JP Morgan has a lot of explaining to do

In comments to this post but more fully explained on his own site, Richard Murphy holds out great hope for the global reform of the tax system. He believes:

It will be hard for Obama not to deliver on some things

Throughout the campaign he has focussed on tax havens. He has his name on the Stop Tax Haven Abuse Act. These places are key to the bank’s business model, and that of the Big 4 come to that. If he delivers (and the public mood is right) then he will change finance, forever.

Richard sees a tide of change rising and given all the signs, I hope he is right. But consider this: JP Morgan last week announced that it is prepared to halt foreclosures and renegotiate a swathe of toxic debt:

JPMorgan has avoided the large writedowns and credit losses posted by rival banks because it has limited exposure to the riskier classes of mortgages, such as subprime loans.

But when the bank acquired failed savings and loan Washington Mutual in September, it inherited that bank’s more toxic mortgages.

The expansion of the mortgage modification plan will target many of these mortgages, as well as prime mortgages held by JPMorgan that are also starting to show signs of deterioration…

JPMorgan has about $250 billion of prime mortgages and home equity loans, $27 billion in subprime mortgages and about $51 billion of “option” adjustable-rate mortgages…

JPMorgan expects to renegotiate $70 billion of mortgages over two years, in addition to $40 billion held by 250,000 borrowers since early last year.

The program covers borrowers who live in their homes and who “show a willingness to pay,” the bank said.

[My emphasis added.]

For those unsure, this means that JP Morgan has virtually ZERO effective risk because come what may, people will pay. How did this happen given that JP Morgan – almost alone among the investment banking community – has come out almost completely unscathed and more powerful than ever?

For one possible explanation, you have to look back at JP Morgan’s history. It is believed that in 1907, JP Morgan orchestrated a run on certain banks in an effort to consolidate its position and advance the case for creating a central bank, the privately owned and almost unaccountable Fed. And who’s a big wheel in that organization? You guessed it: JP Morgan. While at the last link, check out the other connections to well known companies in the oil industry…and from there think Iraq…

The Fed takes interest on the money it loans which comes from…taxpayers. All a virtuous circle when you think about it.

As a final tidbit: who is JP Morgan’s auditor of record? PWC. (It had to be.)

JP Morgan will have had a special insight into the unfolding subprime crisis if not a strategy to avoid too much exposure. After all, it has a history of manipulation upon which to draw. The financial crisis simply represented the next logical step in its quest for greater power. That’s one theory but not totally implausible. Regardless, we now have an outcome where JP Morgan Chase is now America’s largest bank, having leapfrogged over everyone.

With this century old (and more) history of financial supremacy and control, just how far does anyone realistically think that the incoming president will get in bringing tax havens into line? In order to do that, you’ve got to bring the financial system into line. That means breaking the power of the likes of JP Morgan.

As a historical footnote, it is said that the spark for the American War of Independence was the refusal by the British to allow the American colonies from issuing their own currency at zero interest. The US Founding Fathers knew a central bank that charged interest would lead to perpetual and increasing debt. A situation not dissimilar to that which exists today in the US.

Plenty more in the Zemanta supplied links below

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Tagged as: Adjustable rate mortgage, JPMorgan Chase, Subprime lending, Washington Mutual