Frank Rich of the New York Times Is Right on Point (JP Morgan Chase Rides Safely into the Sunset)
As stated in these pages weeks ago, Madoff’s scheme, like all Ponzi Schemes, depended on the creation of an artifice of legitimacy and success.
This past Sunday Frank Rich wrote - in his elegant and insightful manner - about the lawsuit brought by Madoff receiver Irving Picard against JPMorgan Chase for its role as Madoff’s central banker. He highlighted that Chase bankers way back in 2007, eighteen months before Madoff’s arrest, were discussing “a well-known cloud” over Madoff, including speculation that he was “part of a Ponzi scheme.” Despite these concerns, Madoff continued to funnel billions of dollars of his clients’ money through Chase accounts while the bank carefully divested itself of $241 million of its $276 million in Madoff investments. Nice guys.
As stated in these pages weeks ago, Madoff’s scheme, like all Ponzi Schemes, depended on the creation of an artifice of legitimacy and success. Hence, the fancy Wall Street and London addresses, and key to the creation of that fiction, the participation of a first rate bank. JPMorgan Chase was happy to play that role. Without asking questions and despite the growing risk to investors, large and small, Madoff’s accounts remained open and under little to no scrutiny.
And it’s just going to happen again. We need stronger self regulation (“Excuse me Mr. Madoff, wondering if you could answer a few questions from Larry in our compliance department. Ok. Why haven’t you bought a security, a stock, a bond, nothing in, oh, 12 years and instead just pass the new cash received to an older investor”). Alternatively, we need more and tougher financial cops. That ain’t happening. The JPMorgan Chases of the world, with their phalanx of lawyers, will continue to be untouched by their often reckless conduct (or at a minimum turning a blind eye) in connection with the shenanigans of one future Ponzi scheme after another. And with Congress under the spell of the Tea Party and its "cut government spending" mantra blaring from K Street and supported by the latest polling data, money for enforcement will not be forthcoming no matter the risks. I can hear Fed Chairman Bernanke somewhere in the future, like a déjà vu moment, saying “we need a trillion dollars to save the financial system and I can’t tell you if that will even be enough.”
Who then is left to protect the small investors? Well there is Mr. Markopolos, of course, and Mr. Picard is doing his share, to be sure, but they merely represent fingers in the dike. Sadly, we are not better prepared for the next inevitable run up of greed and manipulation of say: “sub-prime mortgage backed securities 2.0” or some new “synthetic derivative” that is being concocted at some white shoe Wall Street law firm charging $900/hour that will become the latest rage for hedge fund managers from coast to coast.
Steven N. Berk has over twenty years of litigation experience spanning both the private and public sectors. His practice ranges from representing Fortune 500 Companies, to consumers. Steven is based in Washington, D.C. and founded Berk Law in May 2009....
