CONFIRMED AT LAST: The attempted cover-up of how JP Morgan torpedoed Lehman Brothers

As an early propagator of the allegation that JP Morgan Chase deliberately hastened the Lehman collapse, the Slog finds itself vindicated three years on by a successful regulator action against JPM, and contemporary documentation.

“And then when you have the suckers by the balls, you squeeze just like this”

Around the time of the Lehman disaster, a senior insider at the firm relayed to me what seemed an astonishing allegation: that in the weeks prior to the eventual collapse, JP Morgan deliberately withheld huge monies owed to Lehman in order to make the bankruptcy a certainty from which they could benefit. I relayed this story to another contact the following year, and he not only corroborated the charge, he also said he was sure Barclays had done the same. The now disgraced Barclays CEO Bob Diamond took over Lehman in a fire sale only weeks later (using taxpayers’ money as a bridging loan to do it) and rapidly built up a commanding position for the division he then headed up, Barcap  – the investment arm of the bank.

Now, more than three years later, regulators have penalised JPMorgan for actions tied to Lehman’s demise. The bank settled the Lehman matter and agreed to pay a fine of approximately $20 million. The action took place because of Morgan’s ‘questionable treatment of [Lehman] customer money’: regulators accused JPMorgan of withholding Lehman customer funds for nearly two weeks. So it had been true after all.

Jamie Dimon’s Morgan Chase dodged and dived on this one for three years in an attempt to smooth over the tracks.  As late as April this year, the Pirate insisted that the ‘monies involved were small’: but that doesn’t tally with this Wall Street Journal snippet from the time as follows:

‘Lehman Brothers Holdings Inc., the securities firm that filed the biggest bankruptcy in history yesterday, was advanced $138 billion this week by JPMorgan Chase & Co. to settle Lehman trades and keep financial markets stable, according to a court filing.’

Advancing cash to keep the markets stable is simply double-talk bollocks: many observers are sure this was the Lehman trades money withheld by JPM. The Lehman administrators continued to air their grievances about it, and in late May 2010 the bankruptcy estate of Lehman Brothers Holdings, Inc. filed suit against JPMorgan Chase, alleging that JPMorgan’s actions in the weeks preceding bankruptcy were wrongful. The claims arose from amendments and supplements to the Clearance Agreement between Lehman and JPMorgan in the weeks immediately preceding the bankruptcy. (In a nutshell, JPM changed the terms without notice to include onerous requirements for massive collateral against giving Lehman its own money back – a form of crooked logic that only a banker could construct. The weight of this collateral requirement on already serious debts took Lehman Brothers from intensive care to the Pearly Gates).

Just before this suit was filed, I took a small risk by including in a Slogpost of 13th March 2010 the phrase ‘former Lehman employees rendered jobless by management hubris and JP Morgan’. Now the full extent of the cannibalism indulged in by Morgan has come to light…although Barcap’s  role remains in a murky penumbra somewhere. But typically, by coughing up twenty million bucks to the Federal Government, the predatory Morgan Chase has got away with ‘not admitting guilt’. Disgraceful. Think of it this way: $20m to ice a major competitor…that has to be the bargain of the decade.

A few more extracts from the 2010 Slogpost make interesting reading today:

‘The top-ranking British law practice Linklaters signed off on controversial accounting practices that let Lehman Brothers shift billions of dollars of debt off its balance sheet. This masked the perilous state of the bank’s finances, and for many years misled both investors and regulators….Not only has crooked dealing been a clear and present carbuncle on the City’s reputation for decades, ancillary professional concerns have long been up to their necks in illegal collusion in such activities….Time and again, accusations of wrongdoing are met with appalled sanctimony by those routinely involved in serious misdeeds….only to result in even worse revelations…..And equally, the sentences handed out to miscreants justifiably evoke cries of ‘one law for the rich and another for the poor’.’

Well, nothing changes. And not much changed in Morgan the Pirate’s behaviour either: on 20th May 2009, so a CNBC story claimed, Washington Mutual (Wamu) sought billions in damages following its acquisition by Morgan Chase, via a class action suit littered with phrases like ‘far below market value’, ‘premeditated plan’, ‘designed to damage’, ‘purchase…on the cheap’, ‘wrongful conduct’, ‘sham negotiations’, ‘misusing confidential information’, ‘violation of confidentiality agreement’, ‘unfair advantage’, and ‘fire sale prices’. Nothing to see there, then. On June 24th last year, an Appeals Court revived the action – whch clearly has some merit. As far as I know, it continues to rumble on today, to the benefit of lawyers….just for a change.

Hat-tip to US Slogger Butch Cassidy for alerting me to progress on the original Lehman scam. If anyone has anything substantial on Diamond Bob’s role in it, the address as always is

News update: From eurozone to euroblown: IMF, Moody’s downgrade euro to Twilight Zone

Poscript: when I suggested in a 2007 edition of the magazine Market Leader that robust Lehman results hid an overdependence on merger and acquisition business, I did not for a second suspect wrongdoing – only myopia. But I can promise you, no editor has ever received such a level of vitriol from Lehmans and others in the sector – coupled with bullying threats of legal action, and accusations of dangerous naivety on my part. It must rank as one of luckiest unintentional scoops of all time.

46 thoughts on “CONFIRMED AT LAST: The attempted cover-up of how JP Morgan torpedoed Lehman Brothers

  1. This practise is come even in this country a young trainee accountant in the 1980,was called into his managers office & told not to pay a £1m bill to a company,one week later the company went bust 100 people losing their jobs, Banks forced the closer charging the company large fees for exceeding limit


  2. Well done, JW.

    However, as you may yourself be beginning to realize, the likes of Bob Diamond aren’t so much interested in their career, but in the money they take home at the end of the day. They aren’t interested in what the media or bloggosphere say any longer, they are effectively neutered along with the electorates of the US and UK.

    The German electorate is asleep, the Dutch electorate don’t care and the French electorate are all putting the world to rights in cafes along the Rive Gauche. In short, nobody is taking any notice.

    Waffle is not going to help here. Anyone who knows me, knows that I do a little more than waffle. There are things that can be done – and done by anyone with a little inventiveness. Like this guy in Miami, who took things perhaps a little too far by hanging out a suited dummy.

    It is the sort of thing that should be done for the Monday morning rush-hour somewhere out on the M3 or M4 into London. KFC, are you up to doing anything? BT perhaps? Or one of the now many trolls could use what little imagination they have and be able to copy what this guy did. After all, copying doesn’t take much in the way of imagination or intelligence, does it now? In that respect they are a little like Bankers themselves, parasitic.

    Oh, and if you want to know where the next bankers are coming from, click my name and find out!! (For some reason you can’t post two links in these comments).


  3. GOSH

    When I google your name i get smulch zero.
    I thought that an important figure (42-36-38) as yourself would yield thousands of results…

    How did your budgiesmuggler bikini fit?
    Don’t forget the gillette, more ladylike…..


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  5. @Troll #35 (The real Gemz)
    (Off Topic).
    When you Google my name the intention was to get smulch zero, dork!

    There is a little tale about Trolls on my other blog. Something about them choosing colours … something Troll #35 seems to have difficulty with!

    The real Gemz “Duh! It’s all brown. Cor, lumme! Even I can choose between brown … and brown”
    … read more …

    Now: what happens if I should change my Gravatar again? Will you do the same? Such deep imagination, such wit. Perhaps if I make it brown this time, you will choose to keep it? It would save you a lot of difficult decisisons!


  6. Mr Ward
    (Off Topic)

    The Slog’s house rules – viz, no obscenity….or personal attacks based on zero evidence. This is a self-completing virtuous circle of a house rule, as it preselects trolls and then enables me to ban them.

    How did your budgiesmuggler bikini fit?
    Don’t forget the gillette, more ladylike…..

    “Personal attack based on zero evidence”

    Time to stand up for what you say? Or is it just a little boyish fun on the part of Troll #35? Of course, it is funny, innit?


  7. Pingback: CONFIRMED AT LAST: The attempted cover-up of how JP Morgan torpedoed Lehman Brothers [TheSlog] « Mktgeist blog

  8. There date with destiny is still to come,the awaken has started,still more need to understand,see the bigger picture & timing but fear not


  9. @Matt: Thanks for the ZH hat-tip.
    Perhaps the most worrying aspect of that report is that it describes quite realistically what can and may be happening already step-by-step. Some people may argue that we are already on the road to it and – despite being the perps of this growing mess – the political elites are out of their depth and don’t have a clue how to deal with it and are simply papering over the widening cracks that keep appearing. I would argue that the time for effective action to correct the mess may have already passed and whatever actions they now take, we will suffer some sort of economic/societal armageddon. It’s surely a frightening prospect and will almost certainly usher in a collapse in democracy as we know it.


  10. Lehman’s is old hat. What are the authorities going to do about JPM’s outrageous sequestering of over $1 billion of customer funds in supposedly sequestered accounts from MF Global forcing it into bankruptcy and the account holders into substantial losses – virtually 100 per cent in London. Not to mention their rigging of the silver futures market with their naked short selling. J Pierpont would be turning in his grave, the WASPS have kicked out of the House of Morgan and the barbarians have taken over and they are in bed with the regulators and the politicians..Markets are dead but manipulation thrives everywhere.


  11. Yup, it’s certainly hard to know how we could possibly prepare for such an event, short of buying a farm – which is, so I am led to believe, precisely what a not insignificant number of financial types did with their bonus money over the last few years…


  12. JPM is at the rotten crooked heart of everything and as the Treasury’s banker that does make them seem so clean and pure either. I’m shocked, shocked that there is evil at the head and the heart of finance. As they said about the 1919 Blacksox ‘Joe, say it ain’t so’.


  13. Actually, I find it creepy and slightly sickening.
    I really think John should do something about it, and cannot understand why he has not done so.


    Paul Craig Roberts and former Goldman managing director contend interest rates are being driven to ridiculously low levels by dealers selling interest rates short though derivatives which accords with Bernancke’s desire for negative real interest rates as a stimulatory measure. The jig must be close to an end in that game. They will be lucky to hold it together after election day as the fiscal cliff approaches and the world gets sceptical about the dollar again. It could happen sooner but when the mood changes there will be real blood on the floor.


  15. Sebastian,
    I suppose it is funny when a banker steals your pension? Or a journalist is untruthful?

    You do have an odd sense of humour …


  16. Bellevue



    Think for one moment. The Slog is all about fraudsers, bankers and all things rotting and horrid across Europe and the US – yet JW allows it to happen right under is nose and he doesn’t even smell it.


  17. Ghost,
    the biggest problem is that most of humanity do not understand and won’t wake up even when faced with death. They will simply wonder how it all went so wrong, but of course won’t be in any way guilty of doing anything wrong … whatsoever.


  18. Gemz, it pricks your self-regard. That’s funny. Your use of phrases like “anyone who knows me” etc is intrinsically funny…. you’re just another unknown commenter on a blog. It’s like the Skibbereen Eagle informing the Kaiser that its eyes are upon him, or the wilder excesses of E.L. Wisty. So when the unreal upside-down Gemz takes the Michael Bliss, it’s funny.

    But I was forgetting. You’re German, aren’t you? No sense of humour at all.

    Dishonest journalists? Surely not?

    You cannot hope to bribe or twist
    Thank god, the British journalist
    But seeing what the man will do
    Unbribed, there’s no occasion to


  19. Sebastian

    Thankyou for the journalistic witticism. The hat fits, does it not?

    Think about what I said though; there are those who know me – or at least some of my character. That is the sort of thing I was alluding to. That you say “But I was forgetting. You’re German, aren’t you?” does mean that you don’t know even the little that you could know.


  20. Matt: The reason they are buying farms and running them as such is that they are business assets so there are tax advantages, I have been selling to them, and buying gold/silver, not certain that right choice but diversification. Without them there would be little farming going on in the marginal regions. Also how short of money will the treasury need to get before there is a land Tax? a’ la French.


  21. JW,

    Did you read last week the article in which an ex-Barclays director, Taylor, regretted not sacking Bob Diamond in 1998 when large losses occurred (unfortunately not quantified) at their Russian desk of which the said Diamond was then head (by the way as a defence apparently the Bob declared his ‘love of Barclays’ and that he had no knowledge of the problem, now where have we heard that defence?)?

    Sorry I can not remember the source of the article (I have been in amnesia mode rather too often lately–it should make me a highly valuable addition to the ranks of financial organisation directors whenever a vacancy occurs).


  22. Alter G

    I am quite sure that in the circumstances, Mr. Diamond would have held enough against any Barclay’s employee that he could retain his position. Bankers are, after all, bankers. They display a lack of ethics, and as with these things, it runs through them like the letters through a stick of seaside rock. I could easily see that a “quiet chat” would have seen the figures massaged (or in this case, simply “lost”) and Mr Diamond retained.

    As to your faculty of forgetting, you are not alone. Any copywriter worth their salt has a “snatch file” where they keep witty aphorisms and suchlike. I would suggest making a Word document and giving a very brief description with a link to the article. A search using your computer for the “file contains the word” (not just the file’s title) will retrieve your article, along with with associated ones in very short order. You can keep these in any obscure folder you choose, as with the search function it matters little where the files are kept. My snatch files run to several Mbs which will give you some idea of my own amnesia!


  23. BTW we have too few of the “Print And Be Damned” leaders today. They are all running scared of anything leaking out whatsoever – at least in the (public) circles that matter. I am sure that the likes of Diamond have file upon file of dirt on their closest friends, just in case things take a turn.

    It is not a world for the unready. You are well out of it.


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