The Slog: As an early
propagator of the allegation that JP Morgan Chase deliberately hastened
the Lehman collapse, the Slog finds itself vindicated three years on by a
successful regulator action against JPM, and contemporary
documentation.
“And then when you have the suckers by the balls, you squeeze just like this”
Around the time of the Lehman disaster, a senior insider at the firm
relayed to me what seemed an astonishing allegation: that in the weeks
prior to the eventual collapse, JP Morgan deliberately withheld huge
monies owed to Lehman in order to make the bankruptcy a certainty from
which they could benefit. I relayed this story to another contact the
following year, and he not only corroborated the charge, he also said he
was sure Barclays had done the same. The now disgraced Barclays CEO Bob
Diamond took over Lehman in a fire sale only weeks later (using
taxpayers’ money as a bridging loan to do it) and rapidly built up a
commanding position for the division he then headed up, Barcap – the
investment arm of the bank.
Now, more than three years later, regulators have penalised JPMorgan
for actions tied to Lehman’s demise. The bank settled the Lehman matter
and agreed to pay a fine of approximately $20 million. The action took
place because of Morgan’s ‘questionable treatment of [Lehman] customer
money’: regulators accused JPMorgan of withholding Lehman customer funds
for nearly two weeks. So it had been true after all.
Jamie Dimon’s Morgan Chase dodged and dived on this one for three
years in an attempt to smooth over the tracks.
As late as April this
year, the Pirate insisted that the ‘monies involved were small’: but
that doesn’t tally with this Wall Street Journal snippet from the time
as follows:
‘Lehman Brothers Holdings Inc., the securities firm that filed
the biggest bankruptcy in history yesterday, was advanced $138 billion
this week by JPMorgan Chase & Co. to settle Lehman trades and keep
financial markets stable, according to a court filing.’
Advancing cash to keep the markets stable is simply double-talk
bollocks: many observers are sure this was the Lehman trades money
withheld by JPM. The Lehman administrators continued to air their
grievances about it, and in late May 2010 the bankruptcy estate of
Lehman Brothers Holdings, Inc. filed suit against JPMorgan Chase,
alleging that JPMorgan’s actions in the weeks preceding bankruptcy were
wrongful. The claims arose from amendments and supplements to the
Clearance Agreement between Lehman and JPMorgan in the weeks immediately
preceding the bankruptcy. (In a nutshell, JPM changed the terms without
notice to include onerous requirements for massive collateral against
giving Lehman its own money back – a form of crooked logic that only a
banker could construct. The weight of this collateral requirement on
already serious debts took Lehman Brothers from intensive care to the
Pearly Gates).
Just before this suit was filed, I took a small risk by including in a Slogpost of 13th March 2010
the phrase ‘former Lehman employees rendered jobless by management
hubris and JP Morgan’. Now the full extent of the cannibalism indulged
in by Morgan has come to light…although Barcap’s role remains in a
murky penumbra somewhere. But typically, by coughing up twenty million
bucks to the Federal Government, the predatory Morgan Chase has got away
with ‘not admitting guilt’. Disgraceful. Think of it this way: $20m to
ice a major appointment…that has to be the bargain of the decade.
A few more extracts from the 2010 Slogpost make interesting reading today:
‘The top-ranking British law practice Linklaters signed off on
controversial accounting practices that let Lehman Brothers shift
billions of dollars of debt off its balance sheet. This masked the
perilous state of the bank’s finances, and for many years misled both
investors and regulators….Not only has crooked dealing been a clear and
present carbuncle on the City’s reputation for decades, ancillary
professional concerns have long been up to their necks in illegal
collusion in such activities….Time and again, accusations of wrongdoing
are met with appalled sanctimony by those routinely involved in serious
misdeeds….only to result in even worse revelations…..And equally, the
sentences handed out to miscreants justifiably evoke cries of ‘one law
for the rich and another for the poor’.’
Well, nothing changes. And not much changed in Morgan the Pirate’s behaviour either: on 20th May 2009, so a CNBC story claimed,
Washington Mutual (Wamu) sought billions in damages following its
acquisition by Morgan Chase, via a class action suit littered with
phrases like ‘far below market value’, ‘premeditated plan’, ‘designed to
damage’, ‘purchase…on the cheap’, ‘wrongful conduct’, ‘sham
negotiations’, ‘misusing confidential information’, ‘violation of
confidentiality agreement’, ‘unfair advantage’, and ‘fire sale prices’.
Nothing to see there, then. On June 24th last year, an Appeals Court
revived the action – whch clearly has some merit. As far as I know, it
continues to rumble on today, to the benefit of lawyers….just for a
change.
Hat-tip to US Slogger Butch Cassidy for alerting me to progress on
the original Lehman scam. If anyone has anything substantial on Diamond
Bob’s role in it, the address as always is jawslog@gmail.com
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