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January 30, 2014

Financial Reform Newsletter – January 29, 2014

 
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Financial Reform Newsletter
January 29, 2014
 

JP Morgan Chase board indefensibly rewards CEO Jamie Dimon for getting sweetheart settlement deals. JP Morgan Chase is ‘generous’ to a fault: after paying more than $20 billion in settlements and fines in 2013 for egregious, widespread illegal and criminal conduct, much of which happened on Chairman and CEO Jamie Dimon’s watch and, indeed, under his nose, the too-big-to-fail bank’s board of directors delivered to Dimon a whopping 74 percent pay raise. The board should be embarrassed and ashamed to reward Dimon after the year that JP Morgan just had. Worse, the raise is a slap in the face to the DOJ and financial regulators who think that even these historically large settlements and fines are enough to punish and deter JP Morgan Chase.

 

The Attorney General says one thing, but does another. Attorney General Eric Holder says no bank is “too big to indict” and more cases are “in the pipeline” involving Wall Street executives for conduct related to causing the worst financial crash since 1929. Let’s hope the Justice Department’s “pipeline” shoots out criminal charges at lightning speed, otherwise the statute of limitations on fraud will pass faster than a Wall Street executive can cash his bonus check. Holder brags that charges have been brought against “thousands of people” over his past five years in office, but don’t be fooled by the spin. Those charges were mostly against small time individuals and firms. Until the Attorney General’s actions match his words, expect the DOJ to continue an astonishing five-year record of inexcusable failure to bring a single criminal action against the wealthy, powerful and politically well-connected too-big-to-fail Wall Street banks.

 

Former FDIC Chair Sheila Bair will be a tough independent director at Santander. With Sheila Bair’s appointment as an independent director, Banco Santander gets a tough-as-nails former regulator willing to tell the bank’s management what it needs to  hear rather than just what it might want to hear. That is why the revolving door narrative is just wrong here. Sheila Bair has a demonstrated record of doing what is right regardless of the circumstances. As chairman of the FDIC, she aggressively policed bad bank behavior. Under enormous pressure, she was willing to stand up for taxpayers and Main Street. She is tough and experienced and will strive to be a watchdog in the boardroom. Wall Street and the big banks need more Sheila Bairs on their boards, not fewer.

 

Take U.S. taxpayers off the hook for bailing out failing foreign banks. The Federal Reserve will soon close a loophole that allowed foreign banks to avoid complying with the financial reform law. Under a proposed rule, foreign banks will be required to maintain sufficient capital to make them safer and reduce the risk of future U.S. government bailouts. Remember, it was the U.S. that bailed out the global banking system in 2008 and 2009, freeing foreign governments from sticking their taxpayers with the exorbitant financial burden required to prevent a global economic collapse. Nine of the top 20 largest users of Federal Reserve Board emergency lending facilities were foreign banks, and 10 of AIG’s top 16 counterparties receiving U.S. bailout funds were foreign banks. As of June 2013, foreign banks were 7 of the 13 largest banks in the world. The sooner the Fed finalizes its rule to bring large foreign banks in line with proper regulation, the sooner the American people can be protected from having to ever again bail out the global banking system.

 

Some recent Better Markets media coverage:

Holder Says No Bank ‘Too Big to Indict,’ More Financial Cases Coming: The Los Angeles Times by Jim Puzzanghera 1/24/2014

Eric Holder Said Something Really Funny the Other Day: Bloomberg by Jonathan Weil 1/27/2014

Financial Reform Remains a Work in Progress:New York Times by Simon Johnson 1/23/2014

Dimon’s Pay Soars 74% to $20M: Financial Times by Camilla Hall and Arash Massoudi 1/24/2014

JP Morgan Gives CEO Jamie Dimon 74 Percent Raise Despite Bank’s Legal Troubles: The Washington Post by Danielle Douglas 1/24/2014

JP Morgan Board Gives CEO Dimon a 74% Pay Hike: USA Today by Gary Strauss and Tim Mullaney 1/24/2014

JP Morgan Seen Paying Dimon $34 Million Award This Year: Bloomberg by Michael J. Moore 1/27/2014

Dimon Does Davos, and His Board Gives Him a Raise: Naked Capitalism by Yves Smith 1/24/2014

Santander Appoints Sheila Bair As Independent Director: Financial Times by Gina Chon and Tobias Buck 1/27/2014

Banco Santander Names Ex-FDIC Chairman Sheila Bair to Board: Bloomberg by Charles Penty 1/27/2014

 

Some other things that might interest you:

Asking Banks to Reveal Where Their High Rollers Are: The New York Times by Gretchen Morgenson 1/25/2014

Washington Has Not Defeated Wall Street. Yet: New Republic by Mike Konczal

Are Banks Too Big to Indict?: Reuters by Charles R. Morris 1/24/2014

“All You Need for a Financial Crisis…”: Baseline Scenario by James Kwak 1/27/2014

Paranoia of the Plutocrats: The New York Times by Paul Krugman 1/26/2014

 
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