Believe it or not I am slowly, and hopefully surely, making my way through the Senate Banking Committee’s report on the JPMorgan “Whale” fiasco. I have to pass a quote along. Here’s the context: JPMorgan, for a time, hid it’s mounting losses by changing the way it valued the investments in which it was trading. This, by the way, was apparently done with the full knowledge of the higher ups, including Jamie Dimon, but let’s put that criminality aside for the moment. This jumped out at me:
The bank told the Subcommittee that, despite the favorable pricing practices noted in the May memorandum, it did not view the CIO as having engaged in mismarking until June 2012, when its internal investigation began reviewing CIO recorded telephone calls and heard CIO personnel disparaging the marks they were reporting. On July 13, 2012, the bank restated its first quarter earnings, reporting additional SCP losses of $660 million. JPMorgan Chase told the Subcommittee that the decision to restate its financial results was a difficult one, since $660 million was not clearly a “material” amount for the bank, and the valuations used by the CIO did not clearly violate bank policy or generally accepted accounting principles. The bank told the Subcommittee that the key consideration leading to the restatement of the bank’s losses was its determination that the London CIO personnel had not acted in “good faith” when marking the SCP book, which meant the SCP valuations had to be revised.
I know a million dollars is not what it used to be (just ask Doctor Evil), but 660 millions is still a “material” amount of money to most of us. It is truly amazing that these bankers can suggest that it’s a trivial sum, hardly worth mentioning. By the way, if you read the report, you can’t help but conclude that all of JPMorgan’s rationalizations summarized in the quoted paragraphs were bunkum, when they weren’t out and out lies.
The report, by the way, is a fascinating thing. It spells out a massive fraud in great detail, clearly states that the malefactors knew just what they were doing, and establishes quite clearly that Congress is totally aware of the criminal behavior of the bankers. It should come as no surprise that the same Congress is considering doing something about this criminal behavior:decriminalizing it.
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