April 13, 2011--JPMorgan & the Cookie Jar

As we attempt to continue to work our way out of the Great Recession, finally some evidence is emerging that reveals its true causes.

Yes, there were inappropriate Fannie-Freddie mortgage loans to unqualified borrowers; yes, political leaders from both parties looked the other way as real-estate-derived financial products ballooned unregulated; yes, most of us thought there was no limit to how high the value of our homes and portfolios would reach. But the real villains were the banks and financial institutions that committed still-unprosecuted crimes that nearly brought down our and the world's economies.

Here at last is evidence presented in a recent article in the New York Timesabout what JPMorgan Chase was up to just before receiving its $25 billion bailout from U.S. taxpayers:

In the summer of 2007, as the first tremors of the coming financial crisis were being felt on Wall Street, top executives of JPMorgan Chase were raising red flags about a troubled investment vehicle called Sigma, which was based in London. But the bank chose not to move out $500 million in client assets that it had put into Sigma two months earlier.

Sigma collapsed a year later. Now, new documents unsealed late last month as part of a lawsuit by bank clients against JPMorgan show for the first time just how high the warnings about Sigma went — all the way to the office of the bank’s chief executive, Jamie Dimon.

While the clients lost nearly all their money, JPMorgan collected nearly $1.9 billion from Sigma’s demise, according to the suit. That’s because as Sigma’s troubles worsened, JPMorgan lent the vehicle billions of dollars and received valuable assets in the form of a security deposit. [Emphasis added.]

But, in an attempt to change the subject, we continue to hear from the demagogic governors of New Jersey, Wisconsin, Indiana, and Ohio that all our problems are attributable to greedy, unionized teachers.