Familiar Bedfellows

Frank Rich: Irving Picard, the special bankruptcy trustee for the Bernie Madoff estate, may yet prove to be the man who exposes Wall Street -- and in particular, JP Morgan Chase -- for their criminal (or at least actionable) misdeeds that created the financial crisis. And Jamie Dimon, Chase's CEO is "sick of" the "constant refrain" of people badmouthing bankers.

Here's my response to Rich's column:

There’s a good reason Bernie Madoff is the only financier doing time. Sen. Dick Durbin explained it back in April 2009 when he tried unsuccessfully, at the height of the financial crisis, to get mild bankruptcy reform through the Senate:

And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place.

 It is hardly surprising that the Congress is underfunding the S.E.C. – they don’t want the S.E.C. catching any big-time crooks. Those crooks are Congress’s bread-and-butter.

But the Congress needn’t have worried. Just as in the days when No One Would Listen to whistleblower Harry Markopolos, the S.E.C. is still pretty much sitting on its hands. Every once in a while, they nab some small-time (by Wall Street standards) crook in a $2,000 suit, but they keep their hands off the big boys. After all, the S.E.C. – in fact, all of the so-called “regulatory agencies” – are beholden to the crooks, too. Most of the high-ranking regulators come from Wall Street, and after they do their “public service” stint, they’ll be right back on the Street, raking in the big bucks.  Just yesterday, Eric Dash of the Times reported that "Joseph Jiampietro, one of the government’s top deal makers during the financial crisis, has joined Goldman Sachs as a senior investment banker covering the financial services industry...." Dash describes Jiampietro as the FDIC's "main liason to hedge funds and broader Wall Street community,” and he adds, “Mr. Jiampietro is the latest in a parade of top federal official to leave Washington for Wall Street." Prior to "his stint in Washington," Jiampietro was an investment banker. Do you really think Mr. Jiampietro's "stint in Washington" had anything to do with public service?

The chair of the S.E.C. – Mary Schapiro – has a long history as a regulator, beginning way back in the days when Ronald Reagan appointed her to sit on the S.E.C. You might think that would make her a tough cookie. Not really. Like the rest of her regulator colleagues, she’s in it for the dough. Back in 2008, her last year as head of the Financial Industry Regulatory Authority, Wall Street’s (ha ha ha) self-policing arm, Schapiro hauled in compensation of $3.3 million. According to Wikipedia, “on departure from FINRA, she received additional lump sum retirement benefit payments that brought her total package in 2008 to $8,985,334 (about the same as Goldman Sachs CEO Lloyd Blankfein made in that year.”

You might suppose that kind of payout would raise eyebrows in the Senate, which had to “advise & consent” to Schapiro's appointment to head the S.E.C. After all, the Senate regularly puts on hold for months or even years confirmation votes for minor appointments. But, no, in the wake of her big payoff and again during the height of the financial crisis, the Senate cleared Schapiro with a voice vote. The Senate in its wisdom Dr. Schapiro would follow that part of the Hippocratic Oath that reads “first, do not harm.” Just think of the great job Schapiro will get with all those marketable “on-the-job” skills she’s acquired at the S.E.C.

Which, to follow Frank’s structure, brings us back to Bernie Madoff. It is hardly surprising that Irving Picard is the prime mover in connecting the dots between Madoff and his enablers at JPMorgan Chase. Despite Mr. Markopolos’ many pleas to the S.E.C. and the extensive documentation he sent them, it wasn’t the S.E.C. that brought down Madoff. It was Madoff’s own sons who told the F.B.I. that their father was running a Ponzi scheme. Where was the S.E.C.? They had previously “investigated” Bernie Madoff. They didn't find a thing. They wouldn’t, would they?