JPMorgan Chase: 50 Shades of Shit

It’s Now Official: The Financial House that Jamie Dimon Built Is the Riskiest Bank in the United States

By Pam Martens and Russ Martens: June 16, 2021 ~

Corporate media outlets like Bloomberg News, the CBS news program 60 Minutes, and CNBC have been seduced into obsequious behavior when it comes to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, despite the fact that Dimon has presided over the most unparalleled crime spree in the history of U.S. banking. Between 2014 and September of last year, JPMorgan Chase has been charged with five criminal felony counts by the U.S. Department of Justice. The bank admitted to all five counts. (See the bank’s detailed rap sheet here.)

Despite this crime spree and endless probation periods followed by more crime, Dimon has further seduced federal bank regulators into allowing his unrepentant behemoth to become the most systemically risky bank in America. That assessment is not our opinion. It is the assessment of the federal government based on hard data.

The National Information Center is a repository of bank data collected by the Federal Reserve. It is part of the Federal Financial Institutions Examination Council (FFIEC), which was created by federal legislation to create uniformity in the examination of U.S. financial institutions by the various banking regulators.

Each year the National Information Center creates a graphic profile of banks measured by 12 systemic risk indicators. The data used to create these graphics come from the “Systemic Risk Report” or form FR Y-15 that banks are required to file with the Federal Reserve. To measure the systemic risk that a particular bank poses to the stability of the U.S. financial system, the data is broken down into five categories of system risk: size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity. Those measurements consist of 12 pieces of financial information that banks have to provide on their Y-15 forms.

The most recent data for the period ending December 31, 2019 indicates that in 8 out of 12 measurements – or two-thirds of all systemic risk measurements – JPMorgan Chase ranks at the top for having the riskiest footprint among its peer banks.

To put it another way, the largest bank in the United States with an apparent insatiable appetite to commit felonies is also the riskiest bank based on other key metrics.

One of the 12 financial metrics is based on the Intra-Financial System Liabilities of each bank. This shows how much money a particular bank has at risk at other banks by using inputs such as how much of its funds it has on deposit with, or has lent to, other financial institutions; the unused portion of any credit lines it has committed to other financial institutions; and its holdings of debt, equity, commercial paper, etc. of other financial institutions. The idea, obviously, is to understand the interconnectivity of systemically-risky banks and whether one could cause a daisy-chain of contagion with other banks. (Think Lehman Brothers and Citigroup in 2008.)

JPMorgan Chase looks particularly dicey in terms of its Intra-Financial System Liabilities. The 2019 data indicate that JPMorgan Chase has $394.86 billion exposure in that category, which is $143 billion more than the next riskiest bank in that category, the Bank of New York Mellon.

Source: National Information Center

Equally unnerving, JPMorgan Chase ranks number one in the instruments that assisted mightily in blowing up Wall Street in 2008 – OTC (Over-the-Counter) derivatives. These are private contracts between two parties and lack the transparency or protections of being traded on an exchange. This means if the counterparty defaults and the exposure is large enough, it could put a federally-insured bank at risk. This is not a hypothetical outcome. The giant insurer, AIG, blew itself up in 2008 because it was holding tens of billions of dollars in OTC derivative contracts for the biggest banks on Wall Street that it could not pay its obligations on. The U.S. government was forced to nationalize AIG and paid more than $90 billion to the banks for their AIG derivative contracts and securities lending obligations that AIG could not make good on.

Among the biggest banks on Wall Street, JPMorgan Chase has the largest exposure to OTC derivatives, with $43.5 trillion exposure, according to the National Information Center data.

Source: National Information Center

As you might recall, the Dodd-Frank financial reform legislation of 2010 was supposed to end the hubris of OTC derivatives and force these vehicles into the sunlight of exchanges and central clearinghouses. But that hasn’t happened. Corporate business media is simply declining to report on it. According to the Office of the Comptroller of the Currency, the federal regulator of national banks, as of December 31, 2020, only “35 percent of banks’ derivative holdings were centrally cleared.” That’s more than a decade after the “reform” legislation was signed into law.

What you don’t want a high-risk institution to be is a pivotal cog in the U.S. payments system. But according to the Center’s data, that’s exactly how JPMorgan Chase has maneuvered itself. The bank was responsible for $337.49 trillion of the U.S. payments system in 2019. That’s more than the next two largest banks in that category combined: Bank of New York Mellon at $169 trillion; and Citigroup at $158 trillion.

Source: National Information Center

Outside of Wall Street On Parade, there are only two trial lawyers who seem to comprehensively understand what is really going on at JPMorgan Chase. In 2016 Helen Davis Chaitman and Lance Gotthoffer, wrote a book, JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook, comparing the bank to the Gambino crime family. The lawyers wrote:

“In Chapter 4, we compared JPMC to the Gambino crime family to demonstrate the many areas in which these two organizations had the same goals and strategies. In fact, the most significant difference between JPMC and the Gambino Crime Family is the way the government treats them. While Congress made it a national priority to eradicate organized crime, there is an appalling lack of appetite in Washington to decriminalize Wall Street. Congress and the executive branch of the government seem determined to protect Wall Street criminals, which simply assures their proliferation.”

Chaitman and Gotthoffer write further in their book:

“If Jamie Dimon is running a criminal institution, he should be prosecuted for it. And law enforcement has the perfect tool for such a prosecution: the Racketeer Influenced and Corrupt Organizations ACT (RICO).

“Congress enacted RICO in 1970 in order to give law enforcement the statutory tools it needed to prosecute the people who committed crimes upon orders from mob leaders and the mob leaders themselves. RICO targets organizations called ‘racketeering enterprises’ that engage in a ‘pattern’ of criminal activity, as well as the individuals who derive profits from such enterprises. For example, under RICO, a mob leader who passed down an order for an underling to commit a serious crime could be held liable for being part of a racketeering enterprise. He would be subject to imprisonment for up to twenty years per racketeering count and to disgorgement of the profits he realized from the enterprise and any interest he acquired in any business gained through a pattern of ‘racketeering activity.’ ”

On September 16, 2019 two current and one former trader at JPMorgan Chase were charged under the RICO statute for turning the precious metals desk of JPMorgan Chase into a racketeering enterprise. Dimon got a pay bump for his “performance” that year to $31.5 million.

There Is Not One Elected Official at the Federal Reserve

There Is Not One Elected Official at the Federal Reserve, But It Has Been Unilaterally Rewriting the Rules on Wall Street Since 2007

By Pam Martens and Russ Martens: June 9, 2021 ~

Source: https://wallstreetonparade.com/2021/06/there-is-not-one-elected-official-at-the-federal-reserve-but-it-has-been-unilaterally-rewriting-the-rules-on-wall-street-since-2007/

The Federal Reserve will release the results of its stress tests of the mega banks on Wall Street on June 24. That exercise is nothing more than a shell game to mislead Congress and the public into believing that actual due diligence is being done by the Fed on these massive federally insured banks with their inhouse trading casinos. (See Three Federal Studies Show Fed’s Stress Tests of Big Banks Are Just a Placebo.) In reality, the Fed is a completely captured appendage of Wall Street.

The Fed has outsourced the nitty-gritty supervision of Wall Street banks to the New York Fed, which is, literally, owned by the same banks. (See These Are the Banks that Own the New York Fed and Its Money Button.)

That the Fed is still allowed by Congress to have anything to do with supervising these banks shows just how far down the rabbit hole Wall Street’s money and influence in Washington has taken the country.

There is only one institution in America that has less credibility than the mega banks on Wall Street. That’s the Federal Reserve. Despite not having one elected official among its ranks, the Fed has unilaterally altered the U.S. financial system into a grotesque version of itself.

Let’s start with what the Fed did beginning in December of 2007 without any approval from Congress. The Fed created a sprawling octopus of bailout programs for the mega banks and their foreign derivative counterparties. The Fed then battled in court for years to keep Congress and the public from learning the astronomical sums the Fed had spent to prop up failed banks across Wall Street. When the government finally released an audit of the Fed’s bailout programs on July 21, 2011, the tally came to a cumulative $16 trillion. (See chart below.) But when the Levy Economics Institute added in other Fed bailout programs that the government audit had bypassed, the actual tally came to $29 trillion.

In what kind of democracy does an institution lacking even one elected official get to unilaterally prop up insolvent banking behemoths after those same banks cratered the U.S. economy through the creation of fraudulent mortgage products?

When the government audit was released, the office of Senator Bernie Sanders of Vermont released a statement, which read in part:

“The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.”

Sanders stated at the time, “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”

That statement from Sanders came almost a decade ago in July 2011. Not only has the Fed not been reformed but it has unilaterally given itself new powers to replace the free market’s setting of interest rates for its own regime of Fed administered rates.

How is the Fed administering rates? It has ballooned its balance sheet to $7.9 trillion (yes, trillion) by gobbling up Treasury securities and mortgage-backed bonds from the surpluses on Wall Street and parking them on its own balance sheet. It’s been engaged in this sleight-of-hand, which it quaintly calls “quantitative easing” since the financial crisis of 2008.

On December 12, 2007, the Fed’s balance sheet stood at $881.75 billion. It has exploded to nine times that amount in the span of 13-1/2 years.

Even Fed insiders have spoken out against these artificially low interest rates administered by the Fed. Eric Rosengren, President of the Boston Fed, noted the following in a speech he delivered to the Marquette University Economics Department on October 8, 2020:

“…the extended low interest rate environment after the Great Recession helps explain why the leverage ratio rose over the past 10 years. Corporations increased their leverage as the prevailing low interest rate environment provided more capacity to take on debt.

“However, in an economic downturn, greater leverage – with its principal and interest repayment demands – may prove problematic for firms, or by extension the economy. This can result in firms being forced into bankruptcy, which hurts a wide range of stakeholders in addition to lenders and investors, including customers, suppliers, and employees.”

Rosengren added later in the speech:

“Clearly a deadly pandemic was bound to badly impact the economy. However, I am sorry to say that the slow build-up of risk in the low-interest-rate environment that preceded the current recession likely will make the economic recovery from the pandemic more difficult.”

The mega banks on Wall Street that are supposed to be supervised by the Fed are among those corporations that have gorged on debt. According to a June 2020 article at Bloomberg News, four of those banking behemoths have also been paying out more than they earned for years. The article revealed the following about the dividends and stock buybacks at Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo:

“From the start of 2017 through March, the four banks cumulatively returned about $1.26 to shareholders for every $1 they reported in net income, according to data compiled by Bloomberg. Citigroup returned almost twice as much money to its stockholders as it earned, according to the data, which includes dividends on preferred shares. The banks declined to comment.”

Citigroup was the largest of the bank basket cases during the crash of 2008. It received a secret $2.5 trillion in cumulative loans from the Fed. (See chart below.) The Fed was not permitted by law to make loans to an insolvent institution. But it decided, on its own, to make loans to this highly questionable institution.

Just how little Congress has done to rein in the Fed is clear from the multi-trillions of dollars the Fed showered on Wall Street trading houses during the repo loan crisis that began on September 17, 2019 – months before there was any COVID cases reported anywhere in the world. (See Fed Repos Have Plowed $6.6 Trillion to Wall Street in Four Months; That’s 34% of Its Feeding Tube During Epic Financial Crash.)

The Fed is not just administering interest rates. It is also administering the stock market. On March 12 of last year, the Dow was down 1900 points intraday and looking like it was about to plunge further. The Fed directed the New York Fed to make the announcement that it would be offering an unprecedented $1.7 trillion in repo loans to its primary dealers (trading houses on Wall Street) over that day and the next. The Dow immediately shaved 500 points from its losses.

As we reported on that date:

“To prop up the stock market further, the Fed announcement indicated that the $500 billion in 3-month loans and $500 billion in one-month loans will be offered weekly ‘for the remainder of the monthly schedule.’ That means $1 trillion a week will be available at below-market interest rates. That will be on top of the $175 billion the Fed is offering daily in one-day loans and the $45 billion it is offering each Tuesday and Thursday in 14-day loans. This is a dramatic expansion of the Fed’s balance sheet to support Wall Street — all without one vote, or debate, or hearing occurring in Congress.”

GAO Data on Fed’s Emergency Lending Programs During 2007-2010 Financial Crisis

Related Articles:

In the Midst of a Liquidity Crisis, the Fed Rolls Back Liquidity Requirements at Banks

Fed’s Latest Plan for Bailing Out Wall Street Banks: Let Them Overdraft their Accounts at the Fed

Despite Its Five Felony Counts, the Federal Reserve Has Entrusted $2 Trillion in Bonds to JPMorgan Chase

This Fed President Thinks Wall Street Banks Should Stop Whining for the Fed to Bail Them Out and Plan for their Own Liquidity

The Fed Has Created the Big Lie for Congress on its Repo Loans while the New York Fed Blocks Freedom of Information Requests

The Fed Is Offering $100 Billion a Day in Emergency Loans to Unnamed Banks and Congress Is Not Curious Enough to Hold a Hearing