PAYBACK FOR BEN BERNANKE: Jamie Dimon Crushed By SEC Settlement

A couple of weeks ago, you’ll remember, Jamie Dimon ambushed Ben Bernanke at a press conference.

He was quickly pronounced a hero on Wall Street for protesting regulations that bankers insist are dangerous and untested. Yesterday, this head line came out: . For Bernanke, it was payback.

Dimon’s and others’ argument is that capital requirements are making it so that banks have to keep selling assets in order to stay within the requirements. As a result, it’s depressing prices and hurting the recovery, we’re told. (There are other reasons the regulations hurt banks’ business and we go into more detail about those here and here.)

But a recent settlement with the SEC — where JPMorgan will pay over $150 million to neither admit nor deny wrongdoing in its selling of CDO Squared, which was made up of assets that, like Goldman’s Abacus, were selected by a hedge fund that was betting that it would fail — undermines what Dimon said. It’s too bad because Dimon had a point.

The Wall Street Journal says:

When it comes to the settlement’s effect on his influence, the alleged fraudulent placement of the CDOs should damage the bank and Mr. Dimon’s reputation because of the conscious nature of the decisions…

[And] it isn’t just CDOs undermining Mr. Dimon. The bank has been accused of a multitude of financial-crisis sins including “robosigning” foreclosure paperwork and foreclosures on active military members.

In other words, the settlement JPMorgan will pay is like vindication for Ben Bernanke. 

Dimon’s question was, has Bernanke studied the effects of heavy regulations? And now the question is flipped back at Dimon. Has Dimon forgotten the effects of too little regulation? Is this why he’s against regulations? Because he wants it to be OK to mislead customers?

What’s even worse is something that the WSJ points out — it’s bolded below.

It’s bad enough that Mr. Dimon is publicly defending an industry whose missteps are apparent. It’s worse that the institution for which he’s responsible engaged in allegedly fraudulent practices. And it’s the ultimate insult to the public and investors that the company is trying to spin the settlement by suggesting anonymously that J.P. Morgan lost money in the deal, therefore it didn’t have an incentive to mislead investors.

Maybe this is why in Korea it’s illegal to manage a hedge funds’ assets and be it’s prime broker >

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