By week’s end, we could have two major settlements against Wall Street firms that will be touted as proof that President Obama means what he says — that the fats cats will be held responsible for their actions.
Don’t buy it.
The administration spin machine will make much of Monday’s settlement with SAC Capital, the giant hedge fund, and one nearly finalized with JP Morgan, the nation’s biggest bank.
But take a closer look, and both “victories” turn out to be more style than substance, with justice working about as well as the ObamaCare Web site.
The president’s not getting directly into the muck of propagandizing — at least not yet. On Monday, his hand-picked US attorney for the Southern District of New York, Preet Bharara, touted the guilty plea he squeezed out of SAC Capital, the hedge fund the feds want you to believe epitomizes Wall Street’s belief that greed is good.
The plea deal shuts down SAC Capital and forces its founder, Steve Cohen, to cough up a massive $1.8 billion fine to settle insider-trading charges. Bharara breathlessly described the payment as the “largest fine in the history of insider trading offenses” and an “appropriate price for the pervasive and unprecedented institutional misconduct that occurred here.”
Well, if you scratch the surface (or read the footnote to Bharara’s complaint), you see that the fine wasn’t all that unprecedented when put in the proper context.
First, Cohen will really pay a bit less than $1.2 billion, not $1.8 billion, since he got “credited” $616 million for a fine he paid in a separate deal with the Securities and Exchange Commission.
And, while SAC is shut down, Cohen himself hasn’t been indicted — despite all the bad stuff alleged against the fund (Bharara called it a “veritable magnet of market cheaters”). So Cohen could still technically start another hedge fund, assuming he beats back a pending SEC case that seeks to bar him from the securities business.
But why would Cohen even care to get back into the game? Even after paying all these fines, he’s still worth more than $8 billion, and can manage his own money and live more than comfortably indulging his penchant for trading high-price art for the rest of his life.
Give the Obama regulatory apparatus this much: While it came up short against Cohen, it has indicted a couple of his traders and many more lesser known players in a broader insider-trading crackdown. You can’t really say the same about the government’s ongoing assault against JP Morgan.
That affair could be somewhat resolved this week, with CEO Jamie Dimon agreeing to pay the Justice Department around $13 billion (final terms aren’t set) for alleged crimes involving the mortgage market that were committed by the bank during the run-up to the 2008 financial crisis.
But again a closer look shows this case to be one of the fishiest in the history of white-collar prosecutions. It was ramped up just when Dimon — a lifelong Democrat — started ramping up his critique of Obama economic policies, including the Dodd-Frank financial-reform law that he believed constrained bank lending and economic growth.
More important, many of the alleged crimes weren’t committed by JP Morgan at all, but by banks it took over at the behest of the feds during the 2008 meltdown. And the feds have identified a scant few real culprits at Morgan other than a couple of traders indicted as part of the unrelated “London Whale” trading fiasco.
JP Morgan officials hope to get the deal nailed down this week, but don’t count on it. This administration isn’t really looking for justice so much as for lots of publicity — in hopes of distracting people from the problems of that Web site.
Charles Gasparino is a Fox Business Network senior correspondent.