Better Markets sent a letter today to Attorney General Eric Holder, calling for the appointment of a special counsel in connection with the multibillion-dollar trading loss at JPMorgan Chase & Co. What’s at stake is very important, and goes to the heart of whether Americans still have faith that the judicial system can hold Wall Street accountable, especially after failing to prosecute any major figures for the 2008 financial crisis.
A probe by the Justice Department would present conflicts of interest, as well as the overall appearance of a conflict of interest. The most glaring example was this weekend when President Obama pre-judged the ongoing investigations by calling the $2 to $5 billion derivatives trading loss just“a big mistake” in his radio address.
This appears much more than a big mistake. In fact, the reported trade is the same type that resulted in a $182 billion taxpayer bailout to AIG. Moreover, JPMorgan and its CEO Jamie Dimon on April 13 apparently gave false information on the trade to the public, shareholders, regulators, and the media. And “big mistakes” don’t typically trigger simultaneous probes by the FBI, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
And that’s why it is so important that the investigation be handed off to an independent counsel to clear any doubt and suspicion whether the administration can and will conduct a full, fair and complete investigation. A few of the reasons justifying an appointment include:
• The president, according to one report, regards Mr. Dimon as one of his “favorite bankers.” After revelations of the bank’s highly questionable trade, President Obama still described Mr. Dimon “as one of the smartest bankers we got” and JPMorgan as “one of the best-managed banks there is.”
• President Obama was widely reported to have considered Mr. Dimon for nomination to be his Treasury secretary.
• Mr. Dimon serves on the board of directors of the Federal Reserve Bank of New York, regarded as the single most important Reserve Bank in the system. As a director, Mr. Dimon exerts considerable influence in areas such as overseeing management of the Reserve Banks, participating in monetary and credit policies, and acting as a link between the government and private sector.
• Mr. Dimon and JPMorgan employees contributed more than $800,000 to President Obama’s 2008 political campaign. Mr. Dimon personally contributed $50,000 to President Obama’s Inaugural Committee. In addition, Michael Cavanagh, recently designated by JPMorgan to lead an internal investigation into the $2 billion trading loss, served as a “bundler” for the 2008 Obama campaign, raising between $50,000 and $100,000.
We note the appointment of a special counsel could restore trust to a public angered that Wall Street has not been accountable for its conduct that caused the 2008 financial crisis. That crisis triggered massive economic and social costs are still being felt today with millions out of work or underemployed, a high foreclosure rate, and delayed retirement plans for many Americans.
“The public interest in getting the truth, determining whether any laws were broken, and holding those involved accountable could not be higher. Furthermore, ensuring that the American people have full confidence in the investigation is equally critical,” the letter states.
“Many question whether there is a double standard in this country: one set of laws for the large, well-connected, and powerful Wall Street banks and one set of laws for everyone else. This is the backdrop against which any consideration of the appointment of Special Counsel must be considered.”