Why Is Jamie Dimon Still Running JPMorgan?

In a dry “statement of facts,” the bank admits to taking part in one of the biggest frauds in history. Shouldn’t a minimum penalty be resignation?

Jamie Dimon, chairman of the board, president and CEO of JPMorgan Chase & Co. testifies before a US Senate Banking Committee full committee hearing on 'A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?' on June 13, 2012 on Capitol Hill in Washington, DC. 
National Journal
Michael Hirsh
See more stories about...
Michael Hirsh
Nov. 20, 2013, 10:11 a.m.

Re­spons­ib­il­ity: It’s one of the first things we teach our chil­dren. If you steal a cook­ie, ad­mit it. It’ll make you a bet­ter adult. Those rules still ap­ply — ex­cept on Wall Street, ap­par­ently, no mat­ter how many cook­ies they steal.  

In oth­er cul­tures less li­ti­gi­ous than ours, like Ja­pan’s or Korea’s, mis­be­hav­ing ex­ec­ut­ives will bow and some­times bawl in front of the cam­er­as, beg­ging the pub­lic’s for­give­ness be­fore resign­ing. But Jam­ie Di­mon is straight-backed and dry-eyed today. And smil­ing broadly, of course. Di­mon has put most of his leg­al prob­lems be­hind him, and now pre­sum­ably he can con­tin­ue on course as CEO of the world’s largest bank, JP­Mor­gan Chase.

Even though Di­mon has just pub­licly ac­know­ledged, in ef­fect, that his com­pan­ies took part in one of the biggest frauds in Amer­ic­an his­tory.

You missed that con­fes­sion, you say? Don’t feel bad. So did al­most every­one else. It is con­tained with­in the dry “state­ment of facts” that ac­com­pan­ies JP­Mor­gan’s his­tor­ic $13 bil­lion set­tle­ment this week. The key sen­tence reads: “Em­ploy­ees of JP­Mor­gan, Bear Ste­arns, and WaMu [Wash­ing­ton Mu­tu­al, which along with Bear was pur­chased by Di­mon] re­ceived in­form­a­tion that, in cer­tain in­stances, loans that did not com­ply with un­der­writ­ing guidelines were in­cluded in the RMBS [res­id­en­tial mort­gage-backed se­cur­it­ies] sold and mar­keted to in­vestors; however, JP­Mor­gan, Bear Ste­arns, and WaMu did not dis­close this to se­cur­it­iz­a­tion in­vestors.”

Trans­lated in­to plain­er lan­guage, Di­mon ap­pears to be con­ced­ing that dur­ing his ten­ure as CEO, JP­Mor­gan ex­ec­ut­ives and sales­men massively de­frauded in­vestors in the subprime craze by ly­ing about the true qual­ity of the hous­ing as­sets they were selling as se­cur­it­ies, and also that they fin­anced loans they knew bor­row­ers couldn’t af­ford to re­pay.

Let’s step back and ques­tion wheth­er, just per­haps, Jam­ie Di­mon ought to feel just a little per­son­al pain over this. As con­duc­ted broadly by Wall Street, these prac­tices nearly des­troyed the U.S. eco­nomy, and we are still feel­ing the dev­ast­at­ing ef­fects today. For this “un­law­ful” con­duct, as the Justice De­part­ment state­ment toughly de­scribes it (but which JP­Mor­gan doesn’t ad­mit to), the bank will pay out $4 bil­lion of the $13 bil­lion “in the form of re­lief to aid con­sumers.”

Case closed. What that means is that Di­mon is get­ting away with a min­im­al ac­know­ledg­ment of wrong­do­ing in what some fin­an­cial ex­perts have called the greatest scam ever per­pet­rated. In­deed, Di­mon’s con­fes­sion scrapes the bot­tom of re­spons­ib­il­ity so lightly that the only men­tion that ap­pears in the set­tle­ment agree­ment it­self is a ref­er­ence that reads: “JP­Mor­gan ac­know­ledges the facts set out in the state­ment of facts,” which ap­pears without any sig­na­tures. The deal will fold up most of JP­Mor­gan’s civil cases, and the only crim­in­al case the Justice De­part­ment is pur­su­ing is a nar­rowly drawn one in Cali­for­nia that won’t touch Di­mon or any oth­er ex­ec­ut­ive in New York.

(A JP­Mor­gan spokes­wo­man did not re­spond im­me­di­ately to an email ask­ing wheth­er the bank’s “ac­know­ledg­ment” of the Justice De­part­ment’s state­ment of facts is tan­tamount to an ad­mis­sion of wrong­do­ing.)

Now, get­ting Di­mon to go even this far was a huge tri­umph for At­tor­ney Gen­er­al Eric Hold­er and the Justice De­part­ment, which had come un­der with­er­ing cri­ti­cism in re­cent months for its fail­ure to hold Wall Street to ac­count. Pre­vi­ous set­tle­ments had not in­cluded any ac­know­ledg­ment of wrong­do­ing. Former crit­ics are prais­ing the agree­ment as a pre­ced­ent for oth­er Wall Street in­vest­ig­a­tions.

“Giv­en the pat­tern of pro­sec­utori­al passiv­ity since Leh­man’s fail­ure, I was ex­pect­ing that pro­tec­tion against in­dict­ments would have been in­cluded in this set­tle­ment.”¦ It em­phat­ic­ally and ex­pressly was not,” says Mi­chael Green­ber­ger, a leg­al and fin­an­cial ex­pert at the Uni­versity of Mary­land. “Do­ing something, even ap­pear­ing to do something, is an­swer­ing the frus­tra­tions of a vast ma­jor­ity of Amer­ic­ans, who fa­cing the worst eco­nom­ic en­vir­on­ment since the Great De­pres­sion (with no end in sight) want to see ac­count­ab­il­ity for those who caused it, those who were res­cued to the tune of tril­lions of tax­pay­er dol­lars and those who are now in fin­an­cially bet­ter shape than every­one else. It is not fair. And, this set­tle­ment and the state­ments sur­round­ing it for the first time since Leh­man failed be­gin to an­swer that bi­par­tis­an an­ger.”

Oth­ers say the res­ult is dis­ap­point­ing. “I feel like it’s too little, too late,” says Kath­leen En­gel, a fin­an­cial fraud ex­pert at Suf­folk Uni­versity. “This is not new in­form­a­tion. People have been mak­ing this point to fed­er­al reg­u­lat­ors and to the state at­tor­neys gen­er­al for six, sev­en years. And in the mean­time the courts were un­will­ing to en­ter­tain these law­suits. If the fed­er­al gov­ern­ment had ac­ted in face of this evid­ence soon­er, then cit­ies and bor­row­ers dam­aged by these loans might have found more re­lief soon­er.”

In­deed, the “state­ment of facts” ap­pears to be a con­fes­sion that there was a great deal of mer­it to law­suits like the one the city of Clev­e­land (which suffered one of the highest fore­clos­ure rates in the coun­try) filed in 2008 against JP­Mor­gan and 20 oth­er ma­jor in­vest­ment banks. That law­suit con­ten­ded that Wall Street’s finest were a “pub­lic nuis­ance” that de­pleted Clev­e­land’s tax base and des­troyed its urb­an-re­new­al pro­grams. “Over the course of sev­er­al years, fin­an­cial in­sti­tu­tions routinely made money avail­able to un­qual­i­fied bor­row­ers who had no real­ist­ic means of keep­ing up with their loan pay­ments,” the law­suit said. “This phe­nomen­on claimed en­tire streets, blocks, and neigh­bor­hoods.”   

The law­suit was even­tu­ally dis­missed. And Jam­ie Di­mon is smil­ing.

What We're Following See More »
Hill Dems Mull Dropping Wasserman Schultz
10 minutes ago

Concerned that she's become too divisive, "Democrats on Capitol Hill are discussing whether Rep. Debbie Wasserman Schultz should step down as Democratic National Committee (DNC) chairwoman before the party’s national convention in July. ... Wasserman Schultz has had an increasingly acrimonious relationship with the party’s other presidential candidate, Bernie Sanders, and his supporters, who argue she has tilted the scales in Clinton’s favor." The money quote, from a Democratic senator who backs Clinton: “There have been a lot of meetings over the past 48 hours about what color plate do we deliver Debbie Wasserman Schultz’s head on." Meanwhile, Newsweek takes a look at why no one seems to like Wasserman Schultz.

House Votes Today on Bill to Strip Budget Autonomy from DC
10 minutes ago

"The U.S. House of Representatives plans to vote Wednesday on a Republican bill that would block the District of Columbia from spending locally raised tax revenue without congressional approval, prompting President Obama to pledge to veto it. In issuing the veto threat on Tuesday, the Obama White House made one of the strongest statements to date in support of the District’s attempt to win financial independence from Congress."

Warren Goes After Trump Yet Again
11 hours ago

When it comes to name-calling among America's upper echelon of politicians, there may be perhaps no greater spat than the one currently going on between Sen. Elizabeth Warren and Donald Trump. While receiving an award Tuesday night, she continued a months-long feud with the presumptive GOP presidential nominee. Calling him a "small, insecure moneygrubber" who probably doesn't know three things about Dodd-Frank, she said he "will NEVER be president of the United States," according to her prepared remarks."We don't know what Trump pays in taxes because he is the first presidential nominee in 40 years to refuse to disclose his tax returns. Maybe he’s just a lousy businessman who doesn’t want you to find out that he’s worth a lot less money than he claims." It follows a long-line of Warren attacks over Twitter, Facebook and in interviews that Trump is a sexist, racist, narcissistic loser. In reply, Trump has called Warren either "goofy" or "the Indian"—referring to her controversial assertion of her Native American heritage. 

Kasich Tells His Delegates to Remain Pledged to Him
16 hours ago

Citing the unpredictable nature of this primary season and the possible leverage they could bring at the convention, John Kasich is hanging onto his 161 delegates. "Kasich sent personal letters Monday to Republican officials in the 16 states and the District of Columbia where he won delegates, requesting that they stay bound to him in accordance with party rules."

Sanders Wants a Recount in Kentucky
17 hours ago

Bernie Sanders "signed a letter Tuesday morning requesting a full and complete check and recanvass of the election results in Kentucky ... where he trails Hillary Clinton by less than one-half of 1 percent of the vote. The Sanders campaign said it has asked the Kentucky secretary of state to have election officials review electronic voting machines and absentee ballots from last week's primary in each of the state's 120 counties.