JPMorgan Chase illegally allowed Lehman Brothers, the investment bank whose 2008 bankruptcy brought the financial system to the brink of collapse, to count customers’ money as its own, according to federal regulators.
The arrangement boosted the amount that Lehman could borrow from JPMorgan, where the customers’ money was deposited, regulators charged Wednesday.
Then, at the height of the financial crisis, JPMorgan refused to release the customer funds for about two weeks, until regulators ordered it to do so, regulators charged.
The charges were spelled out in an enforcement action against JPMorgan by the Commodity Futures Trading Commission (CFTC).
Without admitting or denying wrongdoing, JPMorgan agreed to pay $20 million to settle the civil case.
The matter adds another dimension of alleged lawbreaking to the history of Lehman’s downfall. It was also another vivid illustration that, even in highly regulated modern financial firms, basic controls can break down.
Last fall, the big brokerage firm MF Global collapsed with as much as $1.6 billion of customer funds missing and unaccounted for. There, too, it appears that clients’ money was treated as if it belonged to the firm.
Evidence is mounting that thousands of children in the UK are not getting enough food to eat – and that, as financial hardship spreads, their numbers are increasing rapidly
Chris is 10. He and his brother are so malnourished that their skins are pale and they have rings under their eyes. Their older brothers have such an unhealthy diet that they have lost their adult teeth. They live in the sixth-richest city in the world – London. The boys are just four among thousands of Britain’s hungry children – victims of a “silent epidemic” of malnutrition in the capital and beyond.
Kids Company, which supports 17,000 children in London, has reported a dramatic increase in the number of children coming to its walk-in centres not in search of shelter or safety, but food. The situation is mirrored around the country. In Barnsley, child-support charities are working with parents who struggle to keep cupboards stocked with such staples as milk, bread and pasta. In Bristol, a youth project has gone from offering a place for teenagers to go for advice and support, to a place they go for a basic meal.
FareShare, a charity that redistributes surplus supermarket food, says soup kitchens, hostels and community groups are struggling to meet demand from parents and young people “desperate” for handouts. Since October, 42 per cent of the groups it works with have faced rising demand for food.
However, with that said, we are manipulating the silver futures market and playing a smaller (but still massively manipulative) role in manipulating the gold futures market. We have a little over a 25% (give or take a percentage) position in the short market for silver futures and by your definition this denotes a larger position than for speculative purposes or for hedging and is beyond the line of manipulation.
On a side note, I do not work directly with accounts that would have been directly impacted by the MF Global fiasco but I have heard through other colleagues that we have involvement in the hiding of client assets from MF Global. This is another fraudulent effort on our part and constitutes theft. I urge you to forward that part of the investigation on to the respective authorities.
In an article that is about three years overdue, “JPMorgan’s practices bring scrutiny” the FT finally takes aim at that other “vampire squid”, JP Morgan, which technically is incorrect: because if Goldman is a nimble and aggressive creature, with infinite tentacles in every governmental office, and unencumbered by massive liabilities, JPMorgan is just as connected, but unlike Goldman, it is a behemoth in every other possible capacity, and with its trillion in deposits, matched by tens of billions in bad loans, is a true Bank Holding Company. As such ‘Jabba the Hutt‘ would be a far more appropriate allegory to describe the the firm, whose reach, scope and scale lead the FT to classify it as “Three times a pallbearer, never a corpse.”
As some may recall, back in October 2009, Zero Hedge did an exhaustive expose on the relationship between JPMorgan and the then version of MF Global, Lehman Brothers, whose perfectly functioning division, its North American Brokerage, ended up being scooped up by Barclays for pennies on the dollar. In the meantime, however, JPMorgan, with the backing of the Fed, proceeded to demand as much extra collateral for Lehman repo positions on hold with JP Morgan and the Tri-Party repo system, of which JPM is one of only two custodians, simply because it could, and because this is the easiest way for the bank that is even closer to the Fed than Goldman Sachs, to procure liquidity during times of broad distress. Such as when the money market is about to freeze to death. Since then, the topic of just how much JPMorgan may have ripped off the Lehman estate has escalated, and is set to be an epic showdown in the form of a lawsuit which “accuses JPMorgan of using its “life and death power as the brokerage firm’s primary clearing bank” to put a “financial gun” to its head and demand excess collateral.” And here is the kicker: “It claims JPMorgan abused its access to US government officials and then “accelerated Lehman’s free fall into bankruptcy”, hoovering up collateral to protect itself to the detriment of the firm and other eventual creditors.”
And therein lies the rub: because of all TBTF banks, JPMorgan is literally at the nexus of the entire $16 trillion shadow banking system, the very system that the Fed, much more than traditional liabilities, knows and uses constantly to hypothecate and rehypothecate assets, in essence creating money out of nothing, and which in conjunction with the other Tri-Party repo dealer, Bank of New York, as well as State Street, provides the US financial system with over $30 trillion in shadow credit money in the form of custodial assets – liquidity the bulk of which is not accounted for in any conventional monetary textbook or in any modern theory of money as it is such a novel development, yet which is still 100% fungible, and is by far the biggest secret of the American monetary system. It can be seen as summarized in the following graphic, first created by Citi’s Matt King back in the week before Lehman failed (full report can be read here, and should be by anyone who wishes to understand just what is truly going on behind the scenes in modern finance).
Keep in mind, these are the same custody assets which, as explained previously in the case of MF Global, can be rehypothecated in serial fashion, creating a virtually infinite amount of “money” as long as everyone who is in on the fraud agrees to maintain the ponzi. Of course, if and when someone demands delivery of an underlying assets, the whole thing falls apart, which is what happened with AIG, with Lehman, and to a smaller degree, MF Global.
So what does all of this have to do with Blythe Masters?
Simple.
At the end of the day, and as the Lehman lawsuit alleges, JPMorgan has intimate access to US government officials, and particularly the Federal Reserve, who will in turn take advantage of all JPM facilities, including its trading desk, to preserve the sanctity and foundations of the $30+ trillion in custodial assets and rehypothecation system, which further means that any potential implication that fiat money is impaired has to be wiped out. As it so happens, soaring prices of gold and silver are the primary if not only means left to express rising doubts in the future viability of the dollar, but in the viability of the fiat system in the first place. Which means that the Fed is, without a doubt, one of the biggest “clients” of the Fed in a symbiotic crosshold, where what the Fed wants, JPM has to execute and vice versa.
This brings us to the transcript of Blythe’s interview on CNBC, in which a primary topic, ironically, was whether or not Jamie Dimon’s firm manipulates the prices of precious metals, and particularly silver. What followed was the usual avalanche of platitudes that only a muppet can love:
“JPM’s commodities business is not about betting on commodity prices but about assisting clients”… “it’s about assisting clients in executing, managing, their risks and ensuring access to capital so they can make the kind of large long-term investments that are needed in the long run to expand the supply of commodities”…
“There’s been a tremendous amount of speculation particularly in the blogosphere on this topic. I think the challenge is it represents a misunderstanding as the nature of our business. As i mentioned earlier, our business is a client-driven business where we execute on behalf of clients to achieve their financial and risk management objectives. The challenge is that commentators don’t see that. So to give you a specific example, we store significant amount of commodities, for example, silver, on behalf of customers we operate vaults in New York City, Singapore and in London. And often when customers have that metal stored in our facilities, they hedge it on a forward basis through JPMorgan who in turn hedges itself in the commodity markets. If you see only the hedges and our activity in the futures market, but you aren’t aware of the underlying client position that we’re hedging, that would suggest inaccurately that we’re running a large directional position. In fact that’s not the case at all.
“We have offsetting positions. We have no stake in whether prices rise or decline. Rather we’re running a flat or relatively flat matched book.
“What is commonly out there is that JPMorgan is manipulating the metals market. It’s not part of our business model. it would be wrong and we don’t do it.”
Ah yes, because JPMorgan never engages in “wrong” activites…
And while we admire JPM’s naive statement that it can triple its commodities revenues to $2.8 billion in 2011, while everyone else was losing money in the space, without taking prop bets, we just don’t buy it. Just as we didn’t buy Goldman’s explanation that its prop desk only accounted for 12% of that firm’s revenue, as Goldman told us directly (coupled with our challenge of prop trading in 2009, a pursuit taken on by Paul Volcker a few weeks later, resulting in the Volcker Rule). Needless to say, once the firm did break out its prop trading, it became quite clear just how huge of a factor prop trading truly was for Goldman. Because taken at face value, it would mean that all else equal, JPMorgan transacted at least 3 times more in flow in 2011 than in 2010. Yet, everyone knows that trading volumes in 2011 slumped relative to 2010. So no, Blythe, we appreciate your explanation, but we would appreciate the truth even more.
And yet there is one simple explanation that would make Blythe’s story 100% correct: would JPMorgan consider the Fed, whose interests in keeping the price of precious metals as low as possible, and are aligned with those of JPM for the reasons listed above, its client?
Because if so, then absolutely everything falls into place, as JPMorgan is merely the overt conduit by which the Fed, and specifically the New York Fed, conducts monetary policy in the commodities space, just as Brian Sack would conduct open market operations in the bond arena, and as the FRBNY uses, on occasion, Citadel, and its HFT expertise, to execute its discretionary stock trades (yes, we know about those too).
We would welcome Blythe’s comments on any and all of the topics listed above.
In the meantime, for those who missed it, here’s Blythe.
Bad and uncoordinated policies have “made the recovery worse than it otherwise would have been”, Mr Dimon wrote in his annual letter to shareholders. “You cannot prove this in real time, but when economists 20 years from now write a book on the recovery, it may well be entitled ‘It could have been much better’.”
New regulations, he said, have slowed bank lending at “precisely the wrong time”.
The Rothschild dynasty is to merge its British and French banking operations to secure long-term control of the business and to boost the firm’s financial strength ahead of the introduction of tougher capital requirements for banks.
The 200-year-old banks will be reunited under a single shareholding that will bring together the fortunes of the French and English sides of the renowned family as they attempt to safeguard the business against the effects of new regulation and the fallout from the global financial crisis.
Dr. Helen Caldicott: If Spent Fuel Pool No. 4 collapses I am evacuating my family from Boston.
Few people know that the Pacific Northwest got whacked hard by fallout from the Fukushima disaster with radiation rates hundreds of thousands of times higher than normal background radiation.
The damage from this is not something that the corporate media or the government is talking about. It mysteriously disappeared from the radar almost immediately.
Dr. Caldicott referred to this as a process of “cover-up and psychic numbing.” Looks like it may be working.
The Nuclear Regulatory Commission just approved two new nuclear power plants this week (4/2/12) in South Carolina in addition to the two approved earlier this year in Georgia.
Dr. Caldicott talks about the dangers and hidden costs of nuclear power then tells the awful truth in minute detail about the actual scale of the Fukushima disaster and compares it to the nuclear disasters of Chernobyl and Three Mile Island.
Recent studies estimated that a million people have died so far from Chernobyl.
Dr. Helen Caldicott is a physician, Nobel Peace Prize winner, noted author, anti-nuclear power advocate and has founded numerous national and international groups which oppose nuclear power & weapons, including Physicians for Social Responsibility.
How the self-described ‘mighty’ have fallen. It was a month ago when we first heard of this mysterious British FX trader who dropped $300k in a Liverpudlian nightclub on a bottle of champagne that weighed more than the models he was ‘dating’ that night. The ‘talented, charismatic, and likable’ Alex Hope has been arrested by London’s Financials Services Authority (FSA) in connection with an investigation into a suspected unauthorized FX trading scheme. As City A.M reports this morning, Hope’s publicist confirms he is the 23 year old in question – though he ‘obviously’ denies all allegations. The schadenfreude on London’s FX ‘trading’ desks (as opposed to bucket-shop retail-mauling FX ‘brokerage’ shops) is palpable from what we hear as ‘it couldn’t have happened to a nicer guy’ echoes off the City’s pub ceilings. As yet no charges have been filed – we await with baited breath for the sad truth to be outed.
The only European “thinktank” that has been more correct about predicting developments in the continent than any of its peers (“Greece will never default” – nuf said), has released a new briefing, this time looking at the latest European hotbed of trouble (which is not new at all, just the realization that the LTRO benefit has faded has finally set in), Spain, and specifically if its bank will be forced to seek a Eurozone bailout. OpenEurope is diplomatic about it but the conclusion is that all signs point to yes. Furthermore, as recent general strikes across the country, coupled with occasional rioting, showed, Rajoy’s agenda of enacting austerity which will be critical to receive German assistance simply to make Spain the latest German debt slave, may have some problems being enacted. Yet the biggest catalyst for the housing-heavy exposed Spanish banks is that, as Open Europe finds, of the €400 billion in loans made to residential sector, €80 billion is toxic. And only €50 billion in reserves are available. Hence the simple math: at least a €30 billion shortfall will need to come from Europe. And this assume no further declines in home price, which however are set for a record price drop this year. So… LTRO 3 anyone as the focus once again shifts to “deja vu Greece?”
When one cuts out all the noise, the only true purpose of aggressive (or not) central bank asset expansion, is to be a “buyer” of last resort of sovereign debt funding. Think of it as the source of credit money demand (and hence supply) when every other sector is deleveraging, and when a given Treasury authority needs to pump trillions in debt into the market but when nobody can afford to lever up and buy said incremental debt. Call it monetization, call it funding the deficit, call it whatever: that’s what it is. And when people think of monetization, they think, first and foremost of the Chairman, who recently was caught praising the fiat system at a university named for a person who said the following prophetic line: “Paper money has had the effect… it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” Irony aside, when one cuts to the chase, and ignores even further noise about monetization being direct, indirect, sterilized, shadow, etc, there are just two metrics that are relevant: change in sovereign debt and change in Central Bank Assets. In this regard, of the US’ $5.5 trillion in sovereign debt increase, the Fed matched Geithner for $2.0 trillion of the total, or 37%. An admirable number and certainly better than the BoE’s 29%. Yet who gets the absolute top prize? Why none other than the ECB, which with $2 trillion in expansion (of which about 60% took place under Goldman apparatchik Mario Draghi in just the past 6 months) represents a whopping 63% of total Eurozone sovereign debt expansion of $3.1 trillion!
And yes, the fact that the EURUSD is not trading sub parity is for one simple reason: the market expects that Bernanke will, quite soon, match Draghi dollar for euro, in this sheer madness.
And just to not lose sight of the big centrally-planned picture…
Owning certain kinds of pigs — namely the ones not raised on industrial hog farms — could land you in jail for 4 years.
The mangalitsa pig is different than other pigs. For one thing, it’s covered in thick wool, like a sheep. It’s got upright ears, and a flat tail. The farmers at Michigan’s Baker’s Green Acres are fond of the pig. The thick fur protects them from harsh Michigan winters, and their status as a ‘lard’ pig means that customers prize their marbled meat. They grunt, they eat, and they care for their young just like any other domesticated swine. In short, they’re just regular pigs — that happen to have black fur.
To Michigan’s Department of Natural Resources (DNR), the black-furred pigs are a threat that must be eliminated. A law passed in 2010, set to go into effect on April 1, 2012, outlaws the mangalitsa, and many other pigs that don’t fall within their guidelines:
“Possession of the following live species, including a hybrid or genetic variant of the species, and/or offspring of the species or of a hybrid or genetically engineered variant, is prohibited:
(b) Wild boar, wild hog, wild swine, feral pig, feral hog, feral swine, Old world swine, razorback, eurasian wild boar, Russian wild boar (Sus scrofa Linnaeus). This subsection does not and is not intended to affect sus domestica involved in domestic hog production.”
Possession of just one of these animals carries a felony penalty, punishable by up to four years in prison. And the vague language of the law, not clearly outlining which pigs exactly are feral pigs (it hinges on some tricky pig taxonomy), means that determination will be at the discretion of the Michigan Department of Natural Resources. Farmers’ questions have gone unanswered in public forums — they are encouraged to approach the DNR privately bearing pictures of their pigs for the perusal of DNR agents, who will then determine whether the pigs are ‘feral’ or not.
Enron –> Worldcom –> Adelphia –> Lehman –> MF Global –> Greece –> Sino Forest –> ????
I would rank these as some of the more notorious bankruptcies. These weren’t normal course of business bankruptcies. These were dark and deviant. They have many similarities.
Opaque and convoluted accounting and finances are common to them all. Whether it was Jedi for Enron, repo 105 for Lehman, or off-market swaps with Goldman for Greece, they all used every trick in the book to keep debt off balance sheet and to obfuscate the risk.
Students told to man production lines at Foxconn if they want to graduate, says Hong Kong-based nonprofit
Apple’s factories in China are employing tens of thousands of students, some of them on forced internships, according to campaigners lobbying for better labour conditions at Foxconn plants, which assemble iPhones. Some students could be as young as 16.
The Foxconn chairman, Terry Gou, head of China’s largest private-sector employer – with 1.2 million workers – promised on Sunday to reduce hours and improve pay after an independent audit found multiple labour law violations at his factories.
But campaigners have accused Apple, Foxconn and the Fair Labor Association (FLA), a charitable organisation that carried out the audit published on Friday, of ignoring the issue of forced internships, where students are told they will not graduate unless they spend months working on production lines during holidays.
Financial traders have a new toy: Bitcoin, a digital currency variously dismissed as a Ponzi scheme or lauded as the greatest invention since the Internet.
Unlike conventional fiat money and other digital currencies, Bitcoin runs through a peer-to-peer network, independent of central control. Bitcoins are currently worth $4.88 (3.05 pounds) each on online currency exchanges, where they can be bought and sold for about 15 world currencies.
Users – an odd assortment of uber-geeks, anarchists, libertarians, scammers and forex traders – sent about $4.3 million worth to each other in the last 24 hours.
Banking and payment expert Simon Lelieveldt believes they are living on borrowed time.
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