Matt Taibbi and Alayne Fleischmann Discuss JP Morgan Mortgage Fraud, Eric Holder CoverUp on Democracy Now

Even though many readers have already read Matt Taibbi’s new article on how Attorney General Eric Holder acceded to Jamie Dimon’s efforts to squelch a criminal prosecution of JP Morgan’s securitization of toxic mortgages, I thought it would be useful to present the Democracy Now discussion of the story, particularly since the whistleblower, Alayne Fleischmann, discusses the case in her own words. Amy Goodman also asks Tabbi late in the broadcast about his departure from First Look.

You can read the transcript here. I wanted to add to this section:

ALAYNE FLEISCHMANN: Well, one issue I had is that although I warned not to securitize the loans, there was no way—I was blocked off, especially after I had raised complaints, from being able to see any of the data or the diligence process, which right there shows that something was wrong. So, after I left JPMorgan, I actually had no idea, for a full four years, that the loans had been securitized. On one hand, I was worried they would, but I really thought no one would ever actually securitize those loans.

MATT TAIBBI: This is an important distinction—


MATT TAIBBI: —because Alayne had no idea that a crime had been committed until she had concrete knowledge that the loans had actually been resold to somebody else. They’re certainly allowed to buy as many bad loans and as many risky mortgages as they want. It’s not until they go to some investor and represent to them that these are, you know, AAA-rated securities or whatever, or highly rated securities, that they’re actually committing fraud. And so, she had no way of knowing that. Even after she was laid off from the company, she had no knowledge of what actually happened. So she couldn’t actually report the crime yet, because she only saw one half of the deal.

I hate to say it, but that view of how JP Morgan could have committed fraud was insufficiently imaginative. Another route was stuffing investment accounts where the bank had discretion. As we discussed previously, JP Morgan’s second biggest private wealth client, Len Blavatnik*, lost $100 million on a $1 billion corporate cash fund across all his business entities. That fund had clear investment guidelines for the investments to be low risk and highly liquid. JP Morgan instead stuffed his portfolio with mortgage dreck when the bank was desperate to unload toxic mortgage paper. Blavatnik argued in a suit against the bank that htat was twice the level of real estate related assets permitted (that even before you get to the issue of the risk level). Blavatnik recovered half the amount he lost. I wonder how much better he would have fared had he had access to Alayne Fleischmann as a witness.


*Blavatnik was briefly a client of mine in the early 1990s.

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  1. psychohistorian

    Thanks for the follow on posting.

    I keep hoping that something like this gets us over the US societal tipping point and it can only do so if it is widely read, which this is not yet according to my skimming of news sources. The other hope I have is follow on civil suits by people like Blavatnik that perhaps have enough money to lawyer up and make a scene/difference.

    And now Obama is heading us back into “boots on the ground” war which will be likely used to choke off any groundswell of disgust over this smoking gun exposure of Jamie and JP Morgan…….ARGH!

    1. James

      Not hard to see where this thing’s headed now, is it? Turn up the boil on the mideast and Ukraine over the next two years while Obama stands by appearing to be clueless (granted, he doesn’t have to expend much effort), followed by a hard right swing in 2016 to put “the adults back in charge.” Won’t matter if it’s HillaBeast, Jebster, or a shyster to be named later, the mantra will be Amerika über alles and let’s get our war face on. It’ll be the only distraction remaining from peak unemployment, peak inequality, peak finance, peak corruption, peak energy, and peak AGW. Americans will once again look high and low, near and far, and cause untold amounts of destruction, devastation, and misery in their search for the source of their problems and never find it because we’re just too damn “exceptional” to look in the mirror.

    2. KMSM

      My only consolation is that “the best-laid schemes of mice and men often go awry.” Two years is a long time, and so much can happen between now and 2016. More of the American public seems to be catching on as to how we’ve been played by both parties. We may see more whistle-blowers and non-violent civil disobedience as Obama abandons any pretense of being the “hope and change” he falsely promised. Oh yes, he’s for change alright, just not the change we were thinking of.

  2. Dave McCrae

    November 6, 2014
    Trenz Pruca
    Company Name
    4321 First Street
    Anytown, State ZIP

    re:Case 1:14-cv-00733-ly
    Dear Trenz,
    I’m looking for legal assistance.
    In March of 2013 my mortgage servicer filed a foreclosure notice and attempted sale of my home. At that time, advance mortgage payments were made well in advance and fully described in the payment record. Due to the highly automated process and lack of human oversight characteristic of that industry at that time, I sought CH13 bankruptcy protection immediately before sale to protect assets.
    Under oversight of the federal trustee, I paid the remaining mortgage balance, and received clear title to property in 2014. I then acted to recover my expenses of defense. An initial pro se filing in 424 Court Burnet County to block sale was resurrected in July of 2014 and moved to Texas Western District Court. I amended complaint to include both the servicer, PHH Mortgage and the Texas mortgage mill, BBDFTE (now BDFTE, B is gone). The 424th had asked my wife to be included as plaintiff, the Western District asked for her to be removed. I filed this action qui tam the Consumer Financial Protection Bureau, who now represents the United States. I reported action to the Department of Justice, who showed no interest. Eric Holder currently runs that operation at his pleasure. I’ve solicited every State AG for any investigatory information they may have in their possession, with cryptic response.
    The defendants denied all actions and asked for dismissal. No one had foreclosed the house. The attempt was unsuccessful. I still live here. I agreed with their position and filed an amended complaint, removing ‘wrongful foreclosure’ and replacing it with ‘consumer fraud.’ The theft is the same. I have the same damages. I filed a demand under Rule 38 for jury trial of issues, and was docketed as such. The defendants employed at least eight attorneys; no one showed interest in attending a Rule 26(f) meeting. I asked the judge to consider order Alternative Dispute Resolution. I filed three settlement offers for the record, with expiration dates. The third offer is currently open, expiring at jury seating. I think I’ve been Fair and Generous.
    While we’ve been litigating my insignificant problems, Eric Holder’s DOJ, and all 50 State Attorneys general, have enteresd consent judgments with JP Morgan/Citibank, Bank of America, Ocwen, Ally, Greentree, and Wells Fargo, for an aggregate of >80 Billion+. The New Jersey Attorney General has entered a consent judgment with PHH Mortgage, one of my defendants here in Texas, at 615 Million. Possibly I’m a member of that class, Group E. No mortgage servicer has gone to trial anywhere in America in front of a jury. continues to lobby in Washington DC for a more effective justice system. A jury in Yuba County, California, has awarded Philip Linza 16 Million, currently being appealed by PHH, who claim they haven’t done nuthin. Last year’s budget for the Mortgage Fraud Task Force was over 545 Million, so they’ve actually been running the only profitable operation in government. PHH Mortgage has about 2.4% of their industry, which is almost insignificant, but they’re the only ones who have damaged me, so they are the only ones where I have standing. In 2Q 2014 they only lost $500M, but they successfully divested themselves of $3.5B in assets of their transportation division and now they have great expectations of success in reengineering themselves and refocusing on their core business. They currently have about 1.2M mortgages under management in 46 states. Mine is paid off.
    On 4 November Judge Yeakel, rather quickly but not unexpectedly, dismissed the case and ordered me to pay some more costs. I offered a bond of One Dollar, possibly costs are higher by now. I believe I’ve at least preserved all necessary issues to the public record on PACER for appeal, and now I’d like to hire an attorney to manage the appeal and intervention. I’m flabbergasted that I’ve been denied a trial by jury. I’m flabbergasted that a Federal judge has effectively entered a judgment without even a cursory review of Rule 26(f) report, Alternative Dispute Report, or any trial exhibits. I feel my civil rights have been violated. I’d like the appeal court to remand the case for proper trial, and compel participation of the US Attorney Office, who appear to have substantial information concerning the mortgage servicing industry in general and PHH Corporation in particular.
    BTW, at this point I have to proceed In Pauperis. I have no money left. I’ll be glad to pay you later.

    For Truth, Justice, and America,

    David McCrae

  3. nat scientist

    This is an example of how Cultural Change trumps Climate Change. A useful diversion from savagery in trade called free-will capitalism, which preserves the individual rights of the risk takers to profit from their imagination, is disabled by the absence of the simple ethics of fair play. This nonsense would be removed by kindergarten cops, but they are busy turning their backs. More fraud than a Roman circus is all we can expect by playing this one out in public, or walk away from the party and play fair and learn real in whatever space one protects.

  4. craazyman

    Holy Global Warming, is she HOT or what?
    Whoa! it makes me nervous just thinking about it
    If they call her to testify in a trial they better check the courthouse’s air conditioning system or the witness stand might catch fire.
    Maybe they can make a TV show about lawyers. She looks like Gwenneth Paltrow!
    OK, Is she a Hollywood actress pretending to be a lawyer? Cmon no foolin. It’s hard to tell in a world of fantasy and make believe just what’s what. Evidently they didn’t have that problem at JPM. Evidently they knew what was what.

    Why would somebody do that? Knowingly defraud and mislead so instead of a 1 million dollar paycheck they can get a 2 million dollar paycheck. Isn’t 1 million with justice worth more than 2 million with fraud? Isn’t a plantation with field hands who get a living wage worth more than a slave farm? Isn’t justice somehow the center of all reality? It’s strange to think of it as a living thing outside of space and time pressing itself down on the earth invisibly and remote but omnipresent as gravity, pressing hard on every mind and soul. Some people think levitation skills are a form of productivity. But it’s really a form of falling. Eventually when it’s time to land it just makes it crash

    1. JEHR

      Craazyman, normally I would chuckle at your antics but maybe you should make fun of something other than a woman’s good looks especially when she is acting in an ethical manner. Would you mention how good looking and buff Jaimie Dimon was as he lied about what JPM was up to?

    2. myshkin

      Mea culpa, Craaze. Regrettably your first paragraph reflects a tranche, so to speak, of my initial thoughts which, beyond the made for TV movie scenario speculation, included what kind of miserable working environment any woman but particularly an attractive young woman would have likely endured at JPM, in what was reportedly, at that time, a testosterone, drug fueled ultra macho, king of the universe, miasmic swamp.

      As for your next paragraph, craaze, after unleashing the id rant you roll out what some might call the super ego musings. Yes indeed with such ambivalence you are indeed craazyman, as are, of course, we all. Well except those sainted among us.

    3. Jackrabbit

      I think Crazzyman is saying, in his own crazzyway, that sacrificial lambs are sooo cute and pretty.

      She was was apparently hired at a point where JP Morgan execs had made a conscious decision to go all in on fraud. They are too smart NOT to have thought of a fall guy/gal. Put her in front of a regulator or on the stand and she’ll get sympathy and reporters might well write about her and what she is wearing – and less about fraud at JPM.

      It would be interesting to hear more from her about what she faced day to day and whether or to what extent she may have felt that she was ‘set up’. She has said that the diligence people were pressured. Apparently many folded. And we know that she was eventually fired. But it would be interesting to hear specifics of the pressure that was put on her (more, less, of a different type?).

      It would also be interesting to hear about what happened to diligence people in general after 2008. Maybe her story will prompt other to come forward? Do those who were fired, as a group, have a cause for action? If so, that would make for some interesting reporting!

      H O P

      1. rusti

        They are too smart NOT to have thought of a fall guy/gal. Put her in front of a regulator or on the stand and she’ll get sympathy and reporters might well write about her and what she is wearing – and less about fraud at JPM.

        Huh? Did I miss some evidence that points to this? It seems a lot more plausible to me that she was just hired under the assumption that like most people she wouldn’t cause a fuss about illegal activity because standing up against powerful interests for the little guy is a hell of an inconvenience. Keeping quiet would have at least allowed her to get another high paying gig within the industry.

        Realistically speaking, even with her coming forward in this way the Dimons of the world are unlikely to view it as more than an annoyance because they know have nothing to fear from the Holder DOJ or whoever the next puppet is that replaces him.

        1. Jackrabbit

          This is speculation as to why her looks might be relevant; prompted by Crazzyman’s remarks.

          The “evidence” is all circumstantial:

          – execs knew they were doing wrong (no emails)

          – the compliance/diligence department head couldn’t/wouldn’t push back

          – Mid-level execs would be thrown under the bus; that JPM paid $9 BILLION to settle suggests that top people were involved in some way

          If top management gave the green light to fraud (running interference against those that would object), then it seems likely that they would have given some thought to where the blame would fall.

    4. optimader

      “She looks like Gwenneth Paltrow”
      G Paltrow? Crazymaan, you disappoint me.

      Were certainly in agreement regarding Ms. Fleischman, indeed very attractive. I hope that was/is played to full advantage in this case.
      Holder is so full of sht, no bank is to big to prosecute. Just an incredibly stark lie. Impeachment proceedings should have started the next day for both Holder and BHO.

      1. optimader

        btw I am having a very very hard time not wishing for the worst RE: JD health. Very hard. He is just plain evil.

  5. Eclair

    Craazyman, if I saw a picture of you, I might remark that you were a HUNK! Week’s award for cutest butt! And pecs to die for! And then go on to appreciate the wit and acumen of your frequent observations here on NC.

    But … I wouldn’t. Because, in this venue, which is NOT a locker room or a bar or a construction site, how you look has no relevance at all. It is the quality of your mind that interests us.

    So, please discontinue stooping to the juvenile level of males who, by objectifying an attractive woman as sex object, subtly belittle her courage and intelligence and professionalism.

    And, if you were old, ugly and repulsively wrinkled, with balding pate, pot belly and sagging jowls, I still would not remark on it. In this venue.

    1. craazyman

      oh lord, what is this Church Lady Morning?
      an artistic impression is NOT the same thing as a prurient leer at a person’s anatomy (although I wouldn’t mind if you’re a woman and wanted to check out my butt, however if you’re a man I’d get a little uncomfortable). Did you evver see that Eddie Murphy concert where he riffs on that? hahahah. Totally hilarious. Anyway my observation was entirely aesthetic, like looking at a drawing by Leonardo or even Dhurer. sometimes he’d draw a woman and it would look kind of weird but the more you looked at it the more you thought “actually that’s beautiful’ It’s weird how he could do that.. If you re-read my sentences you’ll see & you will regain your composure.

      if Jamie Dimon won’t give her the old job back and tell her clean house, Mike Bloomberg probably would. He likes to surround himself with hot women. That’s just a fact. I once went to the Bloomberg Tower for a training session on the Bloomberg Terminal back in 1999 at it was like happy hour at Hooters. No lie. WTF? Even I was a little taken aback. It’s not a fair world so justice must be outside of space and time. That’s why it’s so hard, because it hides behind faces of beauty and faces of pain.

  6. Blurtman

    So yet another statement of fact that the TBTF’s knowingly packaged and sold toxic securities, and that the rating agencies played along. This is a crime. Worse, these actions created a very significant economic crash that ruined the lives of millions. And at least one TBTF also took out “insurance” on the dreck they created and sold, and knew was toxic, and when they destroyed their incompetent insurer, had their former CEO, now the head of the US Treasury, engineer a bail-out of the insurer so they could continue to cash in on the rest of their fraud.

  7. Kim Kaufman

    Surprised no one commented about First Look. Sounds like it should be called No Look because Taibbi either went over there with this story or found it early and wasn’t allowed to publish. He’s been sitting on it for a while. Apparently Taibbi couldn’t turn it into a humor piece. Hmmm, wonder why Omidyear wouldn’t want something like this published – it would have put Taibbi’s new project on the map.

    1. wendy davis

      Yes, Pierre’s attempts to rebrand Taibbi’s *mission* as satire seemed like a pre-emptive strike to show that Matt just likes to horse around or something.

      The author of that New York Mag piece actually said that Omidyar was skewered for ‘trying to give away his fortune’ with his many faux-lanthropic projects, then engaged in passive voice about how hideous the results of his micro-financing scheme in India turned out. Ah, well, Pierre’s motto is: if something fails, try something else, ho hum. His web page on his ‘philanthropy’ actually notes that it doesn’t mean ya can’t make some money, too!
      I will say that Julian Assange has been having some great fun with all of this on Twitter.

  8. KMSM

    Taibbi remarked at the end of that transcript about the shift that has occurred in American white collar crime. Eric Holder represents a “sea change” that has occurred:

    And there are really two types of people that I talk to who are prosecutors. One is the kind of old-school law enforcement type that want to get the bad guy at all costs, and they’re really career civil servants who just want to do their jobs and want to see justice happen.

    And then there’s this new kind of person who’s appearing in government now, who comes out of the corporate defense sector. These are people who grew up as corporate lawyers defending companies like Chase and Bank of America. And that’s who Eric Holder is, very pointedly.

    He spent a long time at a company called Covington & Burling. And this type of lawyer, this type of law enforcement official, is much more interested in coming up with a settlement that everybody feels good about when they walk out of the room, as opposed to the old-school kind of justice where the bad guy gets his or her comeuppance in the end. And I think his tenure was very representative of a big sea change in the way we do white-collar crime in this country.

    1. psychohistorian

      And don’t forget, Holder is part of the team that developed MERS.

      It is not just where these folks come from but that they seem to be part of a conscious effort to subvert the criminal justice system. And they have succeeded as far I can tell. Look at all the pot smokers in jail and all the corrupt in government and finance that aren’t.

      The longer this inhumanity goes on, the more wrenching will be the blow back. It is hard to keep 7+ billion people under one very small thumb.

      1. KMSM

        The longer this inhumanity goes on, the more wrenching will be the blow back. It is hard to keep 7+ billion people under one very small thumb.

        Exactly. Worth repeating: Nick Hanauer’s TED talk in August 2014: “Beware, fellow plutocrats, the pitchforks are coming.” Although he’s primarily addressing economic inequality, the legal / political / social injustices — chronicled by Taibbi (and many others here and elsewhere) — helped bring that inequality about.

    2. Jim

      This is an important insight by Taibbi.

      Lets assume for a,moment that our modern Big State is now primarily run by “civil servants” who are only interested in a win for Big Capital and Big State constituencies.

      In addition to the above revelation about the U.S. Department of Justice, it has recently been documented( see NC discussion of AIG case) how Big Bank (the Federal Reserve) along with the Treasury Department and the rest of the Executive Branch and finally Congress were committed from the very beginning of the financial crisis to injecting U.S. taxpayer capital directly into largely insolvent private-sector banks– the same institutions that created the 2008 financial crisis to begin with.

      How can a Big State strategy for positive political change in the future (think those who are hopeful about some type of Social Democratic New Deal)– that is largely dependent on an expired cultural attitude of Big State Civil servants who no longer believe in getting the bad guys no matter what—ever be able to serve and represent the interests of the American people?

      1. flora

        I think you are confusing career civil servants with the politically appointed, non-civil servant heads of departments. Holder, for example. Everything I’ve read suggests it’s the political appointees who have quashed the career civil servants attempts to hold the banks accountable.

        1. JTFaraday

          That might be an interesting distinction to investigate. I wouldn’t necessarily buy it without investigating it however.

          When stuff was coming out about the Energy department under the Bush Admin,** it seemed like pretty much everyone who worked there thought that their purpose was to further industry interests, pace “what’s good for GM is good for America.”

          That was the culture there, and until (rather very) recent times most of America approved– because jawbs, aggregate demand, etc. It seems to me that it is much more difficult to untangle government promotion of business interests from its regulatory mandate(s) than people have traditionally acknowledged.

          **re: Bush Energy Department, I didn’t take the time to look for “the best” link, but here’s “a” link on one (sub)department–note that even this quick search nets us some “lower ranking officials”:

          ““A culture of ethical failure” pervades the agency, Mr. Devaney wrote in a cover memo.

          The reports portray a dysfunctional organization that has been riddled with conflicts of interest, unprofessional behavior and a free-for-all atmosphere for much of the Bush administration’s watch…

          The report said that the officials told investigators that the gifts and socializing did not affect how they treated the companies in their official duties.

          They also said they did not view socializing with oil company representatives and taking gifts as inappropriate because they said they needed to be part of the marketing culture in order to market the program’s oil and gas. Several of the lower-ranking program officials have been transferred out of their old jobs, the report said. It recommended stronger supervision and a series of changes to make clearer the limits of acceptable behavior, some of which Mr. Luthi said have already been implemented.”

        2. Jim

          Flora, you raise a good point which needs to be flushed out much more in our collective discussions.

          When I look, for example, at the individuals and networked groups involved in the National Security part of the National State I often look to the 2011 series of articles in the Washington Post called “Top Secret America.”

          The authors identified 46 federal departments and agencies (with thousands of career civil servants) engaged in classified national security work– with their mission ranging from intelligence gathering and analysis to war operations, weapons development and cyber support. The size and the budget is estimated at over $1 trillion, if you also include private contractors operating at more than 10,000 locatlons throughout the U.S.

  9. flora

    I noted Taibbi’s remarks about the ‘new kind of prosecutor’ as well. Many of these ‘new kinds’ are appointed by politicians who don’t want regulations enforced, apparently.

  10. Sluggeaux

    Let me invite you non-lawyers to read Canon 32 of the Model Rules of Professional Conduct of the American Bar Association. Alayne Fleishmann is a person of the highest ethical and moral character (who was no doubt hired by JPMC as a potential “front-person” based on her pleasant demeanor); Eric Holder, Tony West, Mary Jo White and their ilk are blatant violators of their duty as lawyers to exercise candor and to avoid self-dealing:

    Canon 32. The Lawyer’s Duty in Its Last Analysis.

    No client, corporate or individual, however powerful, nor any cause, civil or political, however important, is entitled to receive nor should any lawyer render, any service or advice involving disloyalty to the law whose ministers we are, or disrespect of the judicial office, which we are bound to uphold, or corruption of any person or persons exercising a public office or private trust, or deception or betrayal of the public. When rendering any such improper service or advice, the lawyer invites and merits stern and just condemnation. Correspondingly, he advances the honor of his profession and the best interests of his client when he renders service or gives advice tending to impress upon the client and his undertaking exact compliance with the strictest principles of moral law. He must also observe and advise his client to observe the statute law, though until a statute shall have been construed and interpreted by competent adjudication, he is free and he is entitled to advise as to its validity and as to what he conscientiously believes to be its just meaning and extent. But above all a lawyer will find his highest honor in a deserved reputation for fidelity to private trust and to public duty, as an honest man and as a patriotic and loyal citizen.

  11. Marcie

    It looks like Obama isn’t all that serious about Wall Street crime and is appointing a civil rights prosecutor that as far as I can tell doesn’t have experience with white collar crime. In this case it’s the same street (Main Street that will get prosecuted) and the same game (prosecute anything but white collar criminals on Wall Street). There are three possible reasons for this distasteful behavior on Obama’s part:

    1) He is evil as the Tea Party points out;
    2) He has a plan only no one knows what it is;
    3) He is bought and paid for by the banks.

    1. Blurtman

      Please recall that President Obama, a few months into his first term, stated on the Leno show that the banks committed no crimes. He repeated this claim in public speeches around the same time. No investigations were conducted. Draw your own conclusions.

    2. keepon

      He is bought and paid for by: the banks. the Bilderbergs. the Illuminati. the New World Order. the Caliphate.

  12. flora

    Aside from simple greed and apparent criminality of JPM, coupled with large campaign contributions and influence, I wonder how much DoJ failure to prosecute has to do with the hoped for nirvana of pending global trade deals where it’s assumed US FIRE sector firms will dominate world finance if these trade deals are passed? Since nation-state laws would be superseded in the event , do everything possible to protect even criminal enterprises if they look to dominate future world trade environments, even if it means ignoring national law and harming US citizens.
    Just a hunch.

    1. psychohistorian

      Nirvana for whom?

      The family of trust funds that rule Western finance and have always had sights on the world would be my call.

      I think that the current attempt to force a global empire controlled by private individuals is destined to fail and along with that failure will be the demise of the existing American based empire. Too many people can now see the failure of private money, quasi private banking pretending to be sovereign and the social blindness of the global plutocrats and their toady’s. Its way past time to try another way.

      1. Vatch

        I can’t resist having a little fun with the word “nirvana” and the acronym “FIRE”. One of the meanings of “nirvana” is the extinguishing or blowing out of the fires of desire. So would nirvana for the FIRE sector be the extinguishing of Finance, Insurance, and Real Estate?

    2. Marcie

      The first thing out of turtle-faced Mitch McConnell’s mouth was we will try to work together on trade deals meaning TPP. And Obama will sign it with his blessing.

  13. Ric

    during the broadcast excerpted above they showed part of AG Holder’s testimony in front of the Senate Judiciary Committee where he explains TBTF/TBTJ. It still amazes me how everyone in the room listening to him doesn’t burst out laughing at this incredibly lame excuse. So let me get this straight Mr. Attorney General, we watch as these guys’ heads-I-will-tails-you-lose mentality crashes the world economy, leaving millions unemployed, homeless and hungry, sending entire nations into years and likely decades-long turmoil, causing disruption that turns into outright chaos in many places for ordinary citizens…and you’re telling us we can’t go after them because it might mess things up? What are you @#$^& kidding me?

    I particularly liked how Ms. Fleischmann exposes the “but it’s so complicated” refrain. Sure the financial instruments themselves are complicated but, as she says:

    “the fact that the investors were lied to about the quality of the loans, that’s actually really easy. And the fact that obviously if you have people who can’t afford their loans there’s going to be no money coming out of these loans, that’s also not a difficult thing to understand. … These are some of the easiest white-collar crimes you’re ever going to see.”

    Whaddya say Ms. Lynch? You game?

    1. Oliver Budde

      Love the enthusiasm, but you can be sure that if she were game she would not be the nominee. Obama has expended all available benefits of the doubt by now. He’s counting on the knowledge and understanding of Matt’s readership, those of us here, those reading the Times etc. as not amounting to a hill of beans compared to the mass ignorance, gullibility and deceivability that defines the American populace at large. In other words, he’s all in on the scam. Yes we can, indeed; and boy did they.

      1. Ric

        Ya I forgot to use the sarcasm font for that last line. Of course you’re right there’s no mystery let alone allure remaining in President Obama’s agenda. As you say the fact President Obama nominated her tells us where she stands on prosecuting bank fraud, financial crimes, etc.

        For the man himself, as the first brown-skinned, multiracial president there will always be significance and prestige, though to my mind it’s diluted every time he’s referred to as “the first black president.” Apparently no one on his team bothered to explore the optics of his actual ethnicity, how it could’ve served as a poetic beginning to a national discussion on race relations in America.

      1. keepon

        I’m good with both for what she’s going to go thru against these sizeable scum-bags. How ’bout you? Maybe you could offer her a job?

  14. susan the other

    The most interesting thing in all this info was the revelation that Dimon himself was freaked out as early as the Fall of 2006, and probably sooner. He knew finance was caught in an implosion. Clearly. And then there are the references to Hank Paulson going off to see Sarkozy and LaGarde in early 2007. All of this awareness happened long before the actual crash. And yes, Alayne was there at the beginning. In early 2006 and she objected to the contradictions she understood. Her nervousness about coming out seem almost to stem from a fear that she herself could be implicated. Facial expressions mostly. She has prolly been threatened. Another logical explanation is that she was shuffled off to Alberta to keep her out of the news until the time was ripe. So if that is now, hang on to your hat. And since Bear Stearns and WAMU and Chase were taken over by JPM after 2006, the picture just gets murkier. It’s kinda like a war-weary Frodo, sailing off into the sunset. The thing The Trilogy religiously omits is that there is no sunset left.

  15. bob

    Wait a minute here. Both of the “interviewees” are covered by NDA’s that they signed and continue to adhere to in order to protect their former employers.

    You can’t get the moral high ground by sitting on a pile of ill-gotten cash for your silence.

    They’ve both been “turned out”.

  16. rusti

    It’s really tough not to be discouraged by example after example of people of incredible conscience and character being swatted down by a thoroughly corrupt political system. I hope they don’t try to throw Alayne Fleischmann in jail like Thomas Drake, Aaron Swartz, or Edward Snowden.

    1. Vj

      But Rusti, That is the way it has always been. You and many many wish it is different but we need to realistically be aware that it was no different ever. The optics may from time to time suggest different but it is what it is. No reason to be discouraged just need to be clear eyed. And be clear and steer clear to the extent possible.
      The world and the kabuki can go its merry way.

    1. blurtman

      And now we have Loretta Lynch, the NY AG who negotiated the HSBC, BAC and Citi settlements. You can find her name right next to Place Holder’s on the HSBC settlement. I mean, it’s not as if the Mexican cartels who beheaded folks were Muslims, for heaven’s sake.

      Please write-in William K. Black for president in the next election.

      1. wendy davis

        I have a link that said she used to work for the Federal Reserve, as well. I reckon she’s Senate confirmable, but this is also a trial balloon, as far as I’m concerned. I read a lot names on O’s short list (who knows?), but one was Jeh Johnson, and my bet is/was on him. Chrisitian, and rather strongly; that would play well with the R’s and many D’s, no? Dunno if he’s black, but he seems to be.

        Hmmm on Bill Black. I’d consider it, but I admit that I’m still hoping for the revolution of higher consciousness foretold by many Indigenous spiritual leaders that will lead to a successful nonviolent revolution, in which horizontal democracy is a feature, socialism as well.

          1. wendy davis

            Looks as though she passed the test, yes? Ah…Holder’s choice. Thanks for the link; I’ll add it to my coverage at my.fdl.

            And thanks, Yves Smith: I borrowed a few bits of your post to help mine.

      1. JerryDenim

        Ha! awesome.

        I’m glad to see Matt Taibbi back on his beat at Rolling Stone doing what he does best, although these tales of plain vanilla underwriting abuse pale in comparison to some of Taibbi’s other stories like the Goldman/Paulson Timberwolf affair. After reporting on this bit of reportage I wonder what it would take to get USA today to share those far nastier bits of bank fraud history with their center-right readership?

  17. Ed Walker

    As I said on the previous post:
    The kinds of things Taibbi got from Alayne Fleischmann are described in detail in the Final Report of the Financial Crisis Inquiry Commission, in the information provided by Clayton Holdings, some of which is attached as an Exhibit to the Final Report. I read that report, and it was perfectly clear that this was a straight path to indictments, and I’m quite sure that the staff intended that outcome. I wrote about it here:

  18. NY Geezer

    Sorry to be a contrarian here. This young lawyer is not able to point her finger at Jaime Dimon or anyone near the top of his bank. She appears to be a person with an attorney title who was performing clerical work. She has fingered her supervisor and perhaps persons one or two levels above that supervisor. All these people are too far removed from Dimon to prove his knowledge of or personal involvement in anything.

    On the other hand, in 2007 John Paulson earned almost $4 billion by using credit default swaps to effectively bet against the U.S. subprime mortgage lending market. It has been rumored that Paulson had a hand in picking the the bad mortgages that banks placed in the tranches he bet against which made his bet a sure win and the purchasers of the tranches sure losers. If Taibbi produced a person who has personal knowledge of that process and the roles of the players involved in that process, that would be a smoking gun that might lead to the top of the criminal conspiracy. Or, a person who has personal knowledge of the process whereby such tranches were given triple A ratings by the rating agencies and the roles of the players involved in such processes, could be an equally good smoking gun.

    The problem here is that this is the kind of criminal activity that can only be investigated and tamed if government uses its subpoena powers to open tightly concealed business records and to compel the testimony of hostile witnesses. That will not happen on the federal level during this administration.

    However, since public pension funds were the purchasers of many of those bad mortgage tranches, it could still happen on the state level since those pension funds are within the protective jurisdiction of state comptrollers who are generally given the power to subpoena and compel testimony.

    1. Yves Smith Post author

      Wrong wrong wrong. And I hazard your gender bias is worse than Craazyman’s.

      1. A securities lawyer from a white shoe firm is no “clerk”. This was a senior middle management job. The managing directors she was complaining to were almost assuredly making serious millions of dollars a year in the good years. The investment banking side of “banks” which is what this was on, has much flatter hierarchies and much more discretion pushed down the organization than retail or traditional commercial banks.

      2. Her information DOES implicate Dimon. It’s called Sarbanes Oxley. Dimon certified PERSONALLY that JP Morgan’s controls were adequate. Sarbanes Oxley was designed to end the “I’m the CEO and I know nothing” defense. We’ve discusses at length that this is the perfect tool for fining, and potentially prosecuting bank execs. But no on is willing to use it because, as this incident shows, the Administration is not willing to punish top bank execs when the financial services industry is second only to health care in political donations.

  19. Vatch

    A new book, Too Big to Jail: How Prosecutors Compromise with Corporations, by Brandon L. Garrett, was just published. The author is a professor at the University of Virginia Law School. It’s only been out for a few days, but if anyone has read it yet, I’m sure NC readers would be very interested. Prof. Garrett and Jon Ashley have a web site with information about corporate prosecutorial agreements, such as deferred prosecution agreements:

    Here’s a 10 minute audio interview by Brian Lehrer with the author:

  20. Winston

    Matt doesn’t know Covington drafted Food and Drug law and then developed leading practice under it! This goes way back:

    ” Hutt has specialized in food and drug law at the Washington D.C. firm of Covington and Burlington since 1960, pausing only to serve as Chief Counsel of the FDA from 1971 to 1975.
    from the archives … Interview with Peter Barton Hutt, “Dean of the Food and Drug Bar” (Part 1 of 2)
    Covington Hires Food And Drug Co-Chair From FDA

    “Not mentioned in that press release was the person who helped the ABA achieve the win: Miriam Guggenheim, a food policy focused attorney with Covington and Burling. Though she has not been registered as a lobbyist since 2010–before Congress passed the Food Safety Modernization Act–her online biography notes that she “Successfully petitioned FDA for an exemption” for “most warehouses and distribution facilities.” In her official bio, she describes her work as helping companies achieve “their marketing goals while minimizing regulatory and litigation risks.”
    Guggenheim’s work on behalf of food industry heavyweights shows how much of the influence game in Washingtion still remains in the shadows.”
    Rulemaking in the dark: Little disclosure when big food lobbies the FDA

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