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By Tom Cushing

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About this blog: The Raucous Caucus shares the southpaw perspectives of this Boomer on the state of the nation, the world, and, sometimes, other stuff. I enjoy crafting it to keep current, and occasionally to rant on some issue I care about deeply...  (More)

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When $13 Billion May Not Be Enough

Uploaded: Oct 25, 2013
JP Morgan Chase ("Chase") and the Department of Justice have announced a tentative settlement of charges related to the bank's actions during the mortgage debt crisis of 2008. Non-TeaPartiers will recall that those shenanigans by Chase and others mattered – they nearly brought the world economy to its knees. The raw settlement number is astounding: $13,000,000,000. Lots of zeros. Such is the absurd nature of our times that they may have gotten-off easy.

Essentially, the big banks, their larcenous instincts no longer fettered by pesky former regulations, handed-out home loans like Halloween candy. Then they bundled those confections together, represented them as healthy, and sold-them-off to other famished greedies. All was well, until those worthless securities made their holders sick – some fatally. Taxpayers were called-upon to contribute monetary transfusions to the errant institutions, and in the process free markets in construction and real estate suffered long term disabilities.

Washington being what it is (have you read This Town? Yikes), it has taken just short of forever to investigate the banksters' chicanery, and try to bring charges against them. It should also be recognized that the scale here is massive, and buys the services of the very best lawyers, remarkably practiced at the arts of diffusion and deflection of blame.

The recent chronology has Chase Chairman Jamie Dimon calling Attorney General Eric Holder (a former partner at one of the greatest of those law firms), to intervene in the process – lest any actual charges actually be brought. The parties were then far apart – Chase had offered a good round, but measly $1 Billion to end the matter for good.

That number quickly grew, first to $7 billion, then $11 billion and it came to rest at $13 billion, with some behaviors and potential charges not included. Portions of that total will go to investors and to homeowners, by some means. That's a very large sum – bigger than the annual GDPs of some seventy nations, and enough money in hundred-dollar Benjamins to stretch halfway 'round the globe.
So then, why do I have the sneaking suspicion that Chase got off cheap? There are several reasons, all from a distinctly outsider's perspective.

First, it's the speed with which that number was obtained, and the mammoth contrast with Chase's previous bargaining position. True, when the senior officials get across the table, breakthroughs can occur. And Mr. Dimon certainly had access to the actual value to the bank of avoiding those charges. Still the pace was breath-taking – and makes me wonder how much water remained in the settlement well. We do know, for instance, that Chase had earlier set aside a $28 billion litigation contingency fund. Tax law alchemy, we're told, will further reduce the bank's loss. Somehow, at second glance, paying a minor fraction of that contingency fund seems less impressive.

Second, there's the apparent absurdity of nearly everything that's transpired in the run-out from this crisis. An acquaintance walked-away from his submerged house after not paying for a significant period, and got a large check from his lender for doing it – so-called "cash for keys." Then he joined an action against that bank – and got another check -- even larger than the first. Finally (so far), he registered for yet another mortgage settlement, and got a third big check – practically by return mail! He has no idea why. He has been bought-off, for reasons beyond his knowing – is it not a fair assumption that whatever the bank really did was a great deal worse?

Third, in the land of gee-whiz numbers, $13B is no longer much of a king. Chase's one-year earnings in 2012, again in Benjamins, would go all the way around the world. The financial sector in the 21st century is mammoth beyond the familiarity of most folks. So, is $13B a lot? I'd have to answer, with Les McCann – "compared to what?"

Finally, what's missing here? I'd suggest that it's actual accountability – the kind that stands a chance of deterring actions taken on those baser instincts in the future. When fraudulent behavior, that compromises the interests of everyone in the world who's earning above a bartering subsistence level, can be translated into a cost of doing business -- there may simply be No number that's big enough.

Nobody's going to jail here – hell, everybody's keeping their jobs. The Chase shareholders, who will bear some fraction of the penalty in lost earnings, may grumble. That said, I'll be astounded if, fully spun, it costs Mr. Dimon so much as his bonus, much less his job or his freedom for a time.

Until that kind of consequence occurs, we're going to get more of the same chicanery, to which we are subject, and about which we can do next-to-nothing. The game appears rigged, and all we can do is watch, and wonder.

Comments

Posted by Pleasanton Resident, a resident of Another Pleasanton neighborhood,
on Oct 25, 2013 at 5:14 pm

Tom, I agree with your comments and wonder why Dimon is still so admired by many. What's scary is that the big banks are as big as ever and still "too big to fail."

I'm wondering what will happen with Countrywide (WFB) now that Chase has settled.


Posted by Roz Rogoff, the San Ramon Observer,
on Oct 26, 2013 at 4:16 pm

Roz Rogoff is a registered user.

Someone robs a bank and is sentenced to prison for 10 years. A bank steals billions and gets a fine.

Someone whacks a person on the head in a bar fight and is sentenced to prison for 10 years. PG&E blows up a neighborhood and kills 8 people and gets a fine.

I thought the Supreme Court said Corporations are people, so why not sentence them all to prison. In the immortal words of Oliver Hardy, "This is a fine kettle of fish."


Posted by Tom Cushing, a resident of Alamo,
on Oct 27, 2013 at 11:16 am

PR: somebody I read or saw -- maybe Daily Show? -- said it's not so much what's illegal, but what's now Legal that causes these problems. There are regs that need to be in-place to protect the public's interest against a repeat of this demonstrated risk. Maybe under President Warren? I fear the foxes are not only IN the hen-house -- it has a dome, and they've bought it.

I have no doubt that Dimon's a capable guy -- but if he's also capable of letting his minions commit fraud, then those misdeeds should come to rest at his feet. It needs to be seen as part of his job as CEO -- and if/as/when he has to turn some of his considerable talents to reining-in his wanderlings, then we'll see less of this misbehavior.

Hiya Roz: I guess this phenomenon has been around for a while -- as Woody Guthrie wrote and sang it:

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

And as through your life you travel,
Yes, as through your life you roam,
You won't never see an outlaw
Drive a family from their home...


Posted by Bix, a resident of another community,
on Oct 27, 2013 at 11:48 pm

So... Tom Cushing is also Citizen Payne? Is this true?


Posted by Tom Cushing, a resident of Alamo,
on Oct 28, 2013 at 7:30 am

Yup, to quote Jim Carrey: "It was me."


Posted by Bix, a resident of another community,
on Oct 28, 2013 at 9:30 pm

Okay... But that appears, well... unethical.


Posted by Tom Cushing, a resident of Alamo,
on Oct 29, 2013 at 7:37 am

It's possible to misuse any alter ego here, "Bix." Had I used that moniker to cheerlead or kite my blog, that might be worse than mildly embarrassing. But I mostly used it to express opinions more caustic than I wanted to be identified-with, or where I didn't want the message to get diluted by association with me-as-me/blogger. I'm guessing that's why most folks use them.

If pseudonyms are unethical ... then ... why do you use one?


Posted by Bix, a resident of another community,
on Oct 29, 2013 at 6:34 pm

First, Bix is my real name. Second, all I did was state the obvious. You are bold enough to use your real name in a blog; but change your name when commenting in other sections of the Danville Weekly. Looks like you were "outed."


Posted by Tom Cushing, a resident of Alamo,
on Oct 30, 2013 at 7:28 am

So, a pseudonym is not a pseudonym when it includes Part of your name? Pretty bold.

It seems to me that you did a lot more than state the obvious -- I thought you characterized my use of a pseudonym as unethical. I don't agree, nor would I characterize it along bold/timid lines, but I explained that. I have nothing to add there.

Yup, I was outed by forgetting which of several Embarcadero sites I was on. It doesn't make my top 10 list of embarrassments. Is there more?


Posted by Bix, a resident of another community,
on Oct 31, 2013 at 8:37 pm

Hey, my parents were children of the 60's; therein lies the strange name. LOL, anyway...

How incredibly coincidental that you would write a piece on journalism; namely the part where you miss Walter C. The thing is, would Walter C. have used another name besides his own?

Just keeping it real.


Posted by Tom Cushing, a resident of Alamo,
on Nov 1, 2013 at 6:16 am

Hi Bix -- Well, you\'ll be glad to know that Citizen Paine has retired, from these sites, anyway.

I don\'t know how much more real that makes anything. \'He\' wasn\'t moved to speak all that often, and I\'m guessing that multiple IDs may not be unusual. I don\'t see any need to pursue it unless someone becomes abusive. Others are welcome to their alter egos, and who knows -- I may pick up another one along the way....


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