How JPMorgan’s $5 Million Loss Rose 80-Fold In Minutes After “A Confrontation Between Traders” [Zerohedge]

Actually that title was misleading: there will be no disclosure of “how“, because we don’t know. What we do know is that thanks to the magic of JPM’s definition of “Mark-To-Market” accounting, a $5 million prop trading loss (and thus forbidden by the Volcker Rule) funded by depositor cash as it took place in the infamous CIO unit whose job was to manage “excess deposits” in a prudent manner,became a $400 million prop trading loss in the span of 88 minutes. But not during trading – the market was long closed. The adjustment was purely on paper.

From the JPM Task force report on the CIO “London Whale” fiasco, as referenced yesterday:

April 10 was the first trading day in London after the “London Whale” articles were published. When the U.S. markets opened (i.e., towards the middle of the London trading day), one of the traders informed another that he was estimating a loss of approximately $700 million for the day. The latter reported this information to a more senior team member, who became angry and accused the third trader of undermining his credibility at JPMorgan. At 7:02 p.m. GMT on April 10, the trader with responsibility for the P&L Predict circulated a P&L Predict indicating a $5 million loss for the day; according to one of the traders, the trader who circulated this P&L Predict did so at the direction of another trader. After a confrontation between the other two traders, the same trader sent an updated P&L Predict at 8:30 p.m. GMT the same day, this time showing an estimated loss of approximately $400 million.He explained to one of the other traders that the market had improved and that the $400 million figure was an accurate reflection of mark-to-market losses for the day.

 

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FERC Suspends JPMorgan Unit’s Power-Trading Authority [Bloomberg]

The U.S. Federal Energy Regulatory Commission yesterday suspended a JPMorgan Chase & Co. (JPM) unit’s electricity-trading authority, saying it had filed false information to regulators.

The action, part of a more aggressive effort by the commission to monitor U.S. power markets, prohibits J.P. Morgan Ventures Energy Corp. from selling electricity at market-based rates for six months starting April 1, 2013.

The FERC said the company made “factual misrepresentations” and omitted material information in communications with the California Independent System Operator, or Caiso, and in filings to the commission. Caiso operates the state’s power grid.

“This is very significant in the history of that agency,” Charles Peabody, a bank analyst with Portales Partners in New York, said in an interview. “FERC has really been stepping up its investigations into power manipulation.”

In its order released late yesterday, FERC said the JPMorgan unit will essentially be allowed to participate as a bystander in wholesale power markets, granting it the ability to offer electricity into the market without a price attached. This will ensure that utilities have the ability to obtain enough power to serve the demand from customers. JPMorgan would still be able to trade derivatives under the order.

FERC Suspends JPMorgan Energy Unit’s Market-Based Rate Authority

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JPMorgan faces money laundering probe [Reuters]

JPMorgan Chase & Co's international headquarters are seen on Park Avenue in New York July 13, 2012. REUTERS/Andrew Burton

(Reuters) – JPMorgan Chase & Co’s compliance with U.S. anti-money laundering laws is being reviewed by a banking regulator, a source said, making the largest U.S. bank the latest target of a wide investigation of how banks prevent transactions involving drug money and sanctioned countries.

The Office of the Comptroller of the Currency, an independent branch within the Treasury Department, is examining JPMorgan’s systems that are designed to monitor and filter such transactions, said the source, who is familiar with the situation.

The exact scope of the inquiry and the size of potential liabilities for the bank could not be learned.

JPMorgan spokesman Joseph Evangelisti declined to comment on Saturday.

In its quarterly filing with the U.S. Securities and Exchange Commission last month, JPMorgan said it expected heightened scrutiny by regulators of its compliance with new and existing regulations, including anti-money laundering laws.

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JPMorgan Said to Face Escalating Senate Probe of CIO Loss [Bloomberg]

JPMorgan Chase & Co.’s (JPM) wrong-way bets on derivatives are the focus of an escalating investigation by a U.S. Senate panel led by Carl Levin that has grilled executives from banks including Goldman Sachs Group Inc. and HSBC Holdings Plc, three people briefed on the inquiry said.

 

Levin’s Permanent Subcommittee on Investigations is seeking testimony from those who worked in or helped lead JPMorgan’s chief investment office, according to the people, who asked not to be identified because the inquiry isn’t public. The unit’s London staff lost at least $5.8 billion this year on the botched wagers, which were large enough to shift markets.

Tara Andringa, a spokeswoman for Levin, didn’t respond to a message seeking comment, and Joe Evangelisti at JPMorgan declined to discuss the panel’s inquiry. “As always, the company has fully cooperated with all regulatory and governmental requests around this matter,” Evangelisti said.

The bank, led by Chief Executive Officer Jamie Dimon, 56, faces a panel of lawmakers that in recent years brought executives from Goldman Sachs and London-based HSBC toCapitol Hill, barraging them with questions that challenged their version of events. JPMorgan said in July that its internal review found traders may have tried to obscure the full amount of losses they faced on their transactions.

 

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JP Morgan: At Least $28 Billion in Losses Since “London Whale” [SilverVigilante]

The nation’s biggest bank by assets, JP morgan, has lost more than $22 billion inshareholder value and $28 billion in market value since the London Whale was made public in April 2012 according to Bloomberg.  Much reported and demonstrative of just how well the TBTF CEO’s  up-on-high have it, Dimon originally called the reports of a London Whale a “tempest in a teapot,” but had to go back on that phrase as the firm reported a 2$ billion loss a month later.  For some, not enough quarters for laundry is a tempest in a teapot, let alone a loss of money unimaginably in excess of their lifetime earnings down in the basement. Since the loss, JP Morgan has grown accustomed to regulatory and legal proceedings on numerous fronts. Perhaps this is Washington’s way of breaking the stubborn Jamie Dimon into the incoming new maze of Soviet styled regulation the once touted risk manager fears so totally?

It’s. A Free. Fucking. Country. Is it Really Jamie Dimon?

“As always, the company has fully cooperated with all regulatory and governmental requests around this matter,” Joe Evangelisti of JP Morgan said of recent Senate investigations regarding the London losses.  You see, an MO seems to be developing over at JP Morgan. Operate with flagrant disregard of law and ethics, and then cooperate completely with the authorities thereafter. “Our smug smiles and celebredom will do the rest in the face of public servants,” says TBTF while uttering in a whisper of stale, reptile breath: “Do more than scrape us,  and we will pull the plug.” On the economy, of course, TBTF means.

According to former JP Morgan CEO William B. Harrison, investors overreacted to the bank’s $5.8 billion trading loss. He also said current CEO Jamie Dimon is doing a “great” job.  His smiles and winks and nods are really winning over the Senate aides.

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JP Morgan’s HP Printer (it’s all they have) [MaxKeiser]

‘JPM’s $150 Billion FDIC Reality Adjustment’ – Jamie Dimon Just Admitted To The World That JPM’s Assets Are Overvalued By $150 Billion []

JPM’s $150 Billion FDIC Reality Adjustment

Reuters published an exclusive story this morning:

Buried in the final paragraph:

In a presentation in March, JPMorgan Chase said it had a recovery plan in place and said it was ordered by regulators. The presentation was organized by Harvard Law School and was closed to the media at the time, but is now available online.

Here’s the BEST part of the JPM document.

It’s easy to see on the PDF:

http://www.law.harvard.edu/programs/about/pifs/symposia/europe/baer.pdf

Go to page 9.  Under the wipeout scenario JPM describes a $50 billion trading loss turning into a $200 billion loss as soon as the FDIC takes over.  Why… ? Because JPM says they would expect the FDIC to immediately writedown JPM’s assets by an additional $150 billion.

Holy mark to bullshit.  Jamie Dimon just admitted to the world that JPM is mis-marking assets to the tune of $150 billion.

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“Catch Me If You Can” JPMorgue Has 11+ State, Fed & Int’l Enforcement Bodies After It [silvervigilante]

The Morgue is like Leonardo Dicaprio in the movie “Catch Me If You Can.”  The bank has amassed a laundry list of fraudulent activities that have burst onto the radars of numerous governmental agencies and into the public spotlight. Probably, we are looking at a similar outcome as in the movie. Instead of prosecutions, the bank, like Dicaprio’s character in the movie, will probably be merely asked to go to work for the Feds in some capacity to “pay off” their wrongdoings.

 

jpmorgan--afp

 

 

 

 

 

 

 

JPMorgan Chase & Co. is being investigated by at least 11 state, federal and international enforcement bodies. Officials in Singapore, Germany and Japan are among a list of agencies probing the largest U.S. bank and its trading errors, according to JP Morgan in a filing Thursday.  The U.S. Justice Department, Congress, Securities and Exchange Commission and U.K. Financial Services Authority are all examining the bank, which  could still lose $1.7 billion more on its credit derivatives portfolio, the company said.

“The firm expects heightened scrutiny by its regulators of its compliance with new and existing regulations,” the company said. Regulators will begin to bring “formal enforcement actions for violations of law rather than resolving those violations through informal supervisory processes.”

The Morgue might have escaped the breaking down of their silver manipulation scheme by the CFTC, but that hasn’t kept other U.S. regulators from keeping the pressure on as the bank has been forced to shave 50 basis points off its reported capital levels after having sustained four weeks of trading losses in the second quarter, this on the heels of their “London Whale”  loss reported by the bank earlier in the year. The Morgue said Thursday in a regulatory filing that the Federal Reserve Bank of New York and the Office of the Comptroller “determined” on Wednesday that the bank should amend its reported regulatory capital ratios.

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“Who is Jamie Dimon?”

From a new Vanity Fair/60 Miinutes poll, results for question “Who is Jamie Dimon?”

 

Insider-dealing ring at UBS and JP Morgan facing jail [the independent]

Six men were facing jail terms yesterday after being found guilty by a jury of insider dealing in a ring where employees in the print rooms at UBS and JP Morgan passed on secret takeover deal documents to their trader friends.

Brothers Ersin and Ali Mustafa passed on confidential and price-sensitive information from their printing work, downloading confidential information onto memory sticks for friends who used the information to make spread bets on share prices of the companies involved.

The men made their bets knowing the share prices would rise when the stolen information was made public.

The four-and-a half-month trialwas the longest and most complex prosecution brought by the Financial Services Authority (FSA), involving evidence from hundreds of trading accounts and telephone records.

The men were convicted of making a profit of £732,044 over a two-year period from May 2006. The FSA had prepared further charges but the judge ruled they should not be heard for trial-management reasons – effectively to save the public money on an even longer hearing.

Most of the men’s trading was done through the City Index spread-betting house, often in the names of friends and family in the hope of disguising the suspicious activity.

During the trial, Ali, who worked at UBS, described his older brother, Ersin, as “a wheeler dealer … always looking for the extra buck”.

Ersin, who was at JP Morgan, is currently believed to be in North Cyprus, where the brothers have family.

Ali originally tried to blame other colleagues in the UBS print room but analysis of his computer proved he was definitely the culprit.

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JPMorgan Accused of Manipulating Power Market [allgov]

Raising the specter of Enron’s intrusion into the California energy market a decade ago, theFederal Energy Regulatory Commission (FERC) is investigating allegations that JPMorgan Chase & Co. manipulated the state’s market in 2010-2011 for millions of dollars in windfall profits.

Papers filed in federal court said the bank’s bidding practices may have inflated electricity costs by more than $57 million, but that just covers a six-month period. Some estimates put the cost to utility users as high as $200 million. Those numbers got the attention of theCalifornia Independent System Operator (CalISO)—a non-profit controlled by the state that oversees 80% of the state’s electrical transmissions—although they pale in comparison to the multi-billion-dollar scandal over credit derivatives currently roiling the bank.
Enron’s gaming of the newly-deregulated energy market in 2000 cost taxpayers $1.4 billion.
JPMorgan says it has done nothing illegal and is cooperating with the investigation, but FERC sued the bank on July 2 for refusing to turn over 25 emails it requested. The bank maintains that the documents contain privileged legal advice and are not about the bidding practices under investigation.
FERC has conducted 11 investigations of alleged manipulation of energy markets since January 2011, one of which resulted in a $245 million settlement with Constellation Energy Group Inc. The agency issued a preliminary finding last December that Deutsche Bank AG had manipulated the California market.

JPMorgan Ordered to Identify Witness in Blavatnik Lawsuit [businessweek]

JPMorgan Chase & Co. (JPM) (JPM) was ordered to identify the person with the most knowledge of possible regulatory probes of its J.P. Morgan Investment Management and Chase units related to the labeling of residential real estate- backed securities as part of a lawsuit by billionaire Len Blavatnik, according to a court filing.

Blavatnik, 55, sued New York-based JPMorgan, the biggest U.S. bank by assets, in 2009, claiming it put twice as much money into risky mortgages as his investment guidelines allowed while Chief Executive Officer Jamie Dimon was unloading such securities from the bank’s books. Blavatnik says the bank lost $98 million of his funds.

New York state Supreme Court Justice Melvin L. Schweitzer yesterday ordered JPMorgan to identify the person or provide a sworn affidavit that there is no such investigation after a “thorough and appropriate inquiry” within 30 days.

Blavatnik’s lawyers had served JPMorgan with a notice to name witnesses on a variety of topics, including one related to U.S. Securities and Exchange Commission and regulatory probes of the units, under an agreement to identify witnesses for the purpose of taking depositions in the case, according to Schweitzer’s order.

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Exclusive: Labor Dept looking into JPMorgan stable value fund [Reuters]

(Reuters) – The U.S. Department of Labor is looking into whether JPMorgan Chase & Co (JPM.N) violated its fiduciary duty under the Employee Retirement Income Security Act in connection with one of its stable value funds.

Stable value funds are used in 80 percent of 401(k) self-directed retirement plans and are meant to be the most conservative choice for employees – liquid and backed by insurance.

But, the $1.8 billion JPMorgan Stable Asset Income Fund has had as much as 13 percent of its assets invested in private mortgage debt underwritten and rated by the bank itself. It has reduced that to just under 4 percent, as of June 30, according to a spokesperson.

Many employers with 401(k) plans were unaware of the private mortgage component of the fund until after the 2008 market crash, according to retirement plan consultants who worked with companies that held the portfolios.

Over the past several weeks, the Labor Department has been examining whether the New York-based bank breached its fiduciary responsibilities under ERISA, according to two people with direct knowledge of the situation who declined to be named because of the sensitivity around discussing potential investigations.

One source, who had been contacted by the Labor Department about the JPMorgan fund, said he did not know if the Labor Department had begun a formal investigation or was still in the exploratory process.

“If it’s not a formal investigation, it’s pretty damn close,” the person said.

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CONFIRMED AT LAST: The attempted cover-up of how JP Morgan torpedoed Lehman Brothers [The Slog]

“And then when you have the suckers by the balls, you squeeze just like this”

Around the time of the Lehman disaster, a senior insider at the firm relayed to me what seemed an astonishing allegation: that in the weeks prior to the eventual collapse, JP Morgan deliberately withheld huge monies owed to Lehman in order to make the bankruptcy a certainty from which they could benefit. I relayed this story to another contact the following year, and he not only corroborated the charge, he also said he was sure Barclays had done the same. The now disgraced Barclays CEO Bob Diamond took over Lehman in a fire sale only weeks later (using taxpayers’ money as a bridging loan to do it) and rapidly built up a commanding position for the division he then headed up, Barcap  – the investment arm of the bank.

Now, more than three years later, regulators have penalised JPMorgan for actions tied to Lehman’s demise. The bank settled the Lehman matter and agreed to pay a fine of approximately $20 million. The action took place because of Morgan’s ‘questionable treatment of [Lehman] customer money’: regulators accused JPMorgan of withholding Lehman customer funds for nearly two weeks. So it had been true after all.

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JPMorgan scandal: The tip of the iceberg [blacklistednews]

JPMorgan Chase, the biggest US bank by assets, announced Friday that the trading loss from derivatives bets made by its Chief Investment Office (CIO) had reached $5.8 billion, nearly three times the amount the company had revealed in May. It added that the bad bets could result in an additional $1.7 billion in losses over the rest of the year.

In its second quarter filing with the Securities and Exchange Commission (SEC), the bank admitted that it had failed to report $459 million in losses from the trades in its first quarter report, released April 13. CEO Jamie Dimon and other top executives attempted to lay the blame on “certain individuals” who “may have been seeking to avoid showing the full amount of the losses being incurred in the portfolio during the first quarter”—an allusion to several traders in the London office of the bank’s CIO who have since been forced out of the firm.

Bloomberg News reported that this explanation seemed implausible to former JPMorgan executives it interviewed, who said the company had mechanisms in place to make sure traders could not simply hide their losses. In fact, JPMorgan’s report to the SEC on Friday indicates that the bank recorded a $718 million loss from the London trades on its internal accounts, but did not report the loss in its first quarter earnings statement.

In other words, JPMorgan deliberately falsified its first quarter report to the SEC in order to conceal its massive gambling losses. This is a crime—a violation of banking laws for which Dimon, as the CEO, is responsible. That Dimon was involved in a cover-up is underscored by the proof contained in Friday’s report to the SEC that he was already aware his bank had lost hundreds of millions if not billions when he told a conference call in April that reports of major losses by the bank’s CIO were “a tempest in a teapot.”

The trading loss debacle is only one of many scandals engulfing JPMorgan Chase.

* The bank is currently under investigation for helping to manipulate the London interbank lending rate (Libor), together with other major banks, in order to conceal financial weaknesses and boost profits from speculative bets on derivatives linked to Libor, the most important global benchmark for trillions of dollars in mortgages, credit cards, student loans and other financial products.

* The SEC and other regulators are investigating allegations by current and former JPMorgan financial advisers that the company encouraged them to sell their clients JPMorgan mutual funds when it was against the clients’ interests.

* The US Federal Energy Regulatory Commission has sued JPMorgan to force it to hand over emails related to alleged price-gouging in electrical power markets in California and the Midwest by one of the bank’s subsidiaries.

* JPMorgan, together other major banks and Visa and MasterCard, last week announced a proposal to settle allegations that they colluded to fix fees on credit card transactions, ripping off billions of dollars from retailers and customers and violating antitrust laws.

Dimon has been handsomely rewarded for his role in facilitating these various schemes. He received $23.1 million in compensation last year, up 11 percent from 2010. In this he joined the heads of other major banks, who received an average 12 percent pay increase in 2011.

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JPMorgan Chase Caught “Misrepresenting” Credit Card Collections; Whistleblower Fired [AllGov]

After cutting corners and relying on poor accounting, JPMorgan Chase shut down its legal operation against credit card debtors, some of whom may have been wrongly sued by the bank. It would appear to be another example of greed overcoming honesty. Ten years ago, Chase was recovering about $130 million a year in bad debt collections. By 2009, they were raking in $1.2 billion on credit card recoveries alone. The problem, legally and ethically, was that Chase was misrepresenting what they were selling to professional debt collectors. The increase in profits—and the decrease in ethical standards—would appear to have begun in 2008 when Edmond Helaire and his right-hand man, Jason Lazinbat, were put in charge of the credit card debt division in San Antonio, Texas.

 

JPMorgan Chase Caught “Misrepresenting” Credit Card Collections; Whistleblower Fired

A former bank employee, Linda Almonte, first drew attention to the problem after she was fired for complaining that Chase was selling credit cards debts with erroneous balances to collection companies. Almonte then filed a whistleblower lawsuit contending she was wrongfully terminated.
Almonte had barely settled into her new job at Chase’s credit card litigation support section in San Antonio in 2009 when she was given responsibility for organizing a parcel of almost $200 million worth of delinquent credit card bills to be sold to a debt collector. It did not take long for her to realize that many of the unpaid bills, or judgments, were not what they were supposed to be. Shewrote to her superiors that almost half of the judgments were missing documents or lacked dates and signatures. In addition, for almost a quarter of the judgments, Chase was exaggerating the amount that was owed.

JPM Admits CIO Group Consistently Mismarked Hundreds Of Billions In CDS In Effort To Artificially Boost Profits [Zerohedge]

Back on May 30 we wrote “The Second Act Of The JPM CIO Fiasco Has Arrived – Mismarking Hundreds Of Billions In Credit Default Swaps” in which we made it abundantly clear that due to the Over The Counter nature of CDS one can easily make up whatever marks one wants in order to boost the P&L impact of a given position, this is precisely  what JPM was doing in order to boost its P&L? As of moments ago this too has been proven to be the case. From a just filed very shocking 8K which takes the “Whale” saga to a whole new level. To wit: ‘the recently discovered information raises questions about the integrity of the trader marks, and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses being incurred in the portfolio during the first quarter. As a result, the Firm is no longer confident that the trader marks used to prepare the Firm’s reported first quarter results (although within the established thresholds) reflect good faith estimates of fair value at quarter end.”

As a result of this, regulators who now are only 3 years behind the curve, are most likely snooping to inquire not only how JPM did it (call us: we can brief you in 2 minutes), but who else has been doing this? Hint: everyone.

Because in other words, we have just discovered that the two key components of the entire CDS market: the LIBOR base and market “marks” have been bogus at best, and realistically, fraud. And one wonders why no bank ever will let CDS trade on an exchange…

Full filing:

On July 13, 2012, JPMorgan Chase & Co. reported that it will restate its previously-filed interim financial statements for the first quarter of 2012. The restatement will have the effect of reducing the Firm’s reported net income for the 2012 first quarter by $459 million. The restatement relates to valuations of certain positions in the synthetic credit portfolio of the Firm’s Chief Investment Office. The Firm’s year-to-date principal transactions revenue, total net revenue and net income and the year-to-date principal transaction revenue, total net revenue and net income of the Firm’s Chief Investment Office (“CIO”) will remain unchanged as a result of the restatement. The Firm reached the determination to restate on July 12, 2012, following management review of the matter with the Audit Committee of the Firm’s Board of Directors on the same day.

The restatement results from information that has recently come to the Firm’s attention in connection with management’s internal review of activities related to CIO’s synthetic credit portfolio. Under Firm policy, the positions in the portfolio are to be marked at fair value, based on the traders’ reasonable judgment as to the prices at which transactions could occur. As an independent check on those marks, the CIO’s valuation control group (“VCG”), a finance function within CIO, verifies that the traders’ marks are within pre-established price testing thresholds around external “mid-market” benchmarks and, if not, adjusts trader marks outside the relevant threshold. The thresholds consider market bid/offer spreads and are intended to establish a range of reasonable fair value estimates for each relevant position. At March 31, 2012, the trader marks, subject to the VCG verification process, formed the basis for preparing the Firm’s reported first quarter results.

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This Is How To Kill JPM’s CIO Operation [Zerohedge]

While JPM may or may not have succeeded in burying its deeply humiliating CIO fiasco at the expense of two things: i) a loss of up to 25% in recurring net income and ii) Jamie Dimon proudly throwingnumerous of his key traders under the regulatory bus as scapegoats because it took the firm until July 12 to realize that its entire CDS book was criminally mismarked, thus confirming a “weakness in internal controls” (a statement not only we, but Bloomberg’s Jonathan Weil vomits all over), the truth is that one way or another, Jamie Dimon will find a way to reposition his prop trading book somewhere else, even if it means far smaller and less obtrusive profits for the next several years. Yet there is a way to virtually make sure that Jamie Dimon is never allowed to trade as a hedge fund ever again, and in the process risk insolvency and yet another taxpayer bailout. Ironically, it is JPMorgan itself that tells everyone precisely what it is.

As the firm presents in Earnings Presentation statement Appendix, which succinctly summarizes the firm’s balance sheet, all the CIO/Treasury group is, is merely an conduit to allocate excess liabilities, which in the case of JPMorgan simply means deposit cash, and use these to generate shareholder returns.

A quick glance at the chart above shows that when it comes to traditional banking aspects, there is a roughly $400 billion mismatch between traditional liabilities (Deposits, which amount to $1,116 billion), and assets (Loans, which are $693 billion).

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James Rickards on CNBC: “Jamie Dimon Should Go.” [MaxKeiser]

The guy defending Dimon’s crimes uses the Johnson & Johnson Tylenol recall of 1982 as a model of corporate emergency and response; that Dimon somehow emulated in a positive way in his handling of the balance sheet crimes his company committed. This is nonsense. Tylenol was an attack from outside (the drugs were tampered with). JP Morgan is tampering with itself; for the purpose of defrauding and profiting. Dimon’s crimes have increased systemic risk to the banking industry and Dimon has now become the poster child for crony corruption and financial terrorism in America.

Watch video

CONFIRMED AT LAST: The attempted cover-up of how JP Morgan torpedoed Lehman Brothers [TheSlog]

As an early propagator of the allegation that JP Morgan Chase deliberately hastened the Lehman collapse, the Slog finds itself vindicated three years on by a successful regulator action against JPM, and contemporary documentation.

“And then when you have the suckers by the balls, you squeeze just like this”

Around the time of the Lehman disaster, a senior insider at the firm relayed to me what seemed an astonishing allegation: that in the weeks prior to the eventual collapse, JP Morgan deliberately withheld huge monies owed to Lehman in order to make the bankruptcy a certainty from which they could benefit. I relayed this story to another contact the following year, and he not only corroborated the charge, he also said he was sure Barclays had done the same. The now disgraced Barclays CEO Bob Diamond took over Lehman in a fire sale only weeks later (using taxpayers’ money as a bridging loan to do it) and rapidly built up a commanding position for the division he then headed up, Barcap  – the investment arm of the bank.

Now, more than three years later, regulators have penalised JPMorgan for actions tied to Lehman’s demise. The bank settled the Lehman matter and agreed to pay a fine of approximately $20 million. The action took place because of Morgan’s ‘questionable treatment of [Lehman] customer money’: regulators accused JPMorgan of withholding Lehman customer funds for nearly two weeks. So it had been true after all.

Jamie Dimon’s Morgan Chase dodged and dived on this one for three years in an attempt to smooth over the tracks.  As late as April this year, the Pirate insisted that the ‘monies involved were small’: but that doesn’t tally with this Wall Street Journal snippet from the time as follows:

‘Lehman Brothers Holdings Inc., the securities firm that filed the biggest bankruptcy in history yesterday, was advanced $138 billion this week by JPMorgan Chase & Co. to settle Lehman trades and keep financial markets stable, according to a court filing.’

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Web Extra Chris Whalen: Is JP Morgan blowing hot air with clawbacks? Plus, Natural Gas forecasts

In PFG Scandal, JPMorgan Chase Had Surprising Role: It Held Customer Accounts

The investigation into the collapse of Iowa brokerage firm Peregrine Financial Group is notable for one name that has not yet turned up: JPMorgan Chase.

JPMorgan, the country’s biggest bank, held customer accounts for Peregrine, doing business as PFGBest. But in alleging that Peregrine took customer money, the National Futures Association and Commodity Futures Trading Commission have claimed that customer money is missing not from a JPMorgan account, but from a U.S. Bank account.

That’s news to some Peregrine clients.

 

Pfgbest Customer Account Jpmorgan Chase

 

“All of my clients thought the money was at JPMorgan,” said Mark Sackoor, managing director at Abaco Futures in Boynton Beach, Fla. Sackoor was an “introducing broker” for PFG, connecting individual clients with the firm, which held their money.

Brokerage firms like PFG are required under federal regulations to disclose the name of the bank that holds segregated customer accounts, and JPMorgan was the only bank named in that capacity on the PFG Web site. If you were a client who wanted to send money to PFG, its Web site directed you – and still does – to wire the money to a JPMorgan account called the “PFG Inc. Customer Segregated Funds Account.”

Several people, including clients and employees of PFG, have told The Huffington Post that they understood that segregated customer funds were held at JPMorgan.

But JPMorgan is not mentioned in the CFTC complaint against Peregrine – instead, it says roughly $215 million is missing from an account at U.S. Bank, a unit of U.S. Bancorp. The complaint describes the U.S. Bank account as the segregated funds account for PFGBest customers.

Sackoor, the Florida managing director, says he had never heard of a U.S. Bank segregated-funds account before Peregrine collapsed. He and his clients are still waiting to hear where their money is and when they’ll get it back.

“My clients and I are in limbo waiting for some sort of resolution so that my clients and I can get back to work,” Sackoor says. “What I find really troubling is that there is little to no transparency or verification to a firm’s segregated account balance that is supposed to be what its title suggests it to be.”

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JPMorgan says bad trade has ballooned to $5.8B [AP]

NEW YORK (AP) — JPMorgan Chase said Friday that a bad trade had cost the bank $5.8 billion this year, almost triple its original estimate, and raised the prospect that traders had improperly tried to conceal the blunder.

“This has shaken our company to the core,” CEO Jamie Dimon said.

The bank said managers tied to the bad trade had been dismissed without severance pay and that it planned to revoke two years’ worth of pay from each of those executives.

JPMorgan said it had lost $4.4 billion because of the trade from April through June, and its chief financial officer said the bank had lost an additional $1.4 billion in the first three months of the year.

Dimon’s original estimate of the loss from the bad trade, disclosed in a surprise conference call with Wall Street analysts in May, was $2 billion.

On Friday, Dimon said he believed the loss was mostly contained. In the worst case, if financial markets deterioriate severely, the bank could lose an additional $1.7 billion, he said. That would bring the total loss to $7.5 billion.

Investors appeared relieved that the mess was mostly behind the bank. They sent JPMorgan’s stock price up $1.50, or more than 4 percent, to $35.54. That made it the best-performing stock in the Dow Jones industrial average.

The bank said an internal investigation, including emails and voice messages, had called into question the values that traders placed on certain bets, and that the traders may have been seeking to mask losses.

A spokesman for the Securities and Exchange Commission declined comment. The Justice Department did not immediately respond to requests for comment.

Dimon told Congress last month that the trade was meant to hedge risk at the company and protect it in case “things got really bad” in the global economy. Instead, the trade has backfired and damaged the bank’s reputation.

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JPMorgan To Clawback Bonuses, Will Announce CIO Loss Just Over $5 Billion [Zerohedge]

Many were stunned when Ina Drew left JPM with millions in bonuses a few short days after Jamie Dimon told Senate and Congress those responsible for the multi-billions CIO loss would see compensation clawbacks. They can be unstunned now, following a report from the WSJ that in a few days JPM will announces millions in clawbacks from disgraced CIO executives. As for the final loss on the CIO? Recall what Zero Hedge calculated (not speculated, not surmised, not made up) in the hours literally after the JPM announcement of a $2 billion loss? We said: “Is JPM Staring At Another $3 Billion Loss?” and elaborated that “this is where we find ourselves now – the net notionals remain huge (and implicitly on JPM’s shoulders), his lack of selling has left the credit index maybe 20bps rich to where it might trade given its rough correlation with the S&P 500 and this would imply at least $3bn of losses already in addition at fair-value.” We were again spot on: from the WSJ: “J.P. Morgan is expected to announce Friday that the trading blunders will cost the company just over $5 billion in the second quarter, in which the bank is expected to show a profit, according to people familiar with the situation.” Math: it’s fundamental (Ph.D. economists – take note).

From the WSJ:

J.P. Morgan Chase JPM +0.85% & Co. plans to reclaim millions of dollars in stock from executives at the center of the trading blunder that shocked Wall Street and tarnished the reputation of Chief Executive James Dimon.

The nation’s biggest bank is expected to claw back compensation from individuals including Ina Drew, who ran the company’s Chief Investment Office, or CIO, according to people familiar with the bank’s plans. Ms. Drew was a top lieutenant of Mr. Dimon’s before she resigned this spring following the disclosure of the trading losses.

The bank could disclose the plans as early as Friday when it announces earnings, these people said. The clawback amounts were still being determined this week because of the complicated formulas and conditions for imposition, according to one person familiar with the situation.

J.P. Morgan’s plan is the most prominent instance of a major U.S. bank seeking to recover pay from a high-ranking executive since the financial crisis. Other members of the CIO, including Bruno Iksil, the London-based trader known as the “London whale” for his outsize bets on certain corporate credit indexes, and his bosses Achilles Macris and Javier Martin-Artajo also are expected to face clawbacks, the people said.

As for the loss, which we calculated precisely two months ago, the WSJ says:

J.P. Morgan is expected to announce Friday that the trading blunders will cost the company just over $5 billion in the second quarter, in which the bank is expected to show a profit, according to people familiar with the situation. The company’s future losses on the trade are projected to stay below $1 billion, the people said, and could result in profits of that much if the market turns in the company’s favor.

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JPMorgan Chase Employee Allegedly Steals $100,000 From Man With Alzheimer’s [HuffingtonPost] $JPM

Here’s a new one: A JPMorgan Chase employee has been accused of taking advantage of a man suffering from Alzheimer’s by pulling $100,000 from his bank account, according to a new lawsuit.

The curator assigned to make decisions for Herman Lafayette, who is legally incapacitated because of his Alzheimer’s, claims that a JPMorgan employee took advantage of Lafayette after his diagnosis in 2008. According to the lawsuit, the unnamed bank employee stole $100,000 from Lafayette over the course of a year (h/t Courthouse News Service).

A JPMorgan Chase representative told HuffPost that the bank had just been informed of the lawsuit, and that the bank takes “these matters very seriously and will investigate.”

Of course, banks have been accused of such misappropriation before. In 2010, JPMorgan allegedly had a Washington man unjustly arrested after he attempted to cash his own check. Then last summer, it was reported that Bank of America hadmisappropriated $30,000 worth of Social Security checks for one Riverside, California, resident. The bank only corrected the error after the Riverside District Attorney initiated an investigation.

Chase Lawsuit

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