November 8th, 2014
Econintersect: This could have been an item in our daily column "What We Read Today" but it deserves more visibility. The occasion has two remarkable features: Matt Taibi returning from an unproductive sojourn at First Look Media and the disclosure of what Taibbi calls "a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption." The story concerns a key witness for the recent banking fraud settlement between JP Morgan Chase (JPM) and the U.S. Department of Justice (DoJ) who was kept in the shadows by reaching a settlement and avoiding a trial.
The individual interviewed by Taibbi is a securities lawyer, Alayne Fleischmann, who reported to her superiors in 2006 that blatantly defective mortgages were being packaged into "above subprime" packages of MBS (mortgage backed securities). Nothing happened. The MBS were sold and added to the toxic asset burden that became the GFC (Great Financial Crisis). Fleischmann became one of the key witnesses in the DoJ case against JPM.
Not only did her damaging testimony avoid being presented in a public forum, as it would have been had the case gone to trial, but the settlement between JPM and DoJ stipulates that the evidence is sealed by the final agreement. In other words, according to Taibbi: "The root bargain in these deals was cash for secrecy."
From the article:
She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. "Every time I had a chance to talk, something always got in the way," Fleischmann says.
Fleischmann has decided to give the interview reported in this article because she feels not to speak out would be "like watching an old lady get mugged on the street". She says she thought, "I can't sit by any longer".
So Fleischmann has decided to violate a confidentiality agreement and become a public whistleblower. She is doing so at considerable risk. In her own words:
"I could be sued into bankruptcy. I could lose my license to practice law. I could lose everything. But if we don't start speaking up, then this really is all we're going to get: the biggest financial cover-up in history."
- The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare (Matt Taibbi, Rolling Stone, 06 November 2014)
- Matt Taibbi On Leaving First Look Media: ‘I Am Sad That It Didn't Work Out (Jackson Connor, The Huffington Post, 07 November 2014)
- JP Morgan: 13 is an Unlucky Number (GEI News, 20 and 23 October 2013)