Sections:

Article

MEDIA WATCH: Rahm speaks to the 'one percent' as more proof emerges of their thievery... Senate blasts J.P. Morgan Chase in 300-page report on the coverups of the massive losses from 'The London Whale' while Rahm speaks in New York to the banksters

Chicago Mayor Rahm Emanuel has become notorious among reporters with a sense of humor for staging, almost daily, publicity stunts on behalf of the "one percent" and announcing, almost always without much thought, the ironic claims of Chicago and national corporations of all the jobs that are being brought to Chicago by Rahm's corporate friends. Within the past two years, Chicago's mayor, while barely confronting the details of dealing with the problems in the city's communities, has paraded before the cameras with corporate executives to announce, over and over and over, the "jobs" that such and such a corporation will be adding to Chicago, thanks to Rahm's rule.

Above, one of the dozens of signs devoted to Rahm Emanuel during the Chicago Teachers Strike of 2012. Substance photo by Kati Gilson. Yet as last year's publicity stunts collapse into the ashes of corporate mistakes, Rahm simply moves on to the next. Groupon was a Rahm Emanuel example of Chicago "innovations." Until its business model collapsed and its CEO was forced out. Rahm held forth for a docile press corp about all the jobs being added to Chicago by Motorola. Until the corporation announced that it was cutting 4,000 jobs (with no response from the "Mayor's Press Office").

From the beginning of his campaign for mayor, Emanuel has staged quickie media events to get the visuals in the can, then moved on to the next Hollywood staging. By the second year of his reign, the man dubbed "Chicago's Murder Mayor" (for his murdering of public institutions from schools to libraries and not just because under his regime of government by publicity stunt the drug gangs have been on a rampage) was clearly simply adding to the video archives that would become the promotionals when he moved to become a candidate for President of the United States.

But perhaps the expensive alternative reality in which Chicago's mayor works is catching up with him. At almost the same time his press people were announcing that he would be speaking at a secret meeting at the New York headquarters of J.P. Morgan Chase bank, the U.S. Senate was issuing a report showing that the bank lied to investors about the risks that were escalating from the work of its London chief, dubbed "The London Whale" for the size of the cost he created for the too big to fail bank.

On March 15, Rahm's propaganda departments announced that he would be in New York to speak to the bankers of J.P. Morgan Chase. According to a March 14, 2013 press release from the "Mayor’s Press Office" (paid for by taxpayers) Rahm will again be out of town on March 15, 2013. Why According to "The Public Schedule for Mayor Rahm Emanuel – March 15, 2013" -- Mayor Emanuel will participate in the keynote panel discussion at the 2013 JPMorgan Chase Housing Summit. Time: 11:25 AM ET. Location: JPMorgan Chase Headquarters, 270 Park Avenue, 50th Floor. New York City, NY*. Not all reporters get to hear what Rahm has to say to the bankers though. According to the mayor's press release, the event is for "*Invited media only."

Apparently, Rahm's insiders in Washington, D.C. are as fed up with his Hollywood-generated antics and scripts as most Chicago citizens have become. And although Rahm is still generating large amounts of cash for his political funds from corporate executives, no one tipped Rahm off that while he was "keynoting" an event for J.P. Morgan Chase, a massive (300 page) Senate report would be further exposing the corruption of J.P. Morgan Chase.

By the time Rahm was speaking in New York (11:15 New York Time; 10:15 Chicago Time) the main news about the bank was the latest report exposing its predations.

ONE OF THE MANY PRESS REPORTS CAME FROM THE HUFFINGTON POST:

JPMorgan Senate Report Says Bank Misled Investors, Regulators To Hide Massive 'Whale' Losses

Posted: 03/14/2013 9:47 pm EDT | Updated: 03/15/2013 12:23 am EDT

A scathing report released by a Senate panel Thursday shows the financial crisis never really abated: The forces that delivered it -- a toxic combination of reckless speculation, balance sheet manipulation and outright disdain for regulators -- remained fully at work inside the biggest bank of them all, JPMorgan Chase, as recently as last spring.

The 300-page report, which unfolds in tones worthy of an indictment, says JPMorgan executives brazenly misled and bullied their regulators, going so far as to call them "stupid."

This, the report concludes, explains how a bet engineered by a trader called the London Whale for his enormous, market-moving positions burgeoned into losses reaching $6.2 billion. Chief executive Jamie Dimon initially dismissed the Whale losses as a “tempest in a teapot.”

"In contrast to JPMorgan Chase’s reputation for best-in-class risk management, the whale trades exposed a bank culture in which risk limit breaches were routinely disregarded, risk metrics were frequently criticized or downplayed, and risk evaluation models were targeted by bank personnel seeking to produce artificially lower capital requirements," the report concludes.

The top in-house regulator at JPMorgan, from the U.S. Office of the Comptroller of the Currency, told the Senate subcommittee that it was "very common" for the bank to push back on examiner filings and recommendations. The regulator recalled one instance in which bank executives yelled at OCC examiners and derided them as “stupid.”

"The bank's initial claims that its risk managers and regulators were fully informed and engaged ... were fictions irreconcilable with the bank’s obligation to provide material information to its investors in an accurate manner," says the report from the Senate Permanent Subcommittee on Investigations.

The report traces responsibility for JPMorgan’s trading fiasco to its highest offices, all the way to CEO Dimon.

A JPMorgan spokeswoman rejected the report’s findings, maintaining that the bank has consistently been truthful to regulators and the public about the state of its balance sheet and overall health.

"While we have repeatedly acknowledged mistakes, our senior management acted in good faith and never had any intent to mislead anyone,” Jennifer Zuccarelli, a spokeswoman for the bank, said in a statement. “We know we have made many mistakes related to the CIO matter, and we have already identified many of the issues cited in the report. We have taken significant steps to remediate these issues and to learn from them."

The report is likely to intensify calls to finalize the so-called Volcker Rule, aimed at limiting trades that banks make for their own benefit.

Inside JPMorgan, the loss-making trade was the handiwork of the Chief Investment Office -- a unit officially described as a source of hedging -- investments that diminished the risks on the institution by balancing its positions. But hedging was merely a euphemism, the report asserts, describing the CIO as a locus of increasingly speculative trading made for no reason other than to amplify the bank’s potential profits. Regulators reviewing the CIO’s trades after the blowup described the portfolio as a “make believe voodoo magic composite hedge,” the sub-committee report notes.

The Senate report, the most detailed and damning examination of the Whale trading to date, promises to revive the controversy over Dimon's stewardship of the bank, and the ability of regulators to keep tabs on the nation's biggest financial institutions. It comes on the eve of eagerly-awaited Senate testimony by Ina Drew, who resigned as head of JPMorgan's Chief Investment Office after the Whale bet soured.

The trade involved outsized bets by one trader, Bruno Iksil, on financial instruments known as credit default swaps. The trade tarnished Dimon's once-sterling reputation as Wall Street's savviest leader.

The report cites emails, documents, instant message conversations and recorded telephone conversations between high-level JPMorgan employees. The Senate subcommittee collected nearly 90,000 documents, according to the report.

Key JPMorgan executives claimed to be in the dark about the London Whale losses or downplayed them, even after Drew ordered the trades stopped on March 23, 2012, according to the report.

John Hogan, JPMorgan's chief risk officer, told the Senate subcommittee that the first media reports about the losses in April surprised him and that the portfolio was not on his radar in an "alarming way" before then.

The report reveals the thoughts of those most closely involved with the trade, including Iskil and Drew. In February 2012, JPMorgan asked the CIO’s office to document the ongoing losses and provide an explanation. The bank specifically asked the traders in that group to mark their losses in a way that would look good to investors.

Iksil told the Senate subcommittee he wrote to his superiors he was attempting to reduce paper losses “as much as I can in a bleeding book."

In a phone conversation on March 16, Iksil said to a junior trader: “I can’t keep this going ... I don’t know where he wants to stop but it’s getting idiotic.”

On March 9, 2012, in a recorded conversation with Iksil, a junior trader said, “we’re lagging,” predicting “a big fiasco” and “big drama when, in fact, everybody should have ... seen it coming a long time ago. Anyway, you see, we cannot win here. ... I believe that it is better today that it’s dead, that we are going to crash. The firm will service the debt. ... It’s going to be very uncomfortable but we must not screw up. … It’s going to be very political in the end.”

By the time Drew ordered traders to stop trading on March 23, emails and recorded phone conversations show, the traders were describing the portfolio as “huge” and “more and more monstrous.”

Publicly, the bank was taking a very different tack. On April 13, Douglas Braunstein, then JPMorgan's chief financial officer, said on an earnings call with analysts and investors that the bank was "very comfortable with our positions."

UPDATE: 9:52 p.m. -- The Office of Comptroller of the Currency released a statement, saying it recognizes "that there were shortcomings in the OCC supervision leading up to and responding to the unfolding events" in the bank's Chief Investment Office."

The statement continues:

As the bank revealed the true nature of the CIO operation and the level of loss exposure, the Comptroller escalated the agency’s response and ordered a two-pronged review into the bank’s actions as well as the OCC’s. As a result of that review, we have taken specific steps to improve our supervisory process across the large complex financial institutions we supervise.



Comments:

Add your own comment (all fields are necessary)

Substance readers:

You must give your first name and last name under "Name" when you post a comment at substancenews.net. We are not operating a blog and do not allow anonymous or pseudonymous comments. Our readers deserve to know who is commenting, just as they deserve to know the source of our news reports and analysis.

Please respect this, and also provide us with an accurate e-mail address.

Thank you,

The Editors of Substance

Your Name

Your Email

What's your comment about?

Your Comment

Please answer this to prove you're not a robot:

2 + 3 =