How Power Shifted to Make JPMorgan’s Punishment Possible

Plus a White House wedding and whispers from Washington’s prestige peddlers.

People pass a sign for JPMorgan Chase & Co. at it's headquarters in Manhattan on October 2, 2012 in New York City.
National Journal
Add to Briefcase
Ben Terris and Michael Hirsh
Nov. 22, 2013, 7:29 a.m.

Some won­der wheth­er Mark Leibovich was really spill­ing the in­side story of how Wash­ing­ton works in his pu­tat­ive tell-all, This Town, giv­en that lead­ing roles in his nar­rat­ive were of­ten the bit­ti­est of bit play­ers. And lo, our sus­pi­cions that there’s a lot more to say were con­firmed re­cently by none oth­er than Janet Donovan, the would-be Kay Gra­ham of DC’s gos­sip-salon set.

At what could only be called a meta-con­fab — a gath­er­ing of gos­sip colum­nists who gos­siped about how best to get gos­sip — Donovan de­livered the low­down on just how low This Town rates with her. “You read Mark Leibovich’s book?” Donovan asked. “That was all fairy dust com­pared to what we know in this room.”

No ques­tion, the story of power is al­ways the story of people, large and some­times very small. Happy read­ing.

California Attorney General Kamala Harris (Justin Sullivan/Getty Images) National Journal

One of the spi­ci­est power stor­ies of the week was the his­tor­ic set­tle­ment between the Justice De­part­ment and JP­Mor­gan Chase. It was his­tory-mak­ing both in size ($13 bil­lion) and in get­ting, for the first time, some ac­know­ledge­ment of wrong­do­ing by a ma­jor Wall Street bank. And it marked a dra­mat­ic de­par­ture from the past. Why and how? Cali­for­nia At­tor­ney Gen­er­al Kamala Har­ris (Justin Sul­li­van/Getty Im­ages)

The an­swer is a change in power play­ers, in­clud­ing an at­tor­ney gen­er­al who ex­er­ted pres­sure from way out­side Wash­ing­ton: Kamala Har­ris. Here’s the back story.

Jam­ie Di­mon may not have known what hit him. One minute, it seemed, Tim Geithner was smil­ing at him and Lanny Breuer was look­ing the oth­er way; the next minute, the chair­man of JP­Mor­gan Chase was be­ing nailed to the wall (without a street).

The real story of how At­tor­ney Gen­er­al Eric Hold­er re­gained at least a meas­ure of self-re­spect when it comes to Wall Street is mainly a story of a chan­ging of the guard — how an im­port­ant roster of power play­ers in Wash­ing­ton changed dra­mat­ic­ally. Breuer, Hold­er’s former head of in­vest­ig­a­tions, left sev­er­al months ago to go back to Cov­ing­ton Burl­ing, whence he and Hold­er both came, and which has a lot of bank­ing cli­ents. Geithner, chief pro­tect­or of the banks, left Wash­ing­ton en­tirely, leav­ing things to his suc­cessor at Treas­ury, the more neut­ral Jac­ob Lew. And that’s when things began to change for JP­Mor­gan Chase and the oth­er once-“un­touch­able” banks.

Next, in a key move, Tony West re­placed Tom Per­relli as as­so­ci­ate at­tor­ney gen­er­al, the third-highest spot in Justice. Per­relli had been re­spec­ted — and feared, as a close friend of Obama’s from Har­vard Law. He’d also done some im­press­ive things way back when in the Clin­ton Justice De­part­ment. But Per­relli seemed out of his depth on fin­an­cial in­vest­ig­a­tions, hav­ing quar­ter­backed the dis­astrously in­ad­equate 50-state mort­gage-fraud set­tle­ment in late 2011. West was now in charge as chief ne­go­ti­at­or with JP­Mor­gan.

But the key in­gredi­ent — the real secret sauce — came from out­side the Belt­way. It was a pas­sel of im­port­ant and in­flu­en­tial state at­tor­neys gen­er­al who were also hop­ping mad. That’s where Kamala Har­ris came in. Har­ris, the Cali­for­nia at­tor­ney gen­er­al who’s seek­ing to make a name in na­tion­al polit­ics (along with Mary­land Gov. Mar­tin O’Mal­ley, an­oth­er eager as­pir­ant to na­tion­al pro­file-dom, she co­chaired the 2012 DNC rules com­mit­tee), hap­pens to be Tony West’s sis­ter-in-law. Pub­licly peeved at be­ing as­so­ci­ated with the first set­tle­ment in 2011, she sought to stiffen her bro-in-law’s spine, ac­cord­ing to people close to her and the deal.

Mean­while New York At­tor­ney Gen­er­al Eric Schnei­der­m­an, who was also once seen as a hero of the get-tough-on-Wall Street set, was look­ing to re­store his cred­ib­il­ity after sign­ing the 2011 set­tle­ment in ex­change for be­ing made vice chair­man on Obama’s new fraud task force and get­ting a shout-out at the 2011 State of the Uni­on. In the be­gin­ning, Schnei­der­m­an nev­er got an of­fice; and for months no one knew how reach the task force. And Schnei­der­m­an’s once-bright star faded as Ben­jamin Lawsky, the state fin­an­cial-ser­vice dir­ect­or, be­came the new pro­gress­ive hero. Schnei­der­m­an badly needed a win, and now he had tough­er coun­ter­parts in Wash­ing­ton to work with.

So Hold­er may take the cred­it, but it was the de­par­tures of Breuer, Per­relli, and Geithner, com­bined with the hu­mi­li­ations suffered by the at­tor­neys gen­er­al from Cali­for­nia, New York, and Delaware (Beau Biden, who also had a say), that really made the dif­fer­ence this week. The res­ult? The world’s biggest bank is $13 bil­lion light­er in the wal­let.

Power is as power pools.

That big splashy event at the New­seum this week was Wash­ing­ton’s screen­ing of Garry Trudeau’s new show, Al­pha House, star­ring John Good­man and fea­tur­ing an all-too-brief cameo by Bill Mur­ray as a sen­at­or who over­sleeps at his own ar­rest. Fairly funny in its own right, Al­pha House is also the latest ad­vance on a genre that dates back at least to The West Wing.

Jonathan Alter (Michael N. Todaro/Getty Images for Amazon Studios) Michael N. Todaro/Getty Images for Amazon Studios

Jonath­an Al­ter, the re­spec­ted polit­ic­al journ­al­ist and au­thor who in keep­ing with these topsy-turvy times — when faux news de­livered by comedi­ans like Jon Stew­art trumps “real” news — is one of Al­pha House’s ex­ec­ut­ive pro­du­cers. While he in­sists the show mainly just seeks to en­ter­tain, he and Trudeau (they are long­time friends, hav­ing made reg­u­lar so­journs to New Hamp­shire to­geth­er every four years) are hop­ing to re­build the severed nerve of con­ver­sa­tion in Wash­ing­ton. Jonath­an Al­ter (Mi­chael N. Todaro/Getty Im­ages for Amazon Stu­di­os)

But what’s really go­ing on here is that the lines between pre­tend and real­ity are get­ting blur­ri­er and blur­ri­er. Wash­ing­ton and Hol­ly­wood, which have long been poor re­la­tions ex­cept for one week­end a year (the White House Cor­res­pond­ents Din­ner, of course) ap­pear to be mer­ging. Grover Nor­quist is mak­ing cameos in Al­pha House, and Hil­lary Clin­ton is tak­ing selfies with Meryl Streep.

Al­ter says that what really dis­tin­guishes this show from Veep or House of Cards is that it’s the only polit­ic­al show on tele­vi­sion that’s ac­tu­ally set in real, present-day Wash­ing­ton, and Good­man and the oth­er char­ac­ters are sort of For­rest Gumped in next to Obama and Mitch Mc­Con­nell. The oth­er shows, says Al­ter, “are in a fantasy world.” Be­cause Al­pha House gets right in Wash­ing­ton’s face about today’s dys­func­tion­al polit­ics, but with a lot of hu­mor, Al­ter says he and Trudeau hope it can ac­tu­ally change the con­ver­sa­tion a little. “My as­pir­a­tion for it is that it has a de­tox­i­fy­ing ef­fect.”

Get­ting mar­ried in the Rose Garden used to be a pretty big deal. Tri­cia Nix­on and Ed CoxLynda Bird John­son and Charles Robb, and so forth. Per­haps it’s just that we’ve had a short­age of pres­id­en­tial chil­dren of mar­riage­able age in re­cent years, but it’s hard to deny that the cur­rency of the Rose Garden wed­ding is look­ing fairly de­based these days. That’s no dis­respect to Pete Souza, the White House pho­to­graph­er, but boy did he get lucky. On Sat­urday af­ter­noon, Oct. 19, Obama hos­ted a small wed­ding ce­re­mony for Souza, who also worked in the Re­agan White House, and Patti Lease in the Rose Garden. They were joined by roughly 35 fam­ily mem­bers and friends. (To pre­serve our na­tion­al dig­nity at least a little, there was no re­cep­tion at the White House: After the ce­re­mony, the bride and groom hos­ted a private re­cep­tion off-cam­pus for friends and fam­ily.)

Contributions by Marin Cogan and Ron Fournier
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login