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Feds pretend to crack down, Wall Street pretends to care


The government today announced a probe into the possible mispricing of mortgage bonds leading up to and during the financial crisis of 2008. “We hope to end this probe with a series of fines and a press conference during which one or more officials will offer a brief summary of the offenses,” revealed an unnamed official.

Not really on the quote. I made that up entirely because in all candor it’s become very difficult to take these investigations seriously at this point. Yesterday it was announced that ex-Goldman Sachs (GS) V.P. Fabulous Fabrice Tourres was denied a new trial in his conviction on charges of being dumb enough to send an email overstating his role in the sale of a convoluted product also related to the pricing of mortgage bonds.

As Breakout’s Matt Nesto and I discuss in the attached clip, both of today’s headlines were dramatically overshadowed by the roughly $2 billion in fines paid by JPMorgan (JPM) for its part in the collective effort to ignore Bernie Madoff’s enormous Ponzi scheme for more than a decade.

I’ve taken some personal heat for referring to the endless series of fines paid by JPMorgan as examples of the government systemically “extorting” JPMorgan on Daily Ticker with Aaron Task earlier this week. That criticism is fair. Extortion is the criminal act of forcing a person or entity to pay out money through coercion. In return for said payments the person or entity dishing out the cash would avoid harm of some sort. 

JPMorgan shares are hitting all-time highs despite the financial juggernaut having spent more than $31 billion in fines and legal fees since 2009. Clearly investors don’t see a credible threat of harm coming JPMorgan’s way anytime soon. 

“Justice” certainly doesn’t work to describe what’s happening to JPMorgan. Justice suggests a punitive action that would dissuade future criminal acts and/or the righting of an egregious wrong committed against an aggrieved party. JPMorgan is dishing out shareholder money but shares are at record highs. Shareholders are happier than pigs in slop.

JPMorgan’s relationship with the government is more of a partnership or licensing deal. JPMorgan pays fines, the government gets funded, politicos get to say mean things and claim victory, and no one goes to jail.

In terms of stopping the criminal behaviors in question that happened by itself long ago.  C’mon. Do you really think anyone is buying or selling mortgage backed securities anymore? Wall Street moved on to other hustles years ago.

It’s not a matter of the fines being unfair or insufficient. The fines are pointless. JPMorgan shareholders aren’t being punished and no one except Goldman’s Fabulous Fab is actually going to jail. The question is one of justice and the public enabling an ongoing charade.  There is no justice happening when it comes to Wall Street. There is a series of accusations, payouts and press conferences. If you think that’s justice then you’re one of the enablers.

If the government has the goods it should either put top execs on the stand or come up with some sort of RICO variant to bring against the banks themselves. If no crimes are being committed, regulators should move to more current matters. Either way it’s long past time to stop conning the public with these absurd press conferences and headlines.

Disclaimer: Merrill Lynch is not responsible for the editorial content of this program.

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