JPMorgan Chase admitted it is under investigation by the Justice Department over its hiring practices in Hong Kong, the latest in a string of federal probes and lawsuits against the bank that some believe is motivated by political payback.
Reuters reports that JPMorgan — the largest U.S. bank by assets — disclosed the investigation Friday as part of a routine filing with the Securities and Exchange Commission (SEC), which is also looking into alleged cronyism in the bank’s hiring process in China.
It’s the latest in bad news for JPMorgan, which agreed to pay a record-breaking $5.1 billion to the Federal Housing Finance Authority (FHFA) last week over toxic mortgage securities sold before the financial crisis. An additional $9 billion settlement over the same securities is in the works with the Department of Justice, putting the bank on the hook for an astounding $14.1 billion in penalties.
But although JPMorgan has been relentlessly targeted by federal investigators, its behavior isn’t much different from other American megabanks — including Goldman Sachs, which was largely spared by regulators.
According to critics, JPMorgan is being deliberately targeted due to CEO Jamie Dimon’s critique of the Obama administration’s economic policies before the 2012 election.
Once called President Obama’s “favorite banker” in 2009, Dimon had a falling-out with the president after blaming the stagnant American economy on the government’s failure to follow the Simpson-Bowles debt-reduction plan and accusing the Obama administration of a “constant attack on business.”
“I would call myself a ‘barely Democrat’ at this point,” he said in May 2012, just days before federal agents began looking into his bank.
In the most recent probe, investigators claim that JPMorgan routinely hires young, well-connected Chinese people in order to grease the wheels of important business deals in the country. The bank hired the son of the chairman of China Everbright Group, a massive state-owned financial conglomerate, earning a series of lucrative contracts soon afterward.
But the practice of foreign companies hiring Chinese “princelings” in return for business deals is not unusual. “For those familiar with the financial industry in China or Hong Kong, there really is no revelation here,” James Parker, a former Beijing-based financial analyst, told the Global Post. “The hiring of well-connected people is extremely common, and indeed considered necessary, and not just in the financial industry.”
Merrill Lynch and Morgan Stanley both put the children of high-ranking Communist Party officials on their payroll, while Goldman Sachs hired Hong Ning, the son-in-law of China’s anti-corruption chief.
There are also federal lawsuits on JPMorgan’s toxic mortgage securities. Eighty percent of the bad bonds were sold by Bear Stearns and Washington Mutual, two banks acquired by JPMorgan after their collapse in the wake of the financial crisis. Although banks are financially liable for the wrongdoing of their acquisitions, in 2008 the Bush administration urged JPMorgan to bail out the two banks in order to help stabilize America’s fragile financial markets.
“The decision now to prosecute JPMorgan because of activities undertaken by Bear Stearns before the takeover unfortunately fits the description of allowing no good deed to go unpunished,” said former Massachusetts Democratic Rep. Barney Frank — no friend of the banking industry — in 2012.
JPMorgan is hardly the only institution accused of massive mortgage fraud. A 2012 press release from the Senate Subcommittee on Investigations found that investment bank Goldman Sachs “created complex securities that included ‘junk’ from its own inventory that it wanted to get rid of . . . Its actions did immense harm to its clients, and helped create the financial crisis that nearly plunged us into a second Great Depression.”
But the Justice Department declined to prosecute Goldman Sachs, a move that prompted Senate Investigations chairman Carl Levin, a Michigan Democrat, to accuse the DOJ of “weak enforcement.”
Goldman Sachs was President Obama’s top donor in his 2008 campaign, and many of the bank’s executives enjoy close relations with the Obama White House. Last month the president nominated Goldman Sachs banker Bruce Heyman, an important contributor to his 2012 campaign, to be ambassador to Canada.
Some think this cozy relationship explains the disparity between Goldman and JPMorgan’s treatment by the government. The Wall Street Journal wrote that the Obama administration “prefers dependent banks that quietly accept their role as money pots to be raided when politics demands. Mr. Dimon keeps deviating from the Obama script.”
“This is about vindictiveness,” said financial analyst Charlie Gasparino on Fox News last week, “and it’s really bad for the American political system.”
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact firstname.lastname@example.org.