Courtesy of Pam Martens.
The 307-page report the Senate released last Thursday on JPMorgan’s cowboy culture was deeply unsettling; the testimony under oath at the related Senate hearing on Friday was equally shocking with eyewitness accounts confirming that CEO Jamie Dimon ordered the withholding of financial data to a regulator while both he and the Chief Financial Officer at the time, Douglas Braunstein, presented an Alice in Wonderland version of facts to the public in April 2012.
But it now appears that the worst of this story may be so unsettling to the markets and the public perception of Wall Street that it must be censored from public viewing. Throughout the Senate Permanent Subcommittee on Investigation’s 98 exhibits of emails and internal memos on the wild trading schemes at JPMorgan, the word “Redacted” appears. In a high number of the areas where the material is censored, it concerns trading in the stock market, not the credit market where Bruno Iksil, the trader known as the London Whale, was causing giant ripples and eventual mega losses for the largest bank in the U.S. To date, there has been no media attention to the issue of stock trading within the Chief Investment Office nor has the issue been raised by investigators.
That the words equity trading (meaning stock trading) appear at all in this investigative report raises more serious red flags for JPMorgan. As Wall Street on Parade has repeatedly reported, the Chief Investment Office at JPMorgan, which oversaw the London Whale trades, was using insured deposits of the bank to place its casino bets. Senator Carl Levin, Chairman of the Senate Permanent Committee on Investigations, confirmed on Friday that JPMorgan used insured deposits as well as funds corporations had placed on deposit. That’s clearly not compatible with the Nation’s safety and soundness rules for banks and likely explains why the FBI is involved in an investigation.
To date, Jamie Dimon has attempted to present the giant bets in the credit markets as a hedging operation to offset risks in the company’s overall balance sheet. The credibility of that stance has lost its luster as Levin revealed that the Chief Investment Office in the first quarter of last year had actually taken on more exposure to credit risk rather than hedging it.
The reason for the existence of banks is to make business loans to help grow new industries, jobs and the economy. If one genuinely wants to hedge that risk, as opposed to gambling for the house with proprietary bets, a credible hedge would be to short corporate loan exposure – not buy more of the same exposure. But that is what the Chief Investment Office did – it purchased billions of additional exposure via an illiquid credit index from which it could not untangle itself.
The $6.2 billion in losses thus far acknowledged by JPMorgan from the trading of credit derivatives within the Chief Investment Office is bad enough. But trading stocks with customers’ savings deposits – that truly has the ring of the excesses of 1929 and inexplicable to explain as a hedge against the corporate loans made by the bank.
…
