Madoff’s bank, JP Morgan Chase, criminally charged for ignoring clear warning signs and failing to report his Ponzi scheme. JP Morgan Chase, Bernie Madoff’s banker for more than two decades, has agreed to a $2 billion settlement with the U.S. Attorney for the Southern District of New York. As part of the settlement, JP Morgan was forced to admit it ignored warning signs that allowed Madoff to continue his Ponzi scheme for years. The good news is that the penalty JP Morgan Chase pays will go to compensate victims of Madoff’s fraud. The bad news is that prosecutors once again refused to hold a single individual accountable. Banks don’t commit crimes; bankers do and until individuals are charged, fined and jailed, the crime spree at JP Morgan and on Wall Street will continue.

 

Unsurprisingly, Wall Street and its allies in Congress are already seeking changes to the Volcker Rule. After years of aggressively lobbying against the Volcker Rule’s ban on proprietary trading, Wall Street and its lawyers and lobbyists have wasted little time in suing over the new rule. While financial regulators are set to release a new rule to provide relief to the very few community banks holding trust preferred securities, Congress is poised to push new legislation that would allow all banks to hold many investments that are barred under the Volcker Rule. The effort to water down the new rule just looks like “an excuse to bash the Volcker Rule and an excuse to pretend big banks are community banks.”

 

High-frequency trading firms launch lobbying effort. Four leading high-frequency trading firms this week formed a new trade group to lobby Congress on behalf of the unregulated “Wild West” of the financial markets. Unfortunately, too much HFT prioritizes profits over stability and fairness of the financial markets, destroying investor and public confidence while engaging in predatory conduct. Joining 30 or so other Wall Street financial industry lobbying groups already in DC, the new lobby shop says it’s going to work to change perceptions in Washington after lots of high-profile HFT-related trading debacles and controversies. But, too much of HFT doesn’t just have a “perception” problem – it has lots of real problems and creates lots of problems for markets and investors, as detailed in this blog post by Themis Trading, the leader in debunking HFT industry arguments and lobbying with facts and research.

 

Financial reform champion Gary Gensler departs CFTC. Last week marked the end of Gary Gensler’s tenure as Chairman of the CFTC. A champion of financial reform, Chairman Gensler’s legacy will be standing up to powerful and well-connected Wall Street interests and passing much-needed regulation of the U.S. and cross-border derivatives markets. Former TARP chief Timothy Massad, who’s expected to succeed Mr. Gensler as Chairman, will join the CFTC at a critical juncture for financial reform. As Better Markets President and CEO Dennis Kelleher told the New York Times, “There’s no question Wall Street sees an opening to roll back reform. But Massad is no fool; he knows he’s going to be judged by the very high standards set by Gary Gensler.” 

 

Financial reform news you may have missed over the holidays. While most of us spent the holidays with family and friends, financial reform news barely slowed down to acknowledge the season. To ring in the new year, the Better Markets Blog pulled together the important financial reform stories over the holidays that you may have missed.

 

 

A Roadblock to Brawny Bank Reform: The New York Times by Gretchen Morgenson 1/4/2014

German Regulators Press Deutsche Bank for Shake-Up Over Libor: Financial Times 1/6/2014

Financial Risk Watchdog Stumbles: USA Today by Darrell Delamaide 1/7/2014

Steep Penalties Taken in Stride by JP Morgan Chase: The New York Times by Peter Eavis 1/7/2014

JP Morgan’s Splitting Headache: The Wall Street Journal by David Reilly 1/7/2014