Newscast Media NEW YORK—A tentative deal has been negotiated by JPMorgan Chase CEO Jamie Dimon to settle a case for $13 billion regarding fraudulent mortgage-backed securities (MBS) that were never mortgage backed.
Here is how the scam works: The banks bundled mortgages into pools. These pools of mortgages were then further divided into what is referred to as “tranches”. The tranches are based on the credit scores of homeowners. For example, those with a high beacons score 750+ would be in the top tier. Then those with, say 700-749 would be in the tranche below. Homeowners with 600-699 would be in the next tranche and the bottom tranche would have the lowest credit score, and would be the riskiest. In essence, a tranche is a slice of a deal in structured financing.
These pools of mortgages, also referred to as “derivatives” are then sold on the secondary market in form of a bond that is backed by the value of the house (mortgage). The bond certificate that is issued is what is referred to as a “mortgage-backed security” or a “Collateralized Debt Obligation” (CDO).
These mortgage-backed securities are put into a trust called a Real Estate Mortgage Investment Conduit Trust (REMIC Trust). A trustee like JPMorgan Chase or Bank of America or Wells Fargo is then chosen to oversee the trust. The trust is usually called something like Alternative Loan Trust 2010-XYZ Certificate series. (The year indicates when the trust was opened).
Each trust is then insured with what is referred to as “credit default swaps” that way if a homeowner defaults, the bank cashes in on the insurance policy which is up to 30 times the amount of the home. For example if a person purchases a home for $200,000 the insurance money the bank would get is ($200K X 30)= $6,000,000, for just one home. The bank then sends the homeowner an eviction notice and sells the home again for perhaps $80,000. This money is mostly pocketed by the foreclosure attorneys who run the scam for the banks.
The problem is, during the bailout, the government gave JPMorgan Chase & Company, $390 billion as the Troubled Asset Relief Program (TARP). At the time of the bailout, the bank then declared the derivatives (mortgage-backed securities/collateralized debt obligations) in its possession as “toxic assets.” Upon declaring the CDOs toxic assets, the trusts became defunct and ceased to exist. In other words, the trusts were empty, because the government bought all of them out through TARP. However, because of greed, these banks continued to sell derivatives knowing that those mortgage-backed securities were never mortgage backed and the trusts were empty. That’s how they caused the financial meltdown that started in 2007 and is continuing to be felt to this very day.
So even if JPMprgan Chase and Co. were to pay $13 – $23 billion out of the $390 billion they received, it wouldn’t hurt them. It would be like a drop in the bucket…all of which is taxpayer money. What!
The banks defrauded the federal government (by taking TARP money and continuing to sell bogus mortgage-backed securities); they defrauded investors (by selling them bogus mortgage-backed securities from phantom trusts); they defrauded homeowners (by selling the titles to their homes multiple times on the secondary market, hence creating a cloud on those titles); and finally, they are defrauding the court system (through the use of greedy corrupt attorneys who use forged documents to steal thousands of properties across America, on behalf of trusts that do not even exist!)
Obama is finally cracking down on the big fish. The corrupt attorneys in this game are like sardines, the CEOs like Jamie Dimon, are the crocodiles Obama is going after. I’ve been to Africa and I have swum in the River Nile. Anyone will tell you that before you can safely swim or fish in the Nile, you have to make sure the area is not infested with crocodiles. What Obama is doing is, he’s getting rid of the crocodiles, and once he is done with them, then he’ll go after the sardines.
There is an old African saying that goes: “The big fish is caught with the big hook.” The big fish here are the bank CEOs, the big hook is the Department of Justice.
The entire story about this fraudulent scheme and the settlement between JPMorgan Chase and the Justice Department can be found here.
Newscast Media WASHINGTON—The Securities and Exchange Commission today charged JPMorgan Chase & Co. with misstating financial results and lacking effective internal controls to detect and prevent its traders from fraudulently overvaluing investments to conceal hundreds of millions of dollars in trading losses.
The SEC previously charged two former JPMorgan traders with committing fraud to hide the massive losses in one of the trading portfolios in the firm’s chief investment office (CIO). The SEC’s subsequent action against JPMorgan faults its internal controls for failing to ensure that the traders were properly valuing the portfolio, and its senior management for failing to inform the firm’s audit committee about the severe breakdowns in CIO’s internal controls.
JPMorgan has agreed to settle the SEC’s charges by paying a $200 million penalty, admitting the facts underlying the SEC’s charges, and publicly acknowledging that it violated the federal securities laws.
Click here to read or download the SEC order or settlement.
“JPMorgan failed to keep watch over its traders as they overvalued a very complex portfolio to hide massive losses,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement. “While grappling with how to fix its internal control breakdowns, JPMorgan’s senior management broke a cardinal rule of corporate governance and deprived its board of critical information it needed to fully assess the
company’s problems and determine whether accurate and reliable information was being disclosed to investors and regulators.”
As part of a coordinated global settlement, three other agencies also announced settlements with JPMorgan today: the U.K. Financial Conduct Authority, the Federal Reserve, and the Office of the Comptroller of the Currency. JPMorgan will pay a total of approximately $920 million in penalties in these actions by the SEC and the other agencies.
According to the SEC’s order instituting a settled administrative proceeding against JPMorgan, the Sarbanes-Oxley Act of 2002 established important requirements for public companies and their management regarding corporate governance and disclosure. Public companies such as JPMorgan are required to create and maintain internal controls that provide investors with reasonable assurances that their financial statements are reliable, and ensure that senior management shares important information with key internal decision makers such as the board of directors.
JPMorgan failed to adhere to these requirements, and consequently misstated its financial results in public filings for the first quarter of 2012.
The SEC’s investigation, which is continuing, has been conducted by Michael Osnato, Steven Rawlings, Peter Altenbach, Joshua Brodsky, Joseph Boryshansky, Daniel Michael, Kapil Agrawal, Eli Bass, Sharon Bryant, Daniel Nigro, and Christopher Mele.