Financial Reform Friday Newsletter

November 15, 2013

Trending on Twitter: Wall Street too-big-to-fail bank executives’ cluelessness. Most have heard about JP Morgan Chase’s disastrous attempt to be hip and happening on Twitter with #AskJPM. But, while many of the tweets were funny, the #AskJPM blow up is nothing to laugh about. The fact that JP Morgan executives thought this was a good idea adds to the mounting pile of evidence that Wall Street executives are living in a bubble and remain deaf, dumb and blind to the public’s anger at the massive economic damage they’ve caused. This debacle is a window into the insularity not just at JP Morgan, but at the biggest, most dangerous banks in the world, which continue waging an unprecedented battle against financial reforms meant to prevent another financial crisis.

Will the next CFTC Chair have the guts to make financial reform a reality? Earlier this week, President Obama nominated Timothy Massad as the next Chairman of the CFTC. Little is known about the Chairman Nominee’s positions on outstanding financial reforms or whether he’ll continue current Chairman Gary Gensler’s legacy of standing up to Wall Street and doing what’s right for the American people. The CFTC’s hard work is not over, and the next Chairman must be committed to making financial reform a durable and effective reality.

Double standard of American justice. U.S. District Judge Ned Rakoff, who has a history of being critical of weak Wall Street settlements, this week blasted the DOJ for failing to hold individuals accountable for the financial crisis. In prepared remarks at a New York City Bar Association meeting, Rakoff spoke about the fact that not a single high level Wall Street executive has been prosecuted in connection with the financial crisis. Rakoff’s speech highlights the double standard that exists, with one rule of law for Wall Street’s powerful and well-connected CEOs and one for everyone else.

JP Morgan/DOJ settlement: what’s at stake? Weeks after reports that an agreement between JP Morgan and Department of Justice was imminent, progress on settling charges of widespread fraud and criminal behavior appears to have stalled. There has been a significant amount of justifiable anger over rumored tax breaks that would let the bank write off 35% of the agreement. However, the tax issue is only one part of the real story: a deal conducted behind closed doors prevents lawmakers and the American public from evaluating whether JP Morgan is getting a sweetheart deal, or whether the settlement is punishment enough for unprecedented and massive illegal and criminal conduct.

CFTC opens investigation into Forex manipulation. As the number of global megabanks under investigation for foreign currency exchange manipulation increases by the week, U.S. regulators have opened their own investigation. Currency traders at several Too-Big-to-Fail banks, including JP Morgan, Goldman Sachs and Citigroup, stand accused of using instant messaging to collude with each other to rig exchange rates. How is Wall Street responding to yet another example of manipulating rates and hurting clients, investors and the public? By suspending about a dozen employees total and considering a ban on traders’ use of instant messaging.

Break up the big banks. The GAO this week released a study on Too-Big-to-Fail banks, which found that financial regulators have yet to implement financial reforms designed to end big bank bailouts. According to the GAO, until such measures are in place, Wall Street’s biggest banks continue to have an implicit guarantee of government support during another financial crisis. Speaking at the Dealbook conference in New York earlier in the week, Kenneth Griffin, CEO of Citadel, seemed to predict the results of the GAO study, saying that the only way to deal with too-big-to-fail, too-big-to-manage Wall Street banks is to “break up the banking system.”

Some other things that might be of interest to you:

Prospect of a deal on Volcker rule worries banks: Financial Times by Tom Braithwaite and Gina Chon 11/11/2013

Still Dangerous: The New York Times 11/9/2013

How Elizabeth Warren Can Bring Wall Street’s Nightmare to Life: New York Magazine by Jonathan Chait 11/13/2013

JPMorgan’s Fruitful Ties to a Member of China’s Elite: The New York Times by David Barboza, Jessica Silver-Greenberg, and Ben Protess 11/13/2013