again.  The one place where I agree with Warren Buffett is in his observation that everybody is doing it.  And there’s no question that when the government was trying to staunch the bleeding in the ’08 meltdown, Jamie was asked to pull a whale of a task in swallowing the toxic Jonahs – WaMu and Bear Sterns – and refer to both as ‘strategic business combination transactions’.  So, while we’re throwing criminals under the bus, let’s think about who was in the White House, the Treasury and the Fed and add them to our perp walk.  He played ball with the cover-up of government endorsed fraud and, in a warped moral contortion, could actually blame the government for a chunk of his problems.  Oh, that’s right, he has!

If the U.S. wants to gain a modicum of credibility for the rule of law, Attorney General Eric Holder and New York Attorney General Eric Schneiderman should walk away from the $13 billion and actually take the real list of defendants to court.  But that would actually demonstrate that the victims weren’t; that the public harm was actually the public’s economic indiscretion orgy coming back to bite all of us; and, that the system hasn’t gotten one bit better since 2008.  There will be no justice in this case because there cannot be any.  In his A Theory of Justice, John Rawls postulates that people determine their perception of justice behind a “veil of ignorance.”  Worse still is a public where justice is ignored in cold, sterile contempt for the rule of law.  Our recent debt drama in Washington, our neglect for our own accountability, and the collective cataracts that blind us to what is being done in our name for our own ‘benefit’ are all symptoms of our incapacity to apprehend morality.  We have, in fact, sold our souls.



  1. Thanks for your comment, Dave. I see that today's Washington Post describes this as a "tremendous" victory for the government, and mentions that criminal action is still a possibility. Is it possible for churches to be educated so they speak out on matter like this? I would hope so, but it's a challenge to get religious communities engaged in major public policy issues that affect the poor.

  2. Ray, this is a great suggestion. I’ve seen, far too often that those in positions of moral suasion see economics as ‘dark arts’ or inaccessible to the masses and, as such, fall silent to self-evident abuses. This is not a new phenomenon. Remember that the current abuse of monetary denominated morality has some of its roots at least in the twelfth century Papal Bull of Pope Innocent III when he co-opted usury to fund the Crusades (including the Children’s Crusade). In his December 17, 1198 missive, he provided a means by which priests could ‘launder’ monies trebling the then doctrine of tithing and did so to insure that the church would have financial standing to influence the state. We’re not much different now so the idea of religious leadership on the topic of money – while laudable – is far from precedential.


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave