Matt Taibbi, in the new Rolling Stone, tells the tale of one Alayne Fleischmann, once a deal manager at JP Morgan Chase, the giant bank, too big to fail but not for lack of effort.

You may recall the saga of Chase and its CEO, Jamie Dimon. But large parts of that saga are more myth than documented history…akin to Homer’s Iliad depicting the Trojan War as a panty raid on a college’s women’s dormitory.

Fleischman, for her part, has been attempting to set the record straight. She is a Cornell educated lawyer who surprisingly found herself working for Chase after graduation and then finding she enjoyed her work. That is, until Chase put in place people controlling the securitiization of home mortgages more concerned with the bundle of money Chase would earn than for the fact that many of these mortgages were doomed to fail almost from the outset.

This is a synopsis of what Fleischmann found she was dealing with;

In late 2006, not long after the “no e-mail” policy was implemented, Fleischmann and her group were asked to evaluate a packet of home loans from a mortgage originator called GreenPoint that was collectively worth about $900 million. Almost immediately, Fleischmann and some of the diligence managers who worked alongside her began to notice serious problems with this particular package of loans.

For one thing, the dates on many of them were suspiciously old. Normally, banks tried to turn loans into securities at warp speed. The idea was to go from a homeowner signing on the dotted line to an investor buying that loan in a pool of securities within two to three months. Thus it was a huge red flag to see Chase buying loans that were already seven or eight months old.


In Taibbi’s reporting he makes a couple of analogies to used cars. He likens these defective loans to old junkers given a new coat of paint and resold to unsuspecting consumers. In this case the unsuspecting consumers were the purchasers of the loans packaged to be sold as securities. And, just as a junker getting a cosmetic overhaul but with a rotting body or soon to blow engine, these packaged mortgages were rotten to the core and guaranteed to go into default, costing the investors, perhaps, but a sure financial windfall for Chase.

What carries the used car analogy even further is the element of fraud. Within the mortgage and securities industry there may be no outright prohibition of selling such bound-to-fail mortgages but the entity doing so is bound to identify them as such so that the purchaser is aware of the risk. Likewise it may not be illegal to sell a used car with a blown headgasket but if such defect is known to the seller it has a duty to so inform the customer. That is so even if the car is sold “as is”.

Taibbi also tracks the course of the investigation of Chase for this fraud by the Department of Justice. Instead of facing true criminal charges Chase fessed up and was fined $13 billion. He explains how that figure is misleading and how the entire process was virtually pure smoke and mirrors designed to fool a gullible public into believing some action was finally being taken to punish the people responsible for the almost catastrophic collapse of the financial markets.

Chase was so damaged by this settlement that Dimon suffered considerably due to his leadership during this fraud. His pay was cut…no WAIT!, that’s a typo…his pay was not cut one bit but early this year he received a 74 % increase.

Taibbi spares no government official in his revelations of this chicanery, depicting

Attorney General Eric Holder, (as) 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.  

For her part Fleischmann is still eager to see that Chase is criminally prosecuted.

She believes the proof is easily there for all the elements of the crime as defined by federal law – the bank made material misrepresentations, it made material omissions, and it did so willfully and with specific intent, consciously ignoring warnings from inside the firm and out.

Aside from these charges Matt Tiabbi offers other examples of miscreances committed by Chase while also noting that

…former Debevoise & Plimpton hotshots Mary Jo White and Andrew Ceresny, who represented Chase for some of this case, have since been named to the two top jobs at the SEC. As for the bank itself, its stock price has gone up since the settlement and flirts weekly with five-year highs. 

What is evident from all this is that, while there is no rest for the wicked, there is also no retribution for them.

This is one lemon that, if you were to make lemonade of it, you would gain nothing but indigestion.


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  • Devildog  On November 9, 2014 at 1:05 PM

    Maybe someone out there can help me. Just before the Steeler started, I heard this pro-Obama Harvard professor say on MSNBC that Obama will be favorably rated in the future and one of the reasons he gave was Obama got us out of Iraq. Putting aside what is now going on there, what is confusing to me is who got us out of there. We know who got us in but are we out because Bush signed the agreement to do so or is it Obama who was president when our troops left and wanted us out?

    Help! Please!

    • Tourist  On November 9, 2014 at 5:18 PM

      Putting aside what is now going on there, those on the left happy to be out of Iraq say Obama did it. As a bonus, when the opportunity arises, they remind those on the right not happy to be out of Iraq that Bush committed to it. Those on the right not happy to be out of Iraq say that Obama failed to disregard Bush’s commitment made in the name of the United States of America and to unilaterally negotiate/declare/impose a new Status of Forces Agreement on terms Iraq rejected. As I recall, Devildog, that has been you.

      So, do you want us back in now or not?

      • umoc193  On November 9, 2014 at 5:31 PM

        This reply is for both of you.

        Well, if there’s blame to be assigned for ISIS in assuming it would be null if the troops were still there, Republicans put it under Obama. If Iraq had not gone downhill they would have given Bush credit.

        Here’s the thing. Technically Bush signed the agreement to withdraw and Obama went ahead with that timetable, perhaps making half-hearted attempts to renegotiate. But there would have never been any necessity for a status of forces agreement had the invasion never taken place

        If it is not obvious by now, the fact that al-Qaeda never had any real influence there and the fact that no WMD’s were there, and the further fact that we completely destroyed their government and other stable institutions together mean the invasion was ill-advised and the end result is chaos which in no way enhances the security of the U.S.

        However, now that Obama is determined to reestablish forces there to fight ISIS, he owns the damn thing now. It is another foolish effort on the part of our CINC. Somehow these people act like they were elected Sheriff of the Earth, not merely President of the U.S. That is not a good thing as the deaths of over 100,000 of our servicemen and women since 1950 have shown.

        • Tourist  On November 9, 2014 at 7:09 PM

          “It is another foolish effort on the part of our CINC.” It may be. What’s your preference, a better effort or none? None ever, or just more selectively? Would the test have more to do with the nature, the magnitude, or the likelihood of success?

          How is domestic violence next door or child abuse down the street anyone else’s business? Or Hutus massacring Tutsis? Iraq invading Kuwait? Germany, Poland? Bosnia? Do we need an “interest,” or does the thing sometimes speak for itself? North Korea is sovereign, right?

          Are we the sheriff? Of course not. Can we get involved everywhere, do everything? Of course not. Do our efforts sometimes go south and almost always have unintended consequences? Yep. So what’s our position? Rule of law? Fortress America? Lead by example? Know it when we see it?

          How can we be “all in it together” domestically and indifferent internationally?

  • Devildog  On November 9, 2014 at 8:12 PM

    I ask for what others believe and you recite the views of the left and right, tell me what you think I said previously and then ask what I would do now. Totally non-responsive but I will answer nonetheless.

    Obama got us out of Iraq. Bush’s deal was for Iraqi political purposes at the time. It may not have been a cakewalk for Obama to renegotiate, he most likely could have done it, but he had no intention of doing so. Whether staying there would have prevented ISIS from achieving what it has, probably yes-especially combined with us not trying to unseat Assad.

    What should we do now? Not sure but I like Biden’s idea of years ago but I would spread that idea to Syria-we need a bunch of “stans”. Sunnistan, Shiasan, Kurdistan, Assadstan 😗

    • Devildog  On November 9, 2014 at 8:14 PM

      Further Tourist, let them kill each other, work behind the scene to pick up the pieces with “friendly” people in charge of the stans. After all, what the hell do we have a CIA for?

  • toadsly  On November 9, 2014 at 8:37 PM

    You can’t beat Wall Street!

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