The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare

[Bigun]

The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare

Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking

By Matt Taibbi | November 6, 2014

She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn't take it anymore.

"It was like watching an old lady get mugged on the street," she says. "I thought, 'I can't sit by any longer.'"

Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She's had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.

Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.

Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as "massive criminal securities fraud" in the bank's mortgage operations.

Thanks to a confidentiality agreement, she's kept her mouth shut since then. "My closest family and friends don't know what I've been living with," she says. "Even my brother will only find out for the first time when he sees this interview."

Six years after the crisis that cratered the global economy, it's not exactly news that the country's biggest banks stole on a grand scale. That's why the more important part of Fleischmann's story is in the pains Chase and the Justice Department took to silence her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. "Every time I had a chance to talk, something always got in the way," Fleischmann says.

This past year she watched as Holder's Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called "statements of facts," which were conveniently devoid of anything like actual facts.

Much much more at : http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106

[Bigun]

A VERY long read but well worth the time invested! It is an excellent primer on WHY big money is invested in politics!

"The ordinary citizen who is the target of a government investigation cannot pick up the phone, call the prosecutor and have his case dropped. But Dimon did just that."

[xfreeper]

American citizens: Hey AG, why haven't people been charged with securities fraud in this massive crime?

AG to American citizens: Kiss my ass

[Bigun]

American citizens: Hey AG, why haven't people been charged with securities fraud in this massive crime?

AG to American citizens: Kiss my ass

This story needs to be spread across this land as widely as possible by every means at our disposal!

[truth_seeker]

What was GOP Chris Cox, Chairman of the SEC doing, from 2005 to 2009?

Letting the crooks issue worthless securities, that's what.

[xfreeper]

Do you think any person will ever be criminally charged re this no matter how widely spread the story? Ever?

[Bigun]

Do you think any person will ever be criminally charged re this no matter how widely spread the story? Ever?

Nope! I do not. But the more people we can educate about what really goes on the better.

[truth_seeker]

Do you think any person will ever be criminally charged re this no matter how widely spread the story? Ever?

I was a real estate broker, during the price run up, liar loans, etc. So I have some empathy for the little guy, who simply wanted a home, or to make some money.

However the little guy could not push the demand side alone, if the finance professionals had not provided the means.  It took:

--buyers, borrowers
--appraisers
--lenders, including loan reps, processors, underwriters, etc.
--securities agencies, brokers, etc.
--rating agencies
--accountants and lawyers
--federal regulatory bodies
--and probably more

So where do you start? I contend the people at the very top knew exactly what was happening.

[xfreeper]

Informed people already know how corrupt the relationship between the financial industry and the gov't is. This is simply business as usual, although granted on a larger scale than the (old) norm. Uninformed people....well ignorance is bliss. They are more concerned with the daily lives of the kardashians. Look for Holder to land a sweet position working with the people he failed to prosecute once he leaves gov't 'service'. The beat goes on

[truth_seeker]

Informed people already know how corrupt the relationship between the financial industry and the gov't is. This is simply business as usual, although granted on a larger scale than the (old) norm. Uninformed people....well ignorance is bliss. They are more concerned with the daily lives of the kardashians. Look for Holder to land a sweet position working with the people he failed to prosecute once he leaves gov't 'service'. The beat goes on

Yes, surely Holder will be rich and won't have to do much work.

But check into Chris Cox, too. He sat by mostly idly, while it occurred. What purpose does the SEC serve, if not to block the issuance of bogus securities?

If I died and could be reincarnated, I would put "bond lawyer" high on my list of careers.

The various branches and agencies of governments borrow continually to do their business. Every one of those securities is authored and involves lawyers, accountants, rating agencies, brokers and traders, etc.

Immediately after the crash, it was widely said the rating agencies had given top ratings, to funds they KNEW were already experiencing non-payment of loans.

An associate of mine (with more knowledge) claims it was driven by the investor-demand side. IOW mutual finds of every type, pushing for higher returns.

Never mind they might eventually crash. The planned to be in and out, by then. Same for all the brokers, advisors, etc. They too made bundles, just for being there, then.

There is a concept of "last fool in." It had many of the markings of the Dutch Tulip trading frenzy of the 1600s.

http://en.wikipedia.org/wiki/Tulip_mania

[Bigun]

Yes, surely Holder will be rich and won't have to do much work.

But check into Chris Cox, too. He sat by mostly idly, while it occurred. What purpose does the SEC serve, if not to block the issuance of bogus securities?

If I died and could be reincarnated, I would put "bond lawyer" high on my list of careers.

The various branches and agencies of governments borrow continually to do their business. Every one of those securities is authored and involves lawyers, accountants, rating agencies, brokers and traders, etc.

Immediately after the crash, it was widely said the rating agencies had given top ratings, to funds they KNEW were already experiencing non-payment of loans.

An associate of mine (with more knowledge) claims it was driven by the investor-demand side. IOW mutual finds of every type, pushing for higher returns.

Never mind they might eventually crash. The planned to be in and out, by then. Same for all the brokers, advisors, etc. They too made bundles, just for being there, then.

There is a concept of "last fool in." It had many of the markings of the Dutch Tulip trading frenzy of the 1600s.

http://en.wikipedia.org/wiki/Tulip_mania

And  just who is buying all those QE-N bonds?

[xfreeper]

What purpose does the SEC serve, if not to block the issuance of bogus securities?

LOL. Maybe in another lifetime. In order for a corrupt system to thrive, there must be ways to legitimatize it and run interference and protection

[Bigun]

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."

Frederic Bastiat

[Bigun]

"An elective despotism was not the government we fought for;
but one in which the powers of government should be so
divided and balanced among the several bodies of magistracy
as that no one could transcend their legal limits without being
effectually checked and restrained by the others."

James Madison Federalist No. 58, 1788

[MACVSOG68]

I was a real estate broker, during the price run up, liar loans, etc. So I have some empathy for the little guy, who simply wanted a home, or to make some money.

However the little guy could not push the demand side alone, if the finance professionals had not provided the means.  It took:

--buyers, borrowers
--appraisers
--lenders, including loan reps, processors, underwriters, etc.
--securities agencies, brokers, etc.
--rating agencies
--accountants and lawyers
--federal regulatory bodies
--and probably more

So where do you start? I contend the people at the very top knew exactly what was happening.

I think you start by recognizing that the playing field in the financial and credit markets is anything but level, and that everyone doesn't have an equal share of the opportunities.  Dodd-Frank was written to address a lot of the issues that took place, but I've seen little analysis of any success stories.  And all the regulatory reform in the world isn't going to stop fraud when the government participates.  The SEC was sitting on its butt for a long time, in part by giving oversight authority for the AICPA to establish standards for the private sector and let the big auditing firms conduct the oversight. 

[Bigun]

I think you start by recognizing that the playing field in the financial and credit markets is anything but level, and that everyone doesn't have an equal share of the opportunities.  Dodd-Frank was written to address a lot of the issues that took place, but I've seen little analysis of any success stories.  And all the regulatory reform in the world isn't going to stop fraud when the government participates.  The SEC was sitting on its butt for a long time, in part by giving oversight authority for the AICPA to establish standards for the private sector and let the big auditing firms conduct the oversight.

Dodd-Frank was written to make life easier for the BIG bankers and their legislative collaborators while simultaneously squeezing the little guys right out of the banking services marketplace!

THAT is the sum total of what Dodd-Frank was designed to do and it's working like a charm! It is the financial services equivalent of Obamacare!   

[Oceander]

Dodd-Frank was written to make life easier for the BIG bankers and their legislative collaborators while simultaneously squeezing the little guys right out of the banking services marketplace!

THAT is the sum total of what Dodd-Frank was designed to do and it's working like a charm! It is the financial services equivalent of Obamacare!   

That's not all Dodd-Frank does, but it most definitely privileges the big banks - and other big financial institutions - over regional and small banks.  Perversely, the bigger a bank gets, the less risk it has of failure because once it becomes "systemically important" it is effectively back-stopped by us taxpayers.

[MACVSOG68]

That's not all Dodd-Frank does, but it most definitely privileges the big banks - and other big financial institutions - over regional and small banks.  Perversely, the bigger a bank gets, the less risk it has of failure because once it becomes "systemically important" it is effectively back-stopped by us taxpayers.

The Volker Rule was designed to permit continuance of various investments, but tried to limit them so as not to allow banks to become unstable because of them.  Allegedly more control was required over the larger banks.  Don't know whether it has provided more control or less than did Glass-Steagall.

From other parts of the Dodd-Frank Act, maybe we can put a little more faith in the rating agencies, but I still see about 10 or so proprietary computer programs that pretty much run the stock markets. 

I'm still not sure how Dodd-Frank really handles the derivatives market, which is around $1 quadrillion, several times more than the entire wealth of the globe.  And I don't know the extent to which the new laws oversee the banks and the entire derivatives markets.  Some articles reflect little change since before the crash.

All in all, we'll see, but there's still no level playing field, and the dangers of a financial collapse are IMHO still with us.

[truth_seeker]

I think you start by recognizing that the playing field in the financial and credit markets is anything but level, and that everyone doesn't have an equal share of the opportunities.  Dodd-Frank was written to address a lot of the issues that took place, but I've seen little analysis of any success stories.  And all the regulatory reform in the world isn't going to stop fraud when the government participates.  The SEC was sitting on its butt for a long time, in part by giving oversight authority for the AICPA to establish standards for the private sector and let the big auditing firms conduct the oversight.

It turns out to be absurd. Laws now force appraisals to be performed by companies which are owned and controlled by the major banks, or AMCs for Appraisal Management Companies.

This change cut the incomes of appraisers by half, btw.

[GourmetDan]

Dodd-Frank was written to make life easier for the BIG bankers and their legislative collaborators while simultaneously squeezing the little guys right out of the banking services marketplace!

THAT is the sum total of what Dodd-Frank was designed to do and it's working like a charm! It is the financial services equivalent of Obamacare!

Right-O Bigun...

[MACVSOG68]

It turns out to be absurd. Laws now force appraisals to be performed by companies which are owned and controlled by the major banks, or AMCs for Appraisal Management Companies.

This change cut the incomes of appraisers by half, btw.

No doubt, people working in various sectors feel cramped with the new laws, not always rightfully so.  But as I said earlier, I'm not aware of any success stories yet from that huge set of rules.  I do know I've never seen an appraisal on a property I've purchased that didn't come in just a smidgen above the agreed upon price.

[Oceander]

The Volker Rule was designed to permit continuance of various investments, but tried to limit them so as not to allow banks to become unstable because of them.  Allegedly more control was required over the larger banks.  Don't know whether it has provided more control or less than did Glass-Steagall.

From other parts of the Dodd-Frank Act, maybe we can put a little more faith in the rating agencies, but I still see about 10 or so proprietary computer programs that pretty much run the stock markets. 

I'm still not sure how Dodd-Frank really handles the derivatives market, which is around $1 quadrillion, several times more than the entire wealth of the globe.  And I don't know the extent to which the new laws oversee the banks and the entire derivatives markets.  Some articles reflect little change since before the crash.

All in all, we'll see, but there's still no level playing field, and the dangers of a financial collapse are IMHO still with us.

There isn't a level playing field and Dodd-Frank doesn't make it any more level.  The bigger banks have legal/compliance staff that can take the compliance into stride relatively easily and the market share sufficient to push a lot of the cost onto their customers; the smaller regional and local banks do not and cannot.  The irony is that it was the big banks that were complicit in the financial shenanigans that gave birth to Dodd-Frank, not the regionals and locals.

[truth_seeker]

No doubt, people working in various sectors feel cramped with the new laws, not always rightfully so.  But as I said earlier, I'm not aware of any success stories yet from that huge set of rules.  I do know I've never seen an appraisal on a property I've purchased that didn't come in just a smidgen above the agreed upon price.

I had a deal about 2-3 years ago, where the appraisal did come in low. Perhaps justifiably. It was a tough one to value.

So the seller agreed to sell it for appraised value, to my buyer. The seller had already found their next property, were motivated, etc.

Generally I agree that appraisals usually match the agreed sales price. Those agreed prices are in turn the result of agent estimates of value, time on market, a willing buyers, etc.  The appraisal confirms the market, so to say.

[MACVSOG68]

I had a deal about 2-3 years ago, where the appraisal did come in low. Perhaps justifiably. It was a tough one to value.

So the seller agreed to sell it for appraised value, to my buyer. The seller had already found their next property, were motivated, etc.

Generally I agree that appraisals usually match the agreed sales price. Those agreed prices are in turn the result of agent estimates of value, time on market, a willing buyers, etc.  The appraisal confirms the market, so to say.

I recently purchased a property with a number of acres and and older house requiring remodel.  The appraisal just happened to come in at $5k over my offer that was accepted.  I looked over the comps and saw how the appraiser had to go all around the county to find just the right ones for both the land and buildings on it.  Too low and the sale's not going to go through; too high and they set themselves up for issues about their methodology.  They are what they are.   

[DCPatriot]

I recently purchased a property with a number of acres and and older house requiring remodel.  The appraisal just happened to come in at $5k over my offer that was accepted.  I looked over the comps and saw how the appraiser had to go all around the county to find just the right ones for both the land and buildings on it.  Too low and the sale's not going to go through; too high and they set themselves up for issues about their methodology.  They are what they are.   

Five appraisers may come up with five different estimates of value.

The market usually dictates what a property is worth.

And a cash buyer can change the comparables of a neighborhood over night.  Especially in a Seller's Market, where buyers outnumber sellers.