President Obama’s passive-aggressive relationship with Big Finance, in which the president and his team alternately woo and excoriate Wall Street, may have reached a new level of audacity this week.
On Tuesday, a “law enforcement” source leaked that the Department of Justice had launched a criminal investigation into the trading loss by JPMorgan Chase that is now estimated to be near $3 billion, a bad bet that badly tarnished the reputation of the firm’s once-lionized CEO, Jamie Dimon. (The department has not officially confirmed the probe, and the bank has not commented on it).
That same day, Obama appeared on the daytime television talk show, “The View,” where he called JPMorgan “one of the best-managed banks there is,” and said that Dimon “is one of the smartest bankers we got…” Obama explained that JPMorgan’s risky $3 billion bet was “why we passed Wall Street reform.”
Obama did not explain that Dimon has been one of Wall Street’s most vociferous opponents of reform, nor that the firm’s big hedge bet was allowed because of a loophole in the reform legislation that Obama signed. Nor did the president mention that Dimon has visited the White House at least 18 times, including a small dinner for CEOs and a private meeting with Obama in the Oval Office.
Nor, for that matter, did the president mention the fact that he and the first lady, Michelle Obama, have between $500,000 and $1 million in a JPMorgan Chase “private client asset management” account.
Before leaving New York for Washington, Obama attended a $35,800-a-head fundraiser held by Tony James, head of the private equity giant, Blackstone. Meanwhile, Obama’s re-election team began an assault on private equity as practiced by Mitt Romney’s former firm, Bain Capital, likening its work to a “vampire.”
Such has been the pattern since the start of Obama’s presidency. In 2009, his attorney general, Eric Holder, showily announced the formation of the Financial Fraud Enforcement Task Force, tasked with investigating fraud that contributed to the 2008 financial meltdown, and its lingering aftermath. “We will not allow these actions to go unpunished,” Holder said that day. But, as Newsweek reported last week, Obama’s Department of Justice has not yet prosecuted a single top executive from a major Wall Street firm. And, according to the Transactional Records Access Clearinghouse, a data-gathering organization at Syracuse University, financial-fraud prosecutions by the Department of Justice are at 20-year lows.
The Department reacted to that article this week, saying, according to a spokeswoman, that since 2009, Justice has aggressively prosecuted mortgage fraud, with a 92 percent increase in such cases, and that overall financial fraud cases have increased by 12.5 percent. Justice says the TRAC numbers from Syracuse are wrong, because the Department has instituted a new way of categorizing financial fraud cases.
Perhaps, but the Wall Street Journal reported this week that the Department of Justice, in an exchange of letters with one of its most consistent critics, Sen. Chuck Grassley (R-IA), conceded that it has not even kept count of the number of executives convicted for activities related to the financial meltdown.
That may be because Justice has mostly focused on relatively small-time cases. To much fanfare, the department went after an executive named Daryl Scott Nichols for allowing his vote on condominium Home Owner Association boards to be influenced by friends in a law firm and construction business (Nichols pleaded guilty). In March, a property appraiser in Washington was sentenced to 65 months in jail for fraudulently inflating prices in a scheme to “flip” properties. She netted approximately $1 million in the scheme. The owner of a Miami company got 46 months in prison for a scheme to defraud the U.S. Export Import Bank by filing fraudulent loan applications. And, four executives at a small bank in Tacoma, Washington were indicted on conspiracy charges because they made “false statements on loan applications, false statements to the U.S. Department of Housing and Urban Development.” (The Tacoma trial has been postponed until November).
It is not known what possible criminal actions at JP Morgan Chase the Department of Justice is investigating. But, based on the Department’s record so far, Jamie Dimon and his team likely have little to fear.