reIt’s already been amply demonstrated that Donald Trump’s vow to “drain the swamp” in Washington is a transparent lie. His transition team is full of the very lobbyists against whom he railed on the campaign trail. Additionally, his own children will play prominent roles in the transition while running the blind trust that will oversee the Trump real estate empire during a Trump presidency.
But if there was any doubt that Trump’s image as a populist was nothing more than a mirage, CNBC’s Kate Kelly should have erased it. Kelly learned on Friday morning that Trump is seriously considering giving the Treasury to the man whose bank allowed the biggest financial crime in history to happen right under its nose. Namely, JPMorgan Chase CEO Jamie Dimon.
Watch Kelly’s report here.
As we all know, Trump’s shocking victory sent the markets into free fall. Appointing a man whom Fortune describes as “America’s most famous banker” would, at least on paper, calm the nerves of Wall Street.
Reuters subsequently confirmed that a member of Trump’s transition team reached out to Dimon late last week. Two months ago, Dimon publicly denied any interest in serving under either Trump or Hillary Clinton. A JPMorgan Chase spokesman refused to elaborate beyond that statement.
But the mere fact that Dimon is even being considered says a lot about Trump. It cannot be repeated enough–under Dimon’s watch, JPMorgan Chase turned a blind eye to Bernie Madoff’s massive Ponzi scheme.
That much was clear beyond any doubt in 2010, when Irving Picard, the trustee responsible for cleaning up the Madoff mess, sued Chase for continuing to do business with Madoff despite overwhelming evidence that there was a rank odor surrounding him. Picard contended that Chase officials “knew or should have known” Madoff was a fraud. For those who don’t know, Madoff opened a business account at Chemical Bank in 1986, and maintained that account when Chemical bought Chase Manhattan in 1996 and took the Chase name; Chase merged with JPMorgan in 2000. Whenever customers wanted to withdraw their money, Madoff simply paid them out of that account.
Among other things, Picard discovered evidence that a number of Chase employees–including several high up on the org chart–expressed concerns that Madoff’s activities didn’t add up. For instance, even though Chase’s own risk management executives expressed concerns about the nature of Madoff’s business, Chase bankers continued to make lucrative deals with Madoff.
Picard also discovered that Chase failed to exercise even rudimentary oversight over Madoff’s banking activities. As early as the 1990s, bank officials turned a blind eye to transactions that had the distinct flavors of money laundering and check kiting. Had Chase fulfilled its moral and legal duty to protect Madoff’s customers, Picard contended, it would have discovered that Madoff’s business was a sham.
Even though Chase’s own due diligence had turned up red flags in Madoff’s business activities as early as 2006, it didn’t report those concerns to regulators until October 2008, when it told investigators in the United Kingdom that Madoff’s investments were “too good to be true.” However, it allowed Madoff to continue banking unhindered until his arrest two months later.
As it turned out, this wasn’t the only investigation Chase and Dimon faced related to Madoff. Manhattan U. S. Attorney Preet Bharara began investigating Chase’s role in the fraud soon taking office in 2009. He eventually found that Chemical and Chase had known about Madoff’s shady activity as early as 1994, but didn’t report it even though they were required to do so under the Bank Secrecy Act.
Ultimately, in 2014, Chase was forced to cough up a total of $2.05 billion in fines and penalties for turning a blind eye to Madoff. As part of the first deferred prosecution agreement ever imposed on a major New York City bank, Chase forfeited $1.7 billion–the biggest forfeiture in American history. It also paid a $350 million fine to the Office of the Comptroller of the Currency, and settled the Picard lawsuit for $543 million.
When the news first broke that Chase and Dimon were about to take a severe financial hit for turning a blind eye to Madoff, I argued that there was no defensible reason for Dimon to keep his job. Think about it, folks. Some of the highest officials at one of the largest banks in the nation and the world knew that they had a criminal customer–and yet, did nothing. On principle alone, at the very least the CEO has to go.
Instead, there’s a chance he may be rewarded with the keys to the entire economy. There is something fundamentally wrong when Dimon is still in his post when John Stumpf was all but forced to resign over the bogus accounts at Wells Fargo. So a policy of opening bogus customer accounts to pad sales goals gets the CEO pushed out, but senior people twiddling their thumbs while a massive Ponzi scheme was happening right under their noses doesn’t? What’s wrong with this picture? Both involved fundamental betrayals of customer and public trust.
And now, it looks like Dimon is at least under consideration for having the keys to the entire economy. If Trump goes this route, the swamp won’t be drained at all. It will actually be flowing right down Pennsylvania Avenue from the White House to the Treasury Building. The mere fact that the man who turned a blind eye to the most outrageous swindle in world financial history could potentially get such a promotion is too damn obscene for words.
(featured image courtesy Steve Jurvetson, available under a Creative Commons-BY license)
