Did JPMorgan Almost Fail?
Anthony M. Freed
About this author:- Profile & More Articles
- Visit: Information Security Resources
- Visit: Your Mortgage or Your Life
While the mainstream media is thoroughly distracted by what they term to be the “historic” and “unprecedented” events of the day - like the wild swings of the markets, the midnight deals worth billions, and the political circus that is Washington DC’s inherent ineptness - little attention is being paid to the well documented and eerily similar events of only 100 years ago.
Many of the corporate players were - not so surprisingly - the same as those who are at the center of our present “crisis.” Many of the same threats and socially extortive methods are being employed today to force public and legislative support for draconian changes to our free market system, and there is no shortage of lies and misinformation being propagated as truth.
After years and years of credible warnings that the lack of risk abatement in lending and the over-abundance of inexpensive money of the Greenspan Era would lead to a financial disaster, the mainstream media finds itself running from fire to fire reporting the resulting damage while completely missing the real story: There are arsonists on the loose, and they are burning down our Nation’s financial house.
I wrote about a very strange occurrence - the reporting of J.P. Morgan “transferring” 138 billion dollars to Lehman, after Lehman had already filed for Chapter 11 bankruptcy early last Monday morning…It is highly likely [or a certainty on my planet] that J.P. Morgan was INSOLVENT and was “BAILED OUT” last Monday, September 15, to the tune of 138 billion dollars. This would explain why the Fed and Treasury dictated that Lehman fail - to disguise or otherwise obfuscate the recapitalization of or illicit transfer of 138 billion to A MUCH SICKER, TEETERING ENTITY, J.P. Morgan Chase.
There is definitely no shortage of rumors and intrigue surrounding some of the seemingly unprecedented events of recent months, yet it does not take much digging to realize that this is not a new phenomenon by any stretch of the imagination.
Rock star of the finance world Jamie Dimon is looking less and less like he is merely the creative young up-and-comer with the winning insight on a changing industry whose bold ideas have put him at the top of his field; recent events are making it look more and more like Mr Dimon may well be the reincarnation of John Pierpont Morgan himself.
JP Morgan had a long and well documented history of using his tremendous wealth and power to manipulate market situations in an effort to create cycles of boom and panic which he was perfectly situated to take advantage of.
JP Morgan is generally credited with forcing the passage of the Federal Reserve Act of 1913 and helping to manufacture the 1929 Stock Market Crash that ultimately led to the Great Depression. Now it seems there are ever more stories of impropriety by Jamie Dimon and JPMorgan Chase (JPM), especially regarding the suspicious and all too rapid demise of financial pillar Lehman Brothers (LEH).
Some analysts are now asking, Did JPM Cash Call Bring Down Lehman?
Lehman Brothers Holdings Inc.’s main lender and clearing agent, JPMorgan Chase & Co., caused the liquidity crisis that led to Lehman’s collapse, creditors said.
JPMorgan had more than $17 billion of Lehman’s cash and securities three days before the investment bank filed the biggest bankruptcy in history on Sept. 15, the creditors committee said in a filing Oct. 2 in bankruptcy court in Manhattan. Denying Lehman access to the assets on Sept. 12, the bank “froze” Lehman’s account, the creditors claimed.
JPMorgan, the biggest U.S. bank by deposits, financed Lehman’s brokerage operations with daily advances, while money market funds and other short-term lenders provided overnight loans, according to bankruptcy court documents. When JPMorgan shut Lehman off from funds, Lehman “suffered an immediate liquidity crisis that could have been averted by any number of events, none of which transpired,” according to the filing.
The creditors asked the judge in charge of the case to let them interview a witness and request relevant documents from JPMorgan and to pursue possible legal claims. U.S. Bankruptcy Judge James M. Peck is scheduled to hold a hearing Oct. 16 on that request, the creditors said.
This is a serious charge, and it is not merely speculation, as it is clear from the article that some elements of the accusation are being addressed by the courts presently, but any news of these proceedings have all but escaped the spastic and irrelevant eye of mainstream media.
Lehman Creditors Allege JP Morgan Role in Bank’s Failure: The Wall Street Journal reports that Lehman’s unsecured creditors are calling on the bankruptcy court to examine why the investment bank ran out of funds. The suit argues that JP Morgan abused its role as clearing bank, retaining $17 billion of excess collateral which Lehman could have used to stave off its collapse.
From the Wall Street Journal:
Unsecured creditors of Lehman Brothers Holdings Inc. asked a court overseeing the securities firm’s bankruptcy proceedings for permission to investigate how Lehman ran out of money.
The creditors’ group alleges that J.P. Morgan Chase & Co., which acted as a financial middleman between Lehman and other lenders, helped spark a “liquidity crisis” at Lehman before the firm filed for Chapter 11 bankruptcy proceedings earlier this month…
According to the court filing, about $17 billion in Lehman cash and securities were being held at J.P. Morgan as collateral. In serving as a middleman, or so-called clearing bank, J.P. Morgan operates the bank plumbing that connects firms such as Lehman to third-party lenders. In that role, J.P. Morgan held collateral to ensure the lenders’ loans to Lehman can be repaid. In its claim, the creditors group alleges that J.P. Morgan “withheld $17 billion in excess assets” from Lehman Brothers “in the days just prior to the bankruptcy filing.”
This begs the question: What exactly is the relationship between Jamie Dimon’s JP Morgan Chase and the regulatory elements of the Federal Government charged with overseeing the financial system, but who seem to be acting as the personal agents of “the chosen” like JP Morgan and Goldman Sachs?
Does the U.S. Government Owe JP Morgan? Jamie Dimon made his name helping Sandy Weill build the company Commercial Credit into the giant financial supermarket that we know today as Citigroup. After a series of disagreements with his friend and mentor, Jamie was kicked to the curb shortly after the landmark Travelers deal of the late 1990s.
Dimon ended up over at Bank One as its CEO and ultimately became JP Morgan’s CEO after JP Morgan’s buyout of Bank One.
Dimon’s Credit Crisis Coups:
Coup #1: Bear Stearns. Fast forward to today and we see Jamie Dimon striding across the smoking ruins of America’s most storied financial franchises. He essentially bought Bear Stearns for free, his cash outlay was covered by the existing cash in the firm and he received government guarantees on Bear’s bad debt. It was as close as you could get to a risk-free trade.
Coup #2: Washington Mutual. A big problem for Dimon was how to expand JP Morgan’s retail footprint out West. With its recent purchase of Washington Mutual for $1.9 billion, that problem is solved. The takeover gives JP Morgan 5,400 new branches from California to Florida, and $188 billion in deposits.
All this lovin’ going the way of JP Morgan begs the question: Does the company have a special relationship with the government? After all JP Morgan is the only bank that secured government debt guarantees. And how is it that JPM got the first shot at WaMu even before WaMu itself knew it was for sale? (The FDIC had been planning to take over WaMu for weeks and worked with JP Morgan ahead of time secretly to take over the company.)
JP Morgan’s Government Bailout:
Is the creature from Jekyll Islandpaying back its debts? John Pierpont Morgan is widely credited with twice rescuing the banking system and the federal government itself. In 1895, Morgan put together a private syndicate that loaned the federal government gold to shore up the U.S. Treasury. Then in 1907, Morgan pressured other financiers to inject cash into the failing banking system and crashing stock market. That was before the Federal Reserve existed to provide liquidity.
Many people believe that the Federal Reserve is nothing more than an inside coterie of banks with familial ties that go back for generations. Fact or fiction, is it time to do away with the Fed and try a different approach? If so, what should we replace it with? You tell me.
In JPM’s case, we’ve got a company that is seriously well connected and very well run. So, if you are looking for not only one of the survivors, but also one of the winners from this meltdown take a good long look at JP Morgan. When the credit cycle turns, and it will turn, JP Morgan’s earnings could explode to the upside along with its stock price.
What then do we do if we see this pattern of blatant illegality and corruption?
The very Government Agencies we are supposed to depend on to prevent this kind of Robber-Barron activity are actively engaged in setting up the mechanisms of textbook Fascism, and Americans know very little of the actual workings of our Nation’s Money System and who really owns their wealth.
This is a critical period of time for the survival of democracy between now and - not only the election - but, the actual inauguration and peaceful transfer of power. Many mechanisms of control, both financial and individual, have been implemented over the last decade, with a major up-tick in the erosion of our civil liberties since the devastating attacks of September 11, 2001.
We will continue examining the cumulative effects of these changes in what appears to be a concerted effort on the part of ideologists and the wealth centers of the West to abandon the tenets of Liberty for the efficiency of Fascism.
Democracy has outgrown its usefulness as a foil against Monarchism, and the threat China poses as it abandons its own brand of Communism has created a powerful coalition of interests bent on establishing the supremacy of the United States, even if this means abandoning those characteristics of our nature that have made us what we are today. Or were yesterday.
Disclosure: I hold no positions public or private at this time.
Related Articles
|
Top Rated Comment Streams:
-
1.Hedged In662
- 2.
-
3.Smarty_Pants425
-
4.axelrod608330
-
5.Chris B279
- Free E-Newsletters
This article has 15 comments:
-
philipmax
-
21 Comments
Oct 07 09:18 AMBy 1907 John Pierpont Morgan was the richest and most powerful Oligarch in the world. In the age of the Robber Barons, through J.P. Morgan & Company he had formed the most formidable array of industrial concentration imaginable. He controlled the US Steel Corporation, the largest entity on earth, as well as the American Telephone & Telegraph Company and General Electric Company and United Electric utility, which, together with Rockefeller’s Standard Oil Company and Vanderbilt’s Railroads controlled 95% of the industrial base of the United States.
For 75 years the SEC had a rule that prevented runs on companies’ stock by prohibiting the “naked short” sales (selling stock without possessing the borrowed shares) prevalent before the Depression. After the 1987 debacle, the exchanges instituted the up-tick rule (sale price of the target company’s stock must register a rise in its price immediately before the short sale is executed} that made programed short selling harder to execute. These tools were instituted as a safeguard against ruinous bear raids that could decimate viable companies in days.
Early this summer, without any outcry or demand by the public for change, the exchanges quickly and without fanfare eliminated both of these safeguards in a matter-of-fact fashion that barely elicited any comment.
In quick succession Bear Stearns was decimated in just days, and was quickly snapped up by JP Morgan. A few short months later Lehman Brothers was exterminated with great dispatch that lasted just days. And later that same week the Trillion Dollar giant A.I.G. was brought to its knees in just seventy two hours.
Within a week of this epic American tragedy, the “short rules” were re-instated with stringent “no short sale” list covering 1000 companies.
WOW!!!!!
I will patiently wait for JP Morgan Chase, Bank of America, Goldman Sachs & Co., or Warren Buffett to pick up the “nuggets” left behind by Lehman’s demise and the breakup of A.I.G.
Philip Max NY
The Federal Reserve Bank did not yet exist and the currency was directly linked to the gold and silver circulating in the economy. J.P. Morgan & Company was the at the spigot.
By 1907, US Steel was a huge juggernaut of vertically integrated interconnected companies that not only owned and controlled steel production but also vast tracts of natural resources, as well as, a bewildering network of railroads to transport the raw and finished products. With all the resources at its command, it nevertheless, found it necessary to covet the assets of the Tennessee Coal, Iron and Railroad Company, a small, yet strategic, company that would add another nugget to this vast enterprise. The problem was that the stock of this company was controlled by two New York entities who were reluctant to part with the stock.
Now, JP Morgan was a generous Plutocrat. He would ask the seller to name his price and rarely haggled as he stood to make even more millions by adding his percentage mark-up when he marketed securities to raise additional capital. When he asked Andrew Carnegie to name his price for his vast steel empire, Carnegie replied that $700 Million was the magic number and was delighted to find that Morgan promptly issued a check for that exact amount...only to be greatly distressed when Morgan told him that he was prepared to ante $1 Billion.
So, when Morgan approached the principals at Moore and Schley, a small stock brokerage firm that happened to own, together with the owners of the Trust Company of America, a dominating control of the Tennessee Coal Company, he expected to pay a high price. To his chagrin, they both refused to sell to him at any price.
The result was the” Panic of 07". JP Morgan & Company, through his agents, caused a run on the deposits at the Trust Company forcing it out of business. At the same time, he refused to extend credit and created a credit crunch that was particularly aimed at the customers of Moore and Schley forcing that company out business and in the process acquired the shares of Tennessee coal for pennies on a dollar.
Immediately after the fall of his “enemies” J.P. Morgan famously gathered his buddies to announce that the panic was over.
I retell this incident here because I have a strong suspicion that history is repeating itself on the Centennial of that fateful event.
-
devils advocate
-
6 Comments
Oct 07 09:19 AM-
devils advocate
-
6 Comments
Oct 07 09:19 AM-
trw88
-
13 Comments
Oct 07 10:23 AM-
Bosoxfan
-
1 Comment
Oct 07 11:14 AM-
JasonC
-
367 Comments
Oct 07 11:41 AMJPM held *collateral* and properly held onto it to make Lehman's *creditors*, not itself, as whole as possible. JPM lent $185 billion to Lehman after the filing *at the direct request of the Fed* to facilitate the *liquidation* of Lehman, especially the transfer of its brokerage account securities to other dealers. This involved JPM paying off claims against Lehman with its own money, while awaiting trade settlements in process, to get its advances back. This was JPMs responsibility as *clearing agent* for Lehman security trades, and was asked as a mission by the regulators, and I might add, performed brilliantly in a matter of days. Had it not been, the failure cascade after Lehman would have been even worse than it already is.
As for Wa Mu, that was the FDIC's call. It faced losses of $25 billion to depositers if the bondholders were left intact, which is basically half its trust fund. The regulators judged that news that the FDIC was cut in half with bank failures in the headlines was hardly the way to stem panic, and put the hit on the bondholders instead. One may argue about the wisdom of that - it closed to bond market to many weaker banks, for example - but it was the FDIC's call, and JPM was merely its agent.
The special relationship the tinfoil nutters see between the Fed and firms like JPM and Goldman is simply the reliance of the authorities on *competence*. The regulators need certain things done and done rapidly and well, and they need men on top of the situation to execute for them. They don't rely on Jimmy Stewart at the corner S&L to liquidate $600 billion brokerage-banks in days.
-
Xantippa
-
4 Comments
Oct 07 11:54 AMShow me the numbers!
-
.*.
-
21 Comments
Oct 07 02:19 PM-
User 235322
-
9 Comments
Oct 07 07:24 PM-
dixie
-
49 Comments
Oct 07 11:37 PMJust who were the "other bidders" (if any)?
How was the bidding process conducted?
How much time elapsed? 5 minutes? 5 hours? a day?
This FDIC arranged wedding sounds fishy. Once JPM had WM's trousseau, the bride was tossed overboard. Take the gold and run!
-
User 275984
-
1 Comment
Oct 08 12:19 PM-
pockyclips 2020
-
154 Comments
Oct 09 08:17 AMThe way I remember the 1907 story, J.P. conspired to pump a little known stock that controlled access to the Chicago rail terminal out of spite. Just before the crash, the Chicago, Burlington, and Quincy was accounting for more than a third of the volume of the NYSE. This little railroad is now known as Burlington Northern Santa Fe, the largest railroad in the world, swallowing up Great Northern and the Santa Fe.
J.P was later called on to "rescue" the market. Funny how some things never change!
-
Truth08
-
3 Comments
My Website
Oct 09 12:48 PM-
christo
-
2 Comments
Oct 09 09:06 PMInteresting reading at:
www.engdahl.oilgeopoli...
-
philipmax
-
21 Comments
Nov 11 10:23 PMBy 1907 John Pierpont Morgan was the richest and most powerful Oligarch in the world. In the age of the Robber Barons, through J.P. Morgan & Company he had formed the most formidable array of industrial concentration imaginable. He controlled the US Steel Corporation, the largest entity on earth, as well as the American Telephone & Telegraph Company and General Electric Company and United Electric utility, which, together with Rockefeller’s Standard Oil Company and Vanderbilt’s Railroads controlled 95% of the industrial base of the United States.
For 75 years the SEC had a rule that prevented runs on companies’ stock by prohibiting the “naked short” sales (selling stock without possessing the borrowed shares) prevalent before the Depression. After the 1987 debacle, the exchanges instituted the up-tick rule (sale price of the target company’s stock must register a rise in its price immediately before the short sale is executed} that made programed short selling harder to execute. These tools were instituted as a safeguard against ruinous bear raids that could decimate viable companies in days.
Early this summer, without any outcry or demand by the public for change, the exchanges quickly and without fanfare eliminated both of these safeguards in a matter-of-fact fashion that barely elicited any comment.
In quick succession Bear Stearns was decimated in just days, and was quickly snapped up by JP Morgan. A few short months later Lehman Brothers was exterminated with great dispatch that lasted just days. And later that same week the Trillion Dollar giant A.I.G. was brought to its knees in just seventy two hours.
Within a week of this epic American tragedy, the “short rules” were re-instated with stringent “no short sale” list covering 1000 companies.
WOW!!!!!
I will patiently wait for JP Morgan Chase, Bank of America, Goldman Sachs & Co., or Warren Buffett to pick up the “nuggets” left behind by Lehman’s demise and the breakup of A.I.G.
Philip Max NY
The Federal Reserve Bank did not yet exist and the currency was directly linked to the gold and silver circulating in the economy. J.P. Morgan & Company was the at the spigot.
By 1907, US Steel was a huge juggernaut of vertically integrated interconnected companies that not only owned and controlled steel production but also vast tracts of natural resources, as well as, a bewildering network of railroads to transport the raw and finished products. With all the resources at its command, it nevertheless, found it necessary to covet the assets of the Tennessee Coal, Iron and Railroad Company, a small, yet strategic, company that would add another nugget to this vast enterprise. The problem was that the stock of this company was controlled by two New York entities who were reluctant to part with the stock.
Now, JP Morgan was a generous Plutocrat. He would ask the seller to name his price and rarely haggled as he stood to make even more millions by adding his percentage mark-up when he marketed securities to raise additional capital. When he asked Andrew Carnegie to name his price for his vast steel empire, Carnegie replied that $700 Million was the magic number and was delighted to find that Morgan promptly issued a check for that exact amount...only to be greatly distressed when Morgan told him that he was prepared to ante $1 Billion.
So, when Morgan approached the principals at Moore and Schley, a small stock brokerage firm that happened to own, together with the owners of the Trust Company of America, a dominating control of the Tennessee Coal Company, he expected to pay a high price. To his chagrin, they both refused to sell to him at any price.
The result was the” Panic of 07". JP Morgan & Company, through his agents, caused a run on the deposits at the Trust Company forcing it out of business. At the same time, he refused to extend credit and created a credit crunch that was particularly aimed at the customers of Moore and Schley forcing that company out business and in the process acquired the shares of Tennessee coal for pennies on a dollar.
Immediately after the fall of his “enemies” J.P. Morgan famously gathered his buddies to announce that the panic was over.
I retell this incident here because I have a strong suspicion that history is repeating itself on the Centennial of that fateful event.