JPMorgan Chase Becomes the Main Target
While at first the main target of prosecution on charges of discreditable mortgage practices was Bank of America, which was traditionally one of the top five, if not the top three banks on Wall Street, in autumn 2013 JPMorgan Chase topped the black list. Among Wall Street banks it has consistently occupied first place in assets (currently 2.3 trillion dollars).
JPMorgan Chase will pay the U.S. government 13 billion dollars in exchange for dropping the investigation into the bank's activities in the mortgage field. An agreement to this effect was reached by the bank's management and the U.S. Department of Justice. This is an absolute record for compensations received by the U.S. government from a private business… Incidentally, JPMorgan Chase became a «record holder» in a number of activities even earlier, but the bank prefers not to publicize some of its «achievements». For the period from 2008 to early September 2013, JPMorgan's court and legal costs exceeded 18 billion dollars, which is a record for American banks. This includes costs connected with all the bank's various sins: money laundering, manipulation of LIBOR rates, falsification of financial reports, misleading clients with regard to the real price of stock being purchased (trust activities), etc. The most recent big scandal surrounding the bank is connected with the episode called the «London Whale trades». A trader at the British office of JPMorgan Chase caused losses of over 6 billion dollars as a result of manipulations with derivatives. During their investigation of the «London Whale» incident, financial regulators in the U.S. and Great Britain uncovered a heap of violations on the part of the bank and fined JPMorgan Chase 1 billion dollars. That was in September 2013. And in October the bank became the «main character» in a scandalous episode related to mortgages and mortgage securities.
Litigation between JPMorgan Chase and the U.S. government over the settlement of claims for the mortgage schemes of last decade had been going on for a long time. The bank had been steadily retreating. At the beginning of the year JPMorgan Chase made an offer to the U.S. government to pay around 3 billion dollars both for federal claims (from financial regulators) and for the claims of cheated investors who had at some time bought «junk» mortgage securities issued by the bank. The government considered this to be too little. Several more months passed, and in September of this year reports appeared in the media that the parties might settle on 11 billion dollars. On October 18 unofficial reports appeared that JPMorgan Chase had agreed to pay 4 billion dollars toward settling the claims of the Federal Housing Finance Agency. However, this was only part of the final agreement with the U.S. Department of Justice, which came to 13 billion dollars, as mentioned above. At the same time, the payment of 13 billion dollars is to guarantee that all further civil claims against the bank will be closed on both the federal and state level. But JPMorgan Chase, like Bank of America, is having to pay not only for its own mortgage sins, but for the sins of those companies it acquired during the crisis. In this regard it is worth noting the acknowledgements of Joseph Grundfest, a former commissioner of the U.S. Securities and Exchange Commission (SEC). He stated that most of the questionable mortgage deals were made by banks which JPMorgan bought during the financial crisis at the request of the American government, and not of its own volition. Apparently this was some kind of tacit deal with the government by means of which the bank was then able to receive astronomical amounts of money from the Treasury Department and from the Federal Reserve to save itself. In 2008 JPMorgan came to the assistance of the American government and acquired Bear Stearns and Washington Mutual, which were on the brink of bankruptcy. It was these two companies which had issued the lion's share of the «toxic» securities totaling 33 billion dollars which the bank is being accused of selling to the federal mortgage agencies Fannie Mae and Freddie Mac.
JPMorgan Chase Goes into the Red
The «raids» of financial regulators have begun to tell on the financial status of the bank. JPMorgan Chase was one of the few Wall Street banks which had been able to weather the storm of the financial crisis with no losses in its yearly and even quarterly reports. Starting in 2004, JPMorgan Chase had been showing positive financial results, i.e., a profit, in its quarterly reports. But in the report for Q3 2013, the bank for the first time showed a loss of 380 million. Incidentally, a year before this, in Q3 2012, the bank made a profit of 5.7 billion dollars, and in the second quarter of 2013 a profit of 6.5 billion dollars was recorded. Analysts note that the losses arose from legal costs of 7.2 billion dollars. This includes legal fees, preparation and conducting of negotiations with financial regulators, and payment of fines and compensations. The main part of the legal costs in the third quarter was contributions to the special fund for covering costs within the scope of the agreement reached with the Department of Justice. However, the bank was only able to insure itself against further «raids» by regulators in one area; in other areas, regulating organizations are continuing to investigate JPMorgan. For example, charges of taking bribes (in particular, in connection with the employment of relatives of the heads of Chinese state companies), manipulating key market rates, falsifying financial reports, etc. are being prepared. The topic of mortgages is not completely closed either; criminal charges could still be brought, which would also cause the bank serious expenses.
Government pressure from financial regulators, district attorney's offices and courts is becoming more palpable each year. In late August 2013 Bloomberg experts reported that since 2008, six leading U.S. banks had spent 103 billion dollars on payment of compensations and settlement of various claims from individuals (investors, mortgage holders, and other categories of bank clients) and from the government. The Bloomberg experts calculated that over these five years the banks had paid their shareholders less in dividends than they had left in the courts. The authors of the study warned that the banks' losses most likely will not be limited to a hundred billion dollars; suits from dissatisfied investors and the government could continue to be filed for a decade. In other words, Bloomberg is hinting that as a result of these «raids», many «untouchable» banks could go into the red.
Anti-bank Sentiments in American Society
The question arises as to what is causing the increased legal pressure on leading banks. There are several reasons. First and foremost, there is a growing dissatisfaction with the banking world in American society. This is shown by numerous public opinion surveys. Perhaps never before since the crisis of 1929-1933 have the American people felt such hatred toward bankers, whom they have started calling «banksters» (banker-gangsters). From 2005 through 2010 banks sent around 9.3 million foreclosure notices to U.S. households, which means approximately 35 million people lost their homes. According to some estimates, U.S. foreclosures could reach 14 million by 2014. Of course, the number of evictions is not the same as the number of foreclosures, but over three-fourths of the more than 7.2 million foreclosures in the period of 2005-2010 led to the eviction of families from their homes. That means that over 20 million Americans lost the roof over their heads. In 2010 alone banks confiscated 1.05 million pieces of real estate. Of course, not all evicted bank clients end up on the street. Some move to less expensive houses or apartments, others move in with relatives or friends. But at the same time, many Americans are now living in tent cities, in squatter communities like Slab City in the desert, and in homeless shelters. Last decade's mortgage crisis continues to be felt painfully by millions of Americans who justifiably link their difficulties and sufferings with banks. The number of lawsuits which ordinary Americans throughout the country have filed in connection with various violations and abuses on the part of banks number in the hundreds of thousands. Among those seriously wronged by bankers are representatives of the more prosperous strata of American society as well: those who purchased mortgage-backed securities which turned out to be «junk» or «toxic» securities. Tens of thousands of lawsuits have been filed by such investors. Never before in the history of the U.S. (even in the 1930s) have such an enormous number of lawsuits been filed against bankers.
The American Elite vs. the Wall Street Banks
Some among the politically active part of American society are seeking a cardinal restructuring of the entire U.S. financial and banking system. Many understand that the current monetary model of the American economy threatens America's existence as a sovereign state. After all, power in America today belongs not to the people or the people's representatives (the U.S. Congress), but to the main shareholders of the Federal Reserve System. This private corporation issues the American dollar (according to the U.S. Constitution this is one of the powers of Congress), keeps the government in a noose of debt (lending through the purchase of treasury securities), controls almost all American banks and supports many leading banks of the London City, Switzerland and other countries of continental Europe through loans. The sober-minded among the American elite understand perfectly that it is banks that are to blame for the fact that over the past fifty years such dangerous processes have been taking place as the consistent deindustrialization of the country, the social polarization of American society, the erosion of the middle class and the mass pauperization of the lower classes, the drawing of the country into military ventures in various regions of the world, and the intensification of the unreasonable burden of providing for American interests on a global scale. This part of the American elite (called «patriots», «isolationists», «constitutionalists», «nationalists», etc.) perceive Wall Street banks as obvious cosmopolitan institutions for which America is just a temporary base.
Bold representatives of the patriotic part of the American elite are the well-known public figure and economist Lyndon Larouche; the father of Reaganomics Paul Craig Roberts; Republican congressman, «Tea Party» member and outspoken opponent of the Federal Reserve System Ron Paul; and his son Randall Paul (currently a senator from the state of Kentucky), also an active member of the «Tea Party». One could also name Patrick Buchanan, Jesse Helms, Curt Weldon, Paul Weyrich and others. Mainly all these people identify with the right wing of the Republicans, although there are Democrats among them, as well as a number of «independents» or representatives of small parties. Some analysts believe that many «isolationists» and «patriots», and hence opponents of Wall Street, can be found among Pentagon officers and generals, as well as in the Justice Department. There are also a fair number of «isolationists» and Wall Street opponents in the lower house of Congress. This can be seen in particular from the voting results for a number of bills directed against banksters (for example, a bill that would reinstate the Glass-Steagall Act and one for the complete audit of the Federal Reserve). In cannot be ruled out that it is members of these circles who stand behind the actions of financial regulators described above.
Other Theories about the «Raids» on Banks
There are other theories about the «raids» on banks as well. Some authors name law firms as the initiators of the «raids». It is true that the law business in the U.S. is extremely aggressive, constantly looks for new niches, and lobbies for the passage of laws that would increase demand for its services. Currently in the U.S. there are around 50,000 law firms. In 2008 the revenues of all the law firms and individually practicing lawyers in the U.S. came to 170.8 billion dollars, and the 13 leading law firms had a gross income of over 1 billion dollars per year. After the financial crisis, law firms began to actively feed off of banks. First, banks themselves can be plaintiffs. Many suits were filed by banks as a result of the recent financial crisis; banks try to «shake» their loans and other assets out of clients, and there are also numerous squabbles between banks. Second, banks need to defend themselves in court from financial regulators and disgruntled clients. Third, in order to succeed in their fight with the banks, the financial regulators and disgruntled clients need legal assistance. By the end of last year the number of collective and individual lawsuits filed by individuals against banks with regard to mortgages was approaching 100,000. To this we must add the suits filed by investors who bought «junk» mortgage securities on the financial market, as well as the demands of financial regulators and various government agencies. All this requires expensive legal services. Still, it is unlikely that law firms could be considered the initiators (or at least the main ones) of the «raids» on banks.
There exists an even more exotic explanation of the causes of the «raids» on banks – that supposedly the government is trying to close gaps in the budget that way. The fines that the banks pay into the government coffers today are measured in billions of dollars, but it is unlikely that they could be considered a significant budget source (remember that the annual expenses of the U.S. federal budget are measured in trillions of dollars).
There is also a theory that the current «raids» on Wall Street banks are a manifestation of the endless «behind the scenes» struggle of the Rockefeller clan and the Rothschild clan. The latter, supposedly, are acting on the principle «worse is better» and are trying to undermine the U.S. banking system, leading to the collapse of the Federal Reserve System and its printing press. According to a number of estimates, the Rockefellers and their minions occupy key positions in the Federal Reserve. And in place of the current paper dollar standard whose collapse they are trying to hasten, the Rothschilds will propose some variant of the gold standard. Thus they will once again be tall in the saddle, as in the age of the classic gold coin standard of the 19th century, or at least the gold dollar standard of the Bretton Woods currency system era.
The Consequences of the «Raids»
Incidentally, the «raids» on banks are not limited to investigations by financial regulators and court litigation. This line of attack on banks could be called the legal line. Besides this there is the legislative line: the drafting and promotion in the U.S. Congress of various laws aimed at limiting the omnipotence and lack of supervision of bankers. The most noticeable and consistent fighter in this area was Ron Paul, and now his son Randall is continuing his work on Capitol Hill.
There is also the information line, wherein the media criticizes the U.S. banking system (including the Federal Reserve), reveals the various schemes and cons of individual banks, conducts financial education among the populace, and supports civic movements like Occupy Wall Street. Many analysts are noting that there are many times more anti-bank publications in the U.S. media after the financial crisis than there were before the crisis. A critical tone toward banks has become the norm even in such conservative publications as The Wall Street Journal. Perhaps only in the 1930s, in the period of crisis and depression and in the years of the fairly bold actions of President F. Roosevelt for limiting the greed of banks, was such a pitch of criticism toward banks observed in the American press.
Of course, for now it is impossible to fully understand who initiated the «raids» on the once «sacred cows» of American capitalism. Suggestions that it was the Pentagon generals, the leaders of the Justice Department, the Rothschilds, some anonymous White House employees or someone else are only hypotheses. Whoever these initiators may be, they are all dependent on the sentiments of protest in all levels of American society. In any case, these «raids» are undermining the existing U.S. banking system and could result in the collapse of the American dollar.