Are You Still Banking with a Criminal Enterprise?

By Clint Siegner, Money Metals:

As Mark Twain would say, history rhymed on May 20th when four of the world’s largest banks – including JPMorgan Chase and Citibank here in the U.S. – agreed to plead guilty to criminally rigging currency markets and pay $5.7 billion in fines.

A bank hadn’t accepted criminal charges in the U.S. for almost 30 years. Remember the name Michael Milken? His firm, Drexel Burnham Lambert, was the fifth largest investment bank in the U.S. when it pled guilty to criminal charges including mail fraud, wire fraud, and securities fraud in December 1988. It paid $650 million in fines.

The other part of Twain’s famous expression also fits. History won’t repeat. No one expects JPMorgan Chase or Citibank to share Drexel Burnham’s fate. Just over a year after admitting it was essentially a criminal enterprise, that firm filed for bankruptcy and dissolved.

However, based on the outcome last time Chase and Citi behaved deplorably and got into a jam, it is safe to assume the folks in Washington DC won’t let them implode.

Both firms got a bailout during the financial crisis for issuing too many “liar loans” on real estate mortgages and for losing huge bets on derivatives that no one fully understood.

Today they are ensconced on a list of Global Systemically Important Banks. “Too big to fail” isn’t just a phrase, it’s an official designation.

History is neither rhyming nor repeating when it comes to criminal convictions of the people involved. Milken, Drexel Burnham Lambert’s most infamous trader, went to prison for insider trading and other crimes. It appears he should have spent more time cultivating friends in the right places!

Too Big to Jail: No One at the Criminal Banks Will Be Charged!

“Too big to jail” is also more than just a phrase these days. No person at Chase or Citi is facing criminal charges related to rigging the currency markets.

Strange, but those charges are directed only at the corporations, not employees or executives. And officials agreed to waive the most severe penalties, the kind that can actually destroy a bank via restriction of future trading activities, before accepting the banks’ guilty pleas. Leaders at these banks anxiously explain the misconduct is limited, not pervasive, and certainly not at the top levels of management.

Jamie Dimon, JPMorgan Chase’s CEO, issued a statement following the deal he just made with the Justice Department:

The conduct described in the government’s pleadings is a great disappointment to us. We demand and expect better of our people. The lesson here is that the conduct of a small group of employees, or of even a single employee, can reflect badly on all of us, and have significant ramifications for the entire firm.

Dimon must not have been asking too many questions about how, exactly, traders in his firm managed to achieve such extraordinary results. Chase trading operations were profitable for literally every trading day through the first three quarters of 2013. We now know something about how they accomplished this seemingly impossible feat. It wasn’t acumen and skill behind those massive profits.

They did it by front running their own customers’ trades and colluding with their peers. As one of the traders said in the private chat ring referred to as “The Cartel,” where they conspired to steal from honest players in the market, “If you ain’t cheating, you ain’t trying.”

If the swindling, particularly of their own “valued” customers isn’t enough, there are plenty of other reasons to worry about where you bank:

  • Major U.S. banks are allied with the U.S. government in the war on cash. Chase is currently test piloting a new program to restrict cash in Cleveland. If you like using cash and transacting in private, you should go elsewhere!
  • Banks such as Citi and Chase may be “too big to fail,” but the same cannot be said for your accounts there. Most believe the funds they deposit in checking or savings accounts belong to them. They don’t. Bank deposits become the property of the bank and account holders are unsecured creditors. Anyone counting on FDIC insurance to cover losses should think twice.
  • Credit unions offer lower fees and lower interest rates on loans and pay higher interest rates on deposits.
  • Credit unions typically carry far less leverage and do not speculate in derivatives markets – the kinds of shenanigans mega banks favor.
  • Nobody likes the ethics on display along Wall Street, so why send your money there? Big banks have paid more than $184 billion in fines for 174 cases involving rotten dealings since 2009. Until customers finally start leaving, banks will consider it simply a cost of doing hugely profitable, albeit unethical, business.

If major U.S. banks and their executives are going to be held accountable, it will be at the hands of the market, not the justice system. Are you still supporting them with your business?

If so, now would be a great time to switch to a credit union or a conservatively run smaller bank. It would also be a good idea to convert some bank savings to savings in physical gold and silver where there is zero counterparty risk – something you won’t find anywhere in the financial system. By Clint Siegner, Money Metals

An investment bank pulls the rug out from under self-satisfied complacent markets with a very inconvenient analysis. Read…  Today’s ‘Liquidity Regime’ Is ‘Far More Dangerous for Investors’

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  5 comments for “Are You Still Banking with a Criminal Enterprise?

  1. brian says:

    Thanks for including that Jamie Dimon quote, I had not had a laugh like that in a while, I almost fell out of my chair. Funny how watching the society I live in fall into a miasmatic chasm of despair can actually provide flourishes of riotous humor at times.

  2. Dan Romig says:

    “Too big to fail” is an Orwellian lie. No individual bank should be given a ‘heads we win – tails you lose’ from the taxpayers. If a private bank becomes insolvent, it should be left to die, and those who made the bad decisions need to be out of a job. There will always be another bank to step in and fill the void. Plus, the (privately owned and held) Federal Reserve will be there to be a backstop for solvent banks.

    JPMorgan has been given a ‘get out of jail free’ card by Obama’s Justice Department under Holder, and now under his replacement, Loretta Lynch. Corporate and Mainstream Media have gushed about having an African-American female Attorney General, but they don’t want the public to know that she’s the ultimate Wall Street insider. Not only has Lynch been the queen of government forfeiture of assets after Clinton appointed her to be a federal prosecutor of the Eastern District of New York in 1999, but she also sat on the Board of Directors of the Federal Reserve Bank of New York (under then President of the Board, Tim Geithner) from 2003 to 2005.

    Remember, this was the time that George W, the GOP Congress and the SEC let Wall Street’s big 5, and only the big 5, raise the debt to equity ratio from 12 to 1 up to 40 to 1! Lynch sat there on the Board helping Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley gamble with cheap Fed capital at outrageously leveraged ratios. We know what happened as a result.

    The Cromnibus bill, all 1,603 pages of it, went into law on 16 December of 2014 after passing Congress with bipartisan support, and Democratic President Obama signing it. In this Citigroup written and Jamie Dimon lobbied for piece of legislative excrement, the FDIC is on the hook for HUNDREDS of TRILLIONS of Ponzi-scheme Wall Street derivatives.

    Pam and Russ Martens’ is worth a look readers. They have done a tremendous job investigating and reporting on JPMorgan.

    • d says:

      Of course Lynch is another O bummer $3.00 Note, that’s why she got the job.

      Took along time to get her confirmed, which means somebody tried to avoid cutting some paycheck’s.

      Her first big noise as AG, go after FIFA, far enough away from wall street, and very publicly juicy.

      Great deflection program.

      Read some Sf once long ago about interplanetary wars based around, Socialist, Fiat, cheap high leverage credit, unsustainable consumerism, systems. On one hand.

      Versus. True asset based monetary systems, with low credit leverage, and ecologically sustainable capitalism.

      Dammed if I can find it again, but the cheap creditors were always the aggressors, and always having massive financial stability issues.

      There was some talk of Mexico issuing silver coins whose value was to be directly liked to the metal value, for use nationally and internationally.

      Anybody know what has become of this?

      Did this plan have anything to do with the sudden drop in value of Silver?

  3. Nerdomatic 2000 says:

    How long can the banksters keep getting away with their crimes? How long can the fiat currency last? How long will reality television be a thing?

    These are the questions that keep me awake at night.

  4. Julian the Apostate says:

    Nerdomatic, I’ve been asking the same questions since Obama nationalized two car companies and ripped off the bond holders without so much as a ripple, and I realized we are living in Ayn Rand’s novel Atlas Shrugged. The answer is: nobody knows. At some point the producers still in business will have a bellyful and stop producing. Once this reaches critical mass then anything goes. Until then it’s Business As Usual. I’ve done everything possible to me to prepare. Things continue to accelerate toward a bad ending. Whether this will be an overnight smashup or a 20 year slow burn I don’t know. I have no crystal ball, but my gut tells me it will make the Great Depression look like a Sunday school picnic. Stop holding your breath; you’ll turn blue. I am, etc

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