This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

5 Dumbest Things on Wall Street This Week

1. Bernie's Boneheaded Bankers

JPMorgan Chase (JPM - Get Report) was "dumb" in both senses of the word when it came to Bernie Madoff's Ponzi scheme. Like the rest of the financial world, JPMorgan Chase was "dumb," as in stupid, idiotic or silly, due to its inability to recognize the extent of the fraud Madoff was perpetuating in plain sight. In addition, the behemoth of a bank was "dumb," as in speechless, because it failed to pipe up when it did recognize that Bernie was up to some very bad things indeed.

Now Bernie's favorite bank is paying $2.6 billion in consequences for its dually dumb actions. And while many on Wall Street are decrying this latest multi-billion dollar settlement as yet another attempt by Uncle Sam to pick JPMorgan CEO Jamie Dimon's pocket for its own Madoff mismanagement, a quick read of U.S. Attorney Preet Bharara's statement reveals this really is justice at work.

As for the details, JPMorgan consented to a two-count criminal information, through which the Justice Department charged the bank with "failure to maintain an effective anti-money laundering program... and failure to file a suspicious activity report." JPMorgan agreed to pay $1.7 billion to the federal government as part of the agreement.

It also agreed to pay $350 million to the Office of the Comptroller of the Currency, its primary regulator, and also settled private lawsuits for $524 million, including a suit by Irving Picard, the court-appointed trustee seeking to resolve the claims of the victims of Madoff's Ponzi scheme. JPMorgan's shares fell over 1% to $58 on Tuesday in reaction to this latest settlement.

"We recognize we could have done a better job pulling together various pieces of information and concerns about Madoff from different parts of the bank over time. We filed a Suspicious Activity Reports (SAR) in the U.K. in late October 2008, but not in the U.S.," said the bank in a statement. "We do not believe that any JPMorgan Chase employee knowingly assisted Madoff's Ponzi scheme."

Oh, come on, guys. You shouldn't have mentioned that October 2008 report. That's just embarrassing considering JPMorgan served as "the primary bank through which Madoff ran his Ponzi scheme" since 1986, to borrow Preet's words.

Bharara added that "between 1986 and 2008, an astounding $150 billion went in and out of that account, and notably, none of it was used for the purpose and sale of securities, even though that was Madoff's stated business."

He also offered numerous other examples of warning signs to JPMorgan Chase that Madoff's business was a fraud, and he detailed the bank's actions to mitigate its risk from Madoff's scheme before it collapsed and became known to the public.

Look. We don't deny that in many cases JPMorgan is being forced to hand over billions for the mortgage sins of others, most notably those committed by Bear Stearns and Washington Mutual prior to Dimon's purchase of the pair at the height of the 2008 financial crisis. And we'll grant you that the government's "London Whale" witch hunt also reeks of fishiness.

JPMorgan's Madoff behavior stands apart from all that. And the bank is rightfully paying up for its dumbness, however you define it.

-- Written by Gregg Greenberg in New York

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
5 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
GIS $53.79 0.00%
GT $26.73 0.00%
JCP $8.50 0.00%
JPM $61.28 0.00%
SCSS $32.10 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs