Served by Jesse of Le Café Américain
“Flagrant evils cure themselves by being flagrant…” John Henry Newman
Why the surprise? This is what the Wall Street banks do, even under a ‘reform’ administration. They use their customer money and public funds, for which they pay a pittance, to speculate in markets, distorting prices and taking enormous risks, in order to pay themselves outrageous bonuses. They buy politicial influence to enable regulatory capture and support their financial schemes. And when their bets go wrong, the public absorbs the losses. This is the model of US gangster banking in the 21st century.
The Obama Administration cannot energize their health care reform because the public demands reform in the financial sector, and quite frankly Obama has lost the ‘high ground’ of the reformer by his inability to free his administration from the growing taint of scandal and conflicts of interest.
So it remains for the rest of the world to begin to rein in the outrageous behaviour of the US financial institutions that treat the world’s bourses as their private casinos.
For a party that spent eight years on the sidelines, the American Democrats have proven themselves to be particularly inept at doing anything to promote their agenda once presented with a solid majority by the voting public. One has to wonder if they ever intended to deliver on their promise of change at all.
The banks must be restrained, and the financial system reformed, before there can be any sustainable recovery.
Blair bank targeted in £8.5bn FSA probe
By Ben Laurance
10th August 2009
The bank where Tony Blair is an adviser is the target of an unprecedented probe involving billions of pounds of customers’ funds, the Daily Mail can disclose.
JP Morgan Chase, whose chief executive Jamie Dimon last year recruited the former prime minister as an adviser, is being investigated by the City’s watchdog, the Financial Services Authority for allegedly failing to keep track of £8.5billion of clients’ money.
The FSA has called in a top firm of accountants to examine the bank’s London activities after evidence emerged that JP Morgan had mixed customers’ funds with its own.
Banks are meant to maintain a strict segregation of their own money from that which is held on behalf of clients.
But JP Morgan managers in London discovered last month that client and bank money used for trading futures and options – a way of speculating on movements in currencies, share prices and commodities – had apparently been put into a single pool.
They raised the alarm and notified the FSA. The scale of case is unprecedented, say City insiders. The FSA has penalised small firms in the past for mixing funds owned by clients and the banks themselves.
But this is thought to be the first case involving such a large household name.
JP Morgan Chase faces the threat of an unlimited fine if the watchdog decides enforcement action is necessary.
News of the FSA investigation will come as a huge embarrassment for the bank, which is valued on Wall Street at £100billion.
It is thought that the JP Morgan Chase problem dates back to late 2002. This followed the takeover of JP Morgan by Chase Manhattan two years earlier.
Assets were not segregated to protect clients as FSA rules demand, insiders believe.
When the issue first came to light last month and the FSA was told, the authority called in specialists from leading accountancy firm KPMG to investigate.
The cost of the probe – known as a section 166 review – will be met by the bank.
Sources say that KPMG’s team of investigators has been working at JP Morgan Chase’s offices on London Wall in the City, combing through records and e-mails and interviewing staff.
Bank employees who were involved in handling client funds in 2002 as well as those still responsible have been questioned. The KPMG team has been asked to find out what checks, if any, were made to ensure that clients’ money has been kept safe and segregated.
The accountants have also been asked to calculate if clients lost out because they were not paid any interest they might have been due.
Senior figures at the bank could be reprimanded or even barred from working in the City if the FSA concludes that they were slack in setting up systems for separating customers’ funds.
The accountants have been asked to deliver their preliminary findings to the FSA by the end of this month. A final report is due by the end of September. These reports will not be made public – unless the FSA subsequently decides that the bank should be punished.
JP Morgan Chase has been regarded as one of the more robust of the banks to emerge from last year’s meltdown in the global financial system. Among the six largest U.S. banks, it is the only one to have stayed consistently in the black since the recession began in 2007.
But it still took £15billion last year under the U.S. government’s programme to prop up the financial system. The money has since been repaid.
Last month, the bank reported quarterly earnings of £1.64billion, which was a major factor in spurring the recovery in its shares and in Wall Street prices as a whole.
A report last week showed that last year, the firm paid bonuses of £600,000 ($1m) or more to 1,626 employees. Of those, more than 200 received at least £1.8m. The top four earners received a total of nearly £45million between them…