As Don Corleone said to Bonasera in The Godfather’s iconic opening scene, “Some day, and that day may never come, I’ll ask a service of you.” For J.P. Morgan Chase CEO Jamie Dimon, that day has arrived. Alas, unlike a mafia don, Washington cannot be counted on to keep its word past the end of the next news cycle. Dimon and other Wall Street bankers would be wise to keep that in mind the next time regulators come around saying, “Nice too-big-to-fail bank ya got there. Shame if sumpin’ were to happen to it.”
Long-running negotiations between J.P. Morgan and the Chicago gang occupying Washington appear to be finally coming to a close. At stake is how much protection money the besieged bank will have to pay to resolve its legal and regulatory woes. An extra-judicial, extra-legislative “fine” of $11 billion is making the rounds in the press. That dwarfs prior multi-hundred million dollar payments, which turns out only served to whet Washington’s appetite.
If such a deal actually goes down, it’ll be the coup de grace to the already moribund rule of law in America. No charges. No trial. No evidence that could be evaluated by a judge or jury, much less the public. No clear indication of exactly which laws were broken and by whom. No list of fines prescribed by statute. Just fork over the cash and we’ll let you get back to business. After spending $18 billion in legal expenses since 2008, you can’t blame J. P. Morgan for seeking a deal.
Ominously, most of the “fine” will not be paid into the Treasury. Like local police forces that have profited handsomely from asset forfeiture, much of this money will flow directly into the budgets of the many agencies drawn to the struggling prey by the scent of blood in the water.
It’s not as if the too-big-to-fail banks didn’t ask for it. They surrendered their legal and moral authority to operate as independent entities when they accepted the poisoned chalice of the TARP bailout, and thus turned Washington into a silent partner. In a crowning achievement for cronyism, participants in this program were blessed with a deluge of funds from a Federal Reserve determined to stuff as much freshly printed money onto their balance sheets as possible, freeing up other capital to finance a return to the gaming tables.
Did Dimon and his fellow Wall Street CEOs really think Uncle Sam’s largess would come without a price? Do they really believe there is such a thing as a free lunch? Yes, the TARP money was shoved down his throat by a panicked administration trying to avoid shining a light on basket cases like AIG and Citigroup C -1.15%, but when caught between a rock and a hard place, he took the easy way out and chose not to fight. And Dimon and his Wall Street colleagues would be naïve to think this payment would be his last, and that regulators won’t use their power again to extract big payoffs.
The leverage for governing via selective prosecution was pioneered long ago by Lavrentiy Beria, chief of the Soviet Union’s NKVD. “Show me the man and I’ll find you the crime.” Who can deny that such a mechanism was at work when open season was declared on J. P. Morgan, a tempting target for dozens of agencies eager to stake a claim to the spoils? Demonized by economically illiterate populists like my own home state Senator, Elizabeth Warren, no bank can expect to get any comfort or support from public opinion. The looting of J. P. Morgan and the ultimate defenestration of its outspoken CEO will no doubt teach a lesson to the leaders of other TBTF banks who might dare speak their minds, as when Dimon criticized the excesses of Dodd-Frank.
Look for this shakedown to serve as a model as we move into the age of government byNon-Appropriated Funds Agencies, answerable to no one yet bankrolled by us all.