In extending the credit, JPM assumed that the customer money that was being held by Lehman Brothers could be freely used by the firm, and therefore was a legitimate part of its valuation. The comparison to MF Global is obvious.
In other words, if MF Global had not failed to meet its margin call and gone bust, they might have been fined $20 million in four or five years, while taking in billions in profit and bonuses. What a deterrent!
Although using customer segregated funds to calculate the value of a company is not nearly as egregious as actually stealing them, it does betray a certain mindset on Wall Street that seems to have prevailed in the last ten years or so.
'This land is our land, their money is our money.'
Or perhaps there was an outbreak of sloppy book-keeping on Wall Street as the Fed induced credit bubble reached its apogee in the fraudulent securities packaging market. Who could blame them?
The $20 million fine is incidental to JPM and the violations which occurred over four years ago. And I am sure that as part of settlement, JPM will agree not to do it again, while admitting no guilt.
Perhaps this action by the CFTC is more symbolic than effective. The question I have is what does it really mean?
The $20 million is nothing to JPM, but the CFTC could certainly put it to good use. Perhaps they could use it to move along their study exposing the outrageous manipulation in the silver market by one or two banks that has been slowly moving along for the past four years. Now that is a symbol that we might believe in.
Bloomberg
JPMorgan Pays $20 Million to Settle CFTC Segregated-Fund Claims By Gregory Mott Apr 4, 2012
JPMorgan Chase & Co. (JPM) will pay $20 million to resolve U.S. Commodity Futures Trading Commission claims that the bank mishandled customer segregated funds from Lehman Brothers Holdings Inc. from 2006 to 2008.
The CFTC announced the settlement with JPMorgan in a statement today. Mary Sedarat, a spokeswoman for New York-based JPMorgan, wasn’t immediately available for comment.
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