(NaturalNews) The pervasiveness of Wall Street corruption was laid bare at the outset of the Great Recession of 2009, when scores of banks and financial institutions were bailed out, compliments of the U.S. taxpayer. Hundreds of billions of dollars were doled out after most teetered on collapse because of bad investments and over-speculation driven in large part by a dangerous housing bubble.
More than four years after the government deemed many of these institutions "too big to fail," evidence continues to emerge suggesting that rather than the country failing these banks, these banks continue to fail the country.
Over-leveraged trading and the hiding of criminal behavior
From The New York Times' "Dealbook" section:
Government authorities are planning to arrest two former JPMorgan Chase employees suspected of masking the size of a multibillion-dollar trading loss, a dramatic turn in a case that tarnished the reputation of the nation's biggest bank and spotlighted the perils of Wall Street risk-taking.
The former employees, who worked in London, could be arrested in the coming days, according to people briefed on the matter. The action, the people said, would involve criminal fraud charges.
The paper said the employees, Javier Martin-Artajo, a manager who oversaw the trading strategy, and Julien Grout, a low-level trader in London, might eventually be extradited under an agreement with the British government.
The problem, according to unnamed sources who spoke to the paper on the condition of anonymity, is that the two suspects may be difficult to locate: British officials say they are actually natives of other European countries, and they could be hiding out there.
The Times reported that the FBI and the U.S. Attorney's office in Manhattan would not comment on the case; neither would a JPMorgan spokesman. Martin-Artajo's lawyer would not comment and an attorney for Grout couldn't be found.
More from the Times:
The plan to arrest the traders hints at an aggressive new stance from the government, which has come under fire for prosecuting only a few Wall Street employees tied to the 2008 financial crisis. Taking aim at employees of a Wall Street giant like JPMorgan, even when they fall below the executive ranks, could send a warning shot across the financial industry.
It would be about time.
Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program from 2008 until March 2011, defended the government's bailout of the banks. But he said the TARP program generally did not fulfill specific promises made to the American people and to key lawmakers who risked political careers to support it.
"The government has declared its mission accomplished, calling the program remarkably effective 'by any objective measure,'" he wrote in a column for the Times. "On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree. The bank bailout, more formally called the Troubled Asset Relief Program, failed to meet some of its most important goals."
More big bank misbehavior that cost billions
Specifically, Barofsky noted, the bailout not only allowed the guilty banks to survive and, in many cases, thrive, but homeowners got into trouble with mortgages on homes that were suddenly worth half or less than what they paid for them:
The act's emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.
But it has done little to abide by this legislative bargain. Almost immediately, as permitted by the broad language of the act, Treasury's plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation's largest financial institutions, a shift that came with the express promise that it would restore lending.
Martin-Artajo and Grout are accused of the same chicanery that was at the heart of the bank collapses. U.S. authorities say the hidden losses stem from over-leveraged wagers the traders made at the bank's primary investment office in London. They reportedly used derivatives - "complex financial contracts whose value is typically tied to an asset like corporate bonds" - to bet on how healthy companies like American Airlines would be.
When those trades went south last year, the bank lost more than $6 billion, according to JPMorgan officials.
In 2008, JPMorgan Chase received $25 billion in TARP bailout funds.
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