According to Chris Otts of The Courier-Journal, Dimon told his audience that the United States has "too much inequality." This isn't a novel insight -- the Occupy Wall Street protests were predicated on this idea, expressed through the slogan "we are the 99 percent" -- but it's striking to hear it coming from Wall Street's most outspoken defender of financial elites.

"It doesn't mean we blame the successful," Dimon continued, sounding more characteristic, "but it's true. You want to have problems in society? Have inequality." Dimon mentioned "struggling inner-city public schools" in particular, Otts reports.

The statements represent a slight rhetorical softening for Dimon, who has in the past rejected the anti-banker sentiment that arose after the financial crisis of 2008. "Acting like everyone who's been successful is bad and because you're rich you're bad, I don't understand it," he said in late 2011 at an investors' conference in New York. Since then, a lot has changed for JPMorgan: the bank, seen as the most successful of the financial behemoths during the crisis, was recently the subject of a "riveting and devastating" Senate panel report that accused Dimon and other executives of hiding trading losses from investors and regulators.

According to The New York Times, a criminal investigation of this affair -- known popularly, after the trader who caused the losses, as "the London Whale" -- is "at an advanced stage."

I urge you to read an astonishing new report, which I’ve embedded below, from analyst Josh Rosner of Graham-Fisher and Co. The best way to describe the report, “JPM – Out of Control,” is that it reads like a rap sheet. Notably, Rosner takes mortgage abuses almost entirely out of the equation, and yet still manages to fill a 45-page report with documented case after documented case of serious fraud and abuse, most of which JPM has already admitted to (at least in the sense of reaching a settlement; given out captured regulatory structure the end result is invariably a settlement with the “neither admit nor deny wrongdoing” boilerplate appended). Rosner writes, “we could not find another ‘systemically important’ domestic bank that has recently been subject to as many public, non-mortgage related, regulatory actions or consent orders.”

It’s hard to summarize all of the documented instances in this report of JPM has been breaking the law, but here’s my best shot. I try to keep up on these matters, and yet some of these I’m learning about for the first time:

Bank Secrecy Act violations;

Money laundering for drug cartels;

Violations of sanction orders against Cuba, Iran, Sudan, and former Liberian strongman Charles Taylor;

Violations related to the Vatican Bank scandal (get on this, Pope Francis!);

Violations of the Commodities Exchange Act;

Failure to segregate customer funds (including one CFTC case where the bank failed to segregate $725 million of its own money from a $9.6 billion account) in the US and UK;

Knowingly executing fictitious trades where the customer, with full knowledge of the bank, was on both sides of the deal;

Various SEC enforcement actions for misrepresentations of CDOs and mortgage-backed securities;

The AG settlement on foreclosure fraud;

The OCC settlement on foreclosure fraud;

Violations of the Servicemembers Civil Relief Act;

Illegal flood insurance commissions;

Fraudulent sale of unregistered securities;

Auto-finance ripoffs;

Illegal increases of overdraft penalties;

Violations of federal ERISA laws as well as those of the state of New York;

Municipal bond market manipulations and acts of bid-rigging, including violations of the Sherman Anti-Trust Act;

Filing of unverified affidavits for credit card debt collections (“as a result of internal control failures that sound eerily similar to the industry’s mortgage servicing failures and foreclosure abuses”);

Energy market manipulation that triggered FERC lawsuits;

“Artificial market making” at Japanese affiliates;

Shifting trading losses on a currency trade to a customer account;

Fraudulent sales of derivatives to the city of Milan, Italy;

Obstruction of justice (including refusing the release of documents in the Bernie Madoff case as well as the case of Peregrine Financial).

And, exhale.

The sheer litany of illegal activities just overwhelms you. And these are only the ones where the company has entered into settlements or been sanctioned; it doesn’t even include ongoing investigations into things like Libor, illegally concealing inclusions of mortgage-backed securities in employer funds (another ERISA violation), the Fail Whale trades, and especially putback suits for mortgages, where a recent ruling by Judge Jed Rakoff has seriously increased exposure. While the risks are still very much alive and will continue to weigh on the firm, ultimately shareholders will pay, certainly not executives as long as the no-prosecutions standard holds.

A Whale’s Tale – a Whitewash Report

When compared to the report the Board of Freddie Mac undertook, JPM’s “Task Force” was a whitewash.

Freddie initiated a truly independent investigation by anunaffiliated firm and directed

all employees of the Company to fully cooperate with theinvestigation. There were no limitations proscribed on the scope of the review and as theinvestigators or the Firm’s independent auditors discovered additional matters they werealso looked into

x



In contrast, JPMorgan’s “Task Force” issued a report of questionable independence andlimited in scope. Michael Cavanagh, co-Chairman of JPMorgan’s investment bank, ledthe “Task Force”. Cavanagh reports directly to Jamie Dimon and is both a longtime“lieutenant” and his possible successor

xi

.For Michael Cavanagh to be tasked with investigating another executive that reporteddirectly to Jamie Dimon

xii

about losses in a unit that he knew, as early as 2010, appearedto have inadequate controls

xiii

is more troubling.

As former SEC Chairman Harvey Pitt said, "It's incomprehensible to me that they did these reports internally,

it's like asking Joe Paterno to do the Penn State [sexual abuse] investigation instead of [former FBI director] Louis Freeh…

having picked Cavanagh to do this strikes me as potentially foolish in the extreme, the only reason you do a review this way is because you don't want to find anything unduly damaging