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February 12, 2014

Financial Reform Newsletter – February 12, 2014

Financial Reform Newsletter
February 12, 2014

Better Markets President and CEO Dennis Kelleher discusses the lawsuit against 
the Department of Justice during a press conference at the National Press Club.
Better Markets files lawsuit against the Department of Justice (DOJ) and the Attorney General challenging their unilateral $13 billion agreement with JP Morgan Chase. On February 10, Better Markets filed a lawsuit challenging the historic and unprecedented $13 billion out-of-court settlement agreement between the U.S. Department of Justice and JP Morgan Chase. The largest settlement in U.S. history from a single entity by more than 300% granted JP Morgan blanket civil immunity for years of alleged, but undisclosed, pervasive, egregious and knowing fraudulent and illegal conduct that contributed to the 2008 financial crash and the worst economy since the Great Depression. The DOJ violated the checks and balances of the U.S. Constitution when it finalized the secret, backroom deal by a mere contract without review by the courts. Worse, as an editorial in The Financial Times also highlighted, the agreement appears to have been written more to conceal than reveal. Given that and given the DOJ’s motive and self-interest in burnishing its five-year record of failure to hold Wall Street accountable, the settlement agreement must be reviewed by an independent court. The American people have a right to know whether the settlement is fair and whether it can withstand scrutiny in the light of day.
The CFTC’s proposed rule to prevent excessive speculation in the commodity markets is inadequate. Wall Street traders speculating in the commodity derivatives markets cause massive swings in oil and food prices and force families, homeowners and businesses to pay more than they should for those and other essential goods. Congress passed a law requiring the commodity cops, the CFTC, to enact a new rule to limit such speculation (called a “position limits” rule). Unfortunately, as we detailed in a comment letter we filed, the CFTC’s proposed position limits rule simply will not work: it sets the limits too high and too narrow to prevent excessive speculation in markets in any meaningful way. Position limits are one of the most important tools the CFTC has to protect the markets as well as consumers and businesses. It must make the rule much stronger and protect American households and businesses.
High-frequency trading (HFT) is “Wall Street at its most useless.” That is how a recent Atlantic story describes the practice of high-frequency computer traders profiting from split-second advantages. Most of this is perfectly legal and perfectly rotten since HFT traders use computer algorithms to rig the game in their favor, buying sneak peeks at information, and pouncing before the average trader has any idea of what’s going on. The CFTC recently held a committee meeting to examine the issue of market disruptions caused by high-frequency traders. It is long past time for the Commission to do something because HFT is yet another example of Wall Street run amok that is hurting every one that buys a gallon of milk, a box of cereal or fills up the gas tank.
The Fed meets on critical rule to prevent future U.S. taxpayer bailouts of global megabanks. Next Tuesday, the Federal Reserve will vote on new rules to require the biggest U.S. banks and the U.S. operations of foreign banks to maintain enough capital to prevent a repeat of the 2008 crash. This is absolutely critical, because not only did U.S. taxpayers bail out Wall Street, they also bailed out the global banking system and lots of foreign banks: 10 of AIG’s top 16 counterparties were foreign banks, as were 9 of the 20 largest users of the Fed’s emergency lending facilities. Without the Fed’s proposed rule being finalized next week as proposed or even stronger, taxpayers will once again end up bailing out the banking system, including foreign banks.
Some recent Better Markets media coverage: 
The People Versus Wall Street Banks: Financial Times 2/11/2014
Justice Department Sued Over $13 Billion JPMorgan Pact: The New York Times by Ben Protess 2/10/2014
Legality of JPMorgan’s $13bn Settlement With DOJ Tested: Financial Times by Gina Chon and Kara Scannell 2/10/2014
Better Markets Sues U.S. Justice Dept. Over JPMorgan Deal: Reuters by Sarah N. Lynch and Aruna Viswanatha 2/10/2014
Public Interest Group Sues U.S. Justice Dept. Over JPMorgan Settlement: The Los Angeles Times by Jim Puzzanghera 2/10/2014
Nonprofit Challenges U.S. Settlement With J.P. Morgan: The Wall Street Journal by Julie Steinberg 2/10/2014
JPMorgan’s $13 Billion Accord Seen Needing Court Review: Bloomberg Andrew Zajac and Cheyenne Hopkins 2/10/2014
Jamie Dimon’s Bird in the Hand: HuffPost by Mike Lux 2/11/2014
Some other things that might interest you:
Chinese Official Made Job Plea to JPMorgan Chase Chief: The New York Times by Jessica Silver-Greenberg and Ben Protess 2/9/2014
Let Weak Banks Die, Says Eurozone Super-Regulator: Financial Times by Claire Jones, Sam Fleming, and Alice Ross 2/9/2014
Bank of England Faces Scrutiny Over Forex: Financial Times by Caroline Binham and Daniel Schafer 2/7/2014


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