The Morgue is like Leonardo Dicaprio in the movie “Catch Me If You Can.” The bank has amassed a laundry list of fraudulent activities that have burst onto the radars of numerous governmental agencies and into the public spotlight. Probably, we are looking at a similar outcome as in the movie. Instead of prosecutions, the bank, like Dicaprio’s character in the movie, will probably be merely asked to go to work for the Feds in some capacity to “pay off” their wrongdoings.
JPMorgan Chase & Co. is being investigated by at least 11 state, federal and international enforcement bodies. Officials in Singapore, Germany and Japan are among a list of agencies probing the largest U.S. bank and its trading errors, according to JP Morgan in a filing Thursday. The U.S. Justice Department, Congress, Securities and Exchange Commission and U.K. Financial Services Authority are all examining the bank, which could still lose $1.7 billion more on its credit derivatives portfolio, the company said
“The firm expects heightened scrutiny by its regulators of its compliance with new and existing regulations,” the company said. Regulators will begin to bring “formal enforcement actions for violations of law rather than resolving those violations through informal supervisory processes.”
The Morgue might have escaped the breaking down of their silver manipulation scheme by the CFTC, but that hasn’t kept other U.S. regulators from keeping the pressure on as the bank has been forced to shave 50 basis points off its reported capital levels after having sustained four weeks of trading losses in the second quarter, this on the heels of their “London Whale” loss reported by the bank earlier in the year. The Morgue said Thursday in a regulatory filing that the Federal Reserve Bank of New York and the Office of the Comptroller “determined” on Wednesday that the bank should amend its reported regulatory capital ratios.
The regulatory directive “relates to an adjustment to the firm’s regulatory capital ratios to reflect regulatory guidance regarding a limited number of market risk models used for certain positions held by the firm during the first quarter, including the CIO synthetic credit portfolio,” according to The Morgue.
The bank’s reported Basel I tier one common equity ratio has been revised to 9.8 percent, down from the 10.3 percent originally reported, the investment bank said. This tier I capital represents a key measure of JPMorgan’s ability to absorb losses.
JP Morgan also stated that it lost money on 28 days in the second quarter after the CIO positions were in the process of being unwound. In the first quarter, the bank sustained but one day of losses. The bank has received many requests for documents related to the trading loss from US politicians and regulators like the OCC, the Federal Reserve, the Department of Justice and the UK’s Financial Services Authority.
Jamie Dimon might have long celebrated The Morgue’s “fortress balance sheet” and its excellent risk management, especially as the bank maneuvered the 2007-2009 financial crisis after which many major financials have not even realized half of their pre-crisis market value, but those days are over, and Dimon has been revealed as the Lord Blankfein character he always has been.