Flensing Morgan

September 19, 2013

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Today, JPMorgan announced it reached a settlement with (most of) its regulators regarding the London Whale trades. The company will pay about $920 million to:

The SEC ($200 million)
The UK Financial Conduct Authority (£137.6 million, which is $220 million)
The Fed ($200 million)
The OCC ($300 million)

While JPMorgan acknowledges fault, Jonathan Weil says, the bank has not said which securities laws it violated. “It’s understandable why companies would prefer not to admit liability with particularity. Plaintiffs suing them in private securities litigation would use those admissions against them. What has never made sense to me is why the SEC should care,” he writes.

Sadly for Kevin Roose, who predicts the end of cetacean puns, this is not the end of the saga. The group of regulators settling with the bank does not include the Commodities Future Trading Commission, which is insisting that JPMorgan admit to something specific: manipulating markets. Thanks to Dodd-Frank, the CTFC can now charge banks for “recklessly manipulating markets”, even if they can’t prove that traders intended to manipulate said markets.

Then there are the criminal complaints. Javier Martin-Artajo and Julien Grout were indicted because they allegedly mismarked their credit derivatives positions to cover up some of the losses. The London Whale himself, Bruno Iskil, was not indicted, but his boss was, along with one of his employees. The criminal charges could take some time to wrap up, since the traders in question each need to be extradited from their home countries (Spain for Martin-Artajo and France for Grout).

Meanwhile, in somewhat unrelated news that nonetheless falls under the umbrella of “JPMorgan paying regulators this week”, the OCC is fining JPMorgan $60 million plus restitution for offering and charging its credit card clients identify theft protection they never received.

The almost $1 billion in fines amounts to less than 20% of the $6 billion that JPMorgan lost as a result of the Whale trades. Matt Levine notes that “normally the point of market manipulation is to oh you know make money. Getting fined for a piece of market manipulation that also lost billions of dollars must be particularly galling”.

That’s probably why Jamie Dimon announced Tuesday the firm will — finally! — be getting serious about regulatory compliance, and perhaps stop unnecessarily donating to the coffers of the US Treasury. –– Shane Ferro

On to today’s links:

Can Bill de Blasio actually do anything about rising inequality in New York? – James Surowiecki

The SEC thinks that disclosing workers’ pay will shame CEOs? – Matt Levine

The Fed
Why didn’t the Fed taper? Because Congress is horrible – Neil Irwin
“Yellen continued her tradition of standing in the cafeteria lunch line with the proletariat and eating with the staff” – Bloomberg BusinessWeek
“It seems that the Fed now understands that tapering is tightening” – FT Alphaville

Imperious investor complains about “imperial” boardrooms – WSJ
Whitney Tilson’s new strategy: betting on regulators to actually do their jobs – BuzzFeed

Long Reads
For-profit colleges, or “what happens when we are unwilling to adequately fund public higher education” – Chadwick Matlin

How to price (but not value) Twitter’s IPO – Aswath Damodaran

Niche Markets
Artisanal pencil sharpener ponders career change – Fox NY

60% of employment increases for women since 2009 were in low-paying jobs — it was 20% for men – Bloomberg

Likely Hyperbolic
“It’s almost a human rights violation what they’re charging for internet access in Canada” – Gigaom

For the record, Mark Zuckerberg is “pro-knowledge economy” – USA Today

Colorful Metaphors
Bank lending is “like a clogged pipe. It isn’t really functioning” – Peter Rudegeair

Counterparties could not be reached for comment – Matt Zeitlin

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