By Amy Goodman and Juan González, Democracy NOW!
07 November 14
UAN GONZÁLEZ:
A year ago this month, the Justice Department announced the banking
giant JPMorgan Chase would avoid criminal charges by agreeing to pay $13
billion to settle claims that it had routinely overstated the quality
of mortgages it was selling to investors. When the toxic mortgage
securities started turning bad, investors lost faith in the banking
system, and a housing crisis turned into the 2008 financial crisis that
led to millions of home foreclosures. New York Attorney General Eric
Schneiderman unveiled the settlement last November.
ATTORNEY GENERAL ERIC SCHNEIDERMAN: Not
only will Chase have to pay the largest settlement ever levied against a
financial institution, but it has admitted in our statement of facts
that its own employees, employees of Bear Stearns and employees of
Washington Mutual made material misrepresentations to the investing
public about a large number of residential mortgage-backed securities
that they issued prior to the crash in 2008. This settlement is a major
victory in the fight to hold accountable those who were responsible for
that crash.
AMY GOODMAN: Soon after the JPMorgan
Chase deal was reached, U.S. Attorney General Eric Holder discussed the
bank’s misdeeds during an interview with NBC News’ Pete Williams.
ATTORNEY GENERAL ERIC HOLDER: It packaged
loans that it knew did not pass its own stated due diligence test. We
have a whistleblower who indicated that she expressed concerns about
what the strength of these mortgage-backed securities were, and they put
them out there to the market and said that they were perfectly fine,
when in fact they were not.
PETE WILLIAMS: So, to be clear, you’re saying that JPMorgan’s conduct here contributed to the housing collapse?
ATTORNEY GENERAL ERIC HOLDER:
Not only the conduct of JPMorgan, it was the conduct of other banks
doing similar kinds of things that led directly to the collapse of our
economy in 2008 and in 2009.
JUAN GONZÁLEZ: During that interview,
Attorney General Eric Holder mentioned the role of an unnamed
whistleblower from JPMorgan Chase who aided the Justice Department’s
case against the bank. Well, until this week, that whistleblower, Alayne
Fleischmann, a securities lawyer who worked for JPMorgan, had never
spoken publicly about what she witnessed inside the bank. That changed
yesterday when Rolling Stone magazine published a major new piece by
Matt Taibbi headlined "The $9 Billion Witness: Meet the woman JPMorgan
Chase paid one of the largest fines in American history to keep from
talking."
AMY GOODMAN: In the article, Alayne
Fleischmann criticizes not only JPMorgan’s banking practices, but how
government regulators at the Holder Justice Department responded to the
bank’s lawbreaking. Today, in her first televised interview, Alayne
Fleischmann joins us here on Democracy Now!, along with Matt Taibbi, who
has closely covered the financial crisis for years. His latest book,
Divide: American Injustice in the Age of the Wealth Gap, has just come
out in paperback.
And we welcome you both to Democracy Now! for the hour.
MATT TAIBBI: Thanks for having us on.
AMY GOODMAN: So, Alayne Fleischmann, start at the beginning. Why did you decide to come forward? And how did you end up at Chase?
ALAYNE FLEISCHMANN: Sure. For a long
time, I was expecting it to come out. I’ve been talking to the
government for two-and-a-half years now. And first it went through the
SEC. Then it went through the Civil Division of the DOJ. And at some
stage after watching all of these major banks have deals that actually
the facts get wiped away, I started to feel that if I don’t come
forward, there’s a real chance of that happening here, too.
In terms of JPMorgan Chase, I started there in March
2006 at sort of the height of the boom. When I started, everything
seemed normal. I didn’t really realize some of the things that were
happening in the background. And then things started to change in about
May, a couple months after I had been there.
JUAN GONZÁLEZ: Well, what—when you
went to work there, what specifically was your job? And if you could
walk us through how you began to realize the huge problem that the bank
was a part of?
ALAYNE FLEISCHMANN: Sure. I started
as what they call a deal manager. Basically, we coordinate between all
these different groups when we’re bringing in these loans, that are then
going to be sold to investors. I first noticed that there was a problem
when they brought in a new person to do our diligence, which is just
the review of the loans themselves to make sure they’re of good quality.
As soon as he came in, we suddenly—this wall sort of came down between
myself and the group that was doing this review, and you couldn’t get
information that you would normally get. On top of that, there was
immediately a sort of a no-email policy. He wouldn’t send emails, and we
weren’t allowed to send him emails. He would actually come out and yell
at you if you sent him an email.
AMY GOODMAN: What was the reason?
ALAYNE FLEISCHMANN: It was never
given, which was extremely worrisome, because normally the reason why
you have a compliance and diligence department is to actually have
written policies about what you’re doing, to be able to explain to
people how you’re making your decisions. So it’s exactly the opposite of
what you would normally expect.
JUAN GONZÁLEZ: And when you say to review the quality of the loans, if you could—
ALAYNE FLEISCHMANN: Sure, yes.
JUAN GONZÁLEZ: —for people who are
not aware—you were, in essence, certifying that these individual loans
could be packaged into a group of securities to then be sold to
investors in a huge package, right? But you had to go through every
individual loan? Was that—
ALAYNE FLEISCHMANN: Yeah, that’s
pretty much what happens. It’s really that you’re taking the actual loan
files, that was done between the lender and the borrower, and looking
at them to make sure everything looks right. Does this person have
enough money to pay off their loan? Do they have the sort of history
where we think that they’re going to pay this loan? And if we find that
they don’t, then we’re actually not supposed to purchase the loans, and
certainly shouldn’t be selling them to other investors without at least
telling them there’s something wrong with them.
AMY GOODMAN: And so, what was the smoking gun for you?
ALAYNE FLEISCHMANN: Everything
about—what really started happening—in particular, it became apparent in
October—was that sometimes we had deals coming in where even though I
wasn’t even the person looking at the loans, you could tell from where I
was that something was wrong with them. The GreenPoint deal, which is
what Matt talks about in his article, even when the loans came in, they
were very, very old, which usually you try to actually pull these loans
and sell them within two to three months—these loans were going back to
close to the beginning of the year. If you work in the industry, you
know immediately what that means, is either they couldn’t sell them,
because the buyers were telling them they weren’t any good, or, even
worse, they’d been sold and then had missed a bunch of payments, so they
had actually been sold back to the originator. Any of those loans you
wouldn’t normally sell to investors as regular loans.
JUAN GONZÁLEZ: Now, Matt, you’ve referred in your article to these loans as basically selling old, beat-up used cars—
MATT TAIBBI: Right.
JUAN GONZÁLEZ: —as if they were new. Could you explain that?
MATT TAIBBI: Yeah, that’s exactly
what Alayne is talking about. Essentially, what the bank was doing was
they—you know, there are companies out there, these mortgage lenders,
like a company that might be familiar to people is, like, Countrywide—in
this case, it was an originator called GreenPoint—they would go out
into neighborhoods, and during this boom period, they were giving
mortgages to anybody and everybody with a pulse, essentially. They were
especially low-income neighborhoods. They were offering these very
advantageous loans to people, whether they could afford the houses or
not. They were buying huge masses of these loans. And then they were—
JUAN GONZÁLEZ: They were called like
"liar’s loans," or stated income where no one even checked whether the
person had the income to actually pay it off.
MATT TAIBBI: That’s exactly right.
That’s exactly right. That was the verbiage, "liar’s loans." The FBI
warned that there was going to be an epidemic of these liar’s loans way
back in 2004. The industry ignored these warnings. The government
ignored these warnings. And there was this huge influx of these stated
income loans, where people could just say that they made an enormous
amount of money, and nobody would check.
So the bank buys all these loans, and then what they
were doing is essentially throwing them into big pools, making hamburger
out of them, and then selling that hamburger to pension funds,
insurance companies, hedge funds, all kinds of investors. Typically
ordinary people were the people on the other end buying this stuff. They
were investing in these securities, and often they didn’t even know it.
What Alayne was involved with was making sure that
these loans were of good quality, so that pension funds, when they
bought these securities, weren’t buying something that was going to blow
up on them a year later. And what she found was that they were buying
loans that were of very dubious quality, that were extremely risky, and
that should not have been made into that hamburger.
AMY GOODMAN: We’re going to break,
and when we come back, we want to find out what happened when you went
to your colleagues, your superiors, and then went outside the company to
the U.S. government, right on up to Eric Holder and the Obama
administration. Today, a Democracy Now! broadcast exclusive, Alayne
Fleischmann is with us, the JPMorgan Chase whistleblower, speaking for
the first time about her experience as deal manager at JPMorgan, where
she says she witnessed "massive criminal securities fraud" in the bank’s
mortgage operations during the period leading up to the financial
crisis. And Matt Taibbi is with us, award-winning journalist, now back
with Rolling Stone magazine, his latest piece headlined "The $9 Billion
Witness." Stay with us.
AMY GOODMAN: We’re speaking to
JPMorgan Chase whistleblower Alayne Fleischmann and reporter Matt
Taibbi. His latest piece, "The $9 Billion Witness: Meet the woman
JPMorgan Chase paid one of the largest fines in American history to keep
from talking." Last November, Attorney General Eric Holder appeared on
NBC News just after the JPMorgan Chase settlement was reached. He was
questioned by NBC’s Pete Williams.
PETE WILLIAMS: What about those who say, "Well, the message here is, if you do wrong, you just pay for it and move along"?
ATTORNEY GENERAL ERIC HOLDER:
This was not simply something that JPMorgan simply signed a check and
smilingly said, "This is a good deal for us." This inflicts pain on that
institution.
PETE WILLIAMS: But is this, in essence, a sort of template? We can expect to see other settlements now?
ATTORNEY GENERAL ERIC HOLDER:
I certainly think that the way in which this case has been settled is a
template of what we can expect, both in terms of getting maximum
amounts of money and then using that money so that we get it to people
who suffer the greatest amount—that is, either investors or homeowners.
AMY GOODMAN: That’s Attorney General
Eric Holder. Alayne Fleischmann, let’s take it back a step. When you
started to alert your colleagues and your supervisors at JPMorgan Chase,
what did they say?
ALAYNE FLEISCHMANN: Well, what
happened was the transaction, at one point, just stopped. It turned out
that 40 percent of the loans in this deal had problems with them. When
we tried raising this issue with our superiors, what actually happened
is they just started yelling at the diligence managers who were clearing
the loans, sort of yelling, berating them, making them do reports over
and over again. And it became clear that, although they wouldn’t say it,
it was going to be like that until they would clear the loans. So what
actually happened is these loans started being cleared, but basically
just by sort of the brute force of what was going on there.
I raised it first with a managing director and an
executive director, and couldn’t get any response. After that, I decided
the best possibility would be to write a letter to another managing
director that actually laid out everything I was seeing. I used the
GreenPoint deal as an example, which is why the letter specifically says
exactly who was doing what all over this deal. But it also lays out
general problems in our diligence that the salespeople were being
involved, which isn’t normal, and that there seemed to be a lot of
pressure on diligence managers to clear loans that shouldn’t have been
purchased or sold.
JUAN GONZÁLEZ: And the importance of putting it down in a—
ALAYNE FLEISCHMANN: Yeah.
JUAN GONZÁLEZ: —putting all the facts down in a letter, what that meant inside the company?
ALAYNE FLEISCHMANN: Yeah. Well, what
it used to be is that the way that you could stop these things from
happening was, if you write a memo that lays out what’s happening, the
management won’t go forward, because they realize that if they do,
there’s going to be this evidence of what happened.
JUAN GONZÁLEZ: There’s going to be a paper trail of the—mm-hmm.
ALAYNE FLEISCHMANN: Yeah. The big
worry with these settlements and the way they’re being done—and I’m not
the only whistleblower in these cases—is that you have these emails and
these memos, but nothing happens. A fine gets paid, and then all of the
facts and who did what gets washed away. So, as a whistleblower, you’re
thinking, "I did all of this, and the DOJ has all of this, but for some
reason they’re not going forward on it."
AMY GOODMAN: So, what happened when you went outside the company? How did you go outside?
ALAYNE FLEISCHMANN: Well, one issue I
had is that although I warned not to securitize the loans, there was no
way—I was blocked off, especially after I had raised complaints, from
being able to see any of the data or the diligence process, which right
there shows that something was wrong. So, after I left JPMorgan, I
actually had no idea, for a full four years, that the loans had been
securitized. On one hand, I was worried they would, but I really thought
no one would ever actually securitize those loans.
MATT TAIBBI: This is an important distinction—
ALAYNE FLEISCHMANN: Yeah.
MATT TAIBBI: —because Alayne had no
idea that a crime had been committed until she had concrete knowledge
that the loans had actually been resold to somebody else. They’re
certainly allowed to buy as many bad loans and as many risky mortgages
as they want. It’s not until they go to some investor and represent to
them that these are, you know, AAA-rated securities or whatever, or
highly rated securities, that they’re actually committing fraud. And so,
she had no way of knowing that. Even after she was laid off from the
company, she had no knowledge of what actually happened. So she couldn’t
actually report the crime yet, because she only saw one half of the
deal.
JUAN GONZÁLEZ: And you were laid off in—at the beginning of 2008, right?
ALAYNE FLEISCHMANN: Eight, yeah.
JUAN GONZÁLEZ: Yeah, actually before the crash. Already there was turmoil—
ALAYNE FLEISCHMANN: Yeah.
JUAN GONZÁLEZ: —in the home loan market, but there was not—the crash had not happened.
ALAYNE FLEISCHMANN: Right.
JUAN GONZÁLEZ: And so that the bank,
when Jamie Dimon and other leaders later said that they had no
realization that the market was tanking as fast as it could, at least
your memos were certainly indicating to them that there were major
problems in their portfolios.
MATT TAIBBI: Well, what’s funny is
they actually said two completely opposite things. There was an article
in Fortune magazine later in 2008 in which they report that Jamie Dimon,
the CEO of the company, knew as early as October of 2006 that the
industry was rife with underwriting problems, all the things that Alayne
is talking about. The company was aware of this, and there are quotes
in which the CEO is telling his subordinates, "We’ve got to get out of
these investments, because this whole thing can go up in smoke." And
then, meanwhile, so Chase is selling its own investments in these kinds
of mortgages, but they’re taking these same mortgages and selling them
to investors and not telling them that they have these concerns. Later,
when they testify in front of the Financial Crisis Inquiry Commission in
2010, Dimon said exactly the opposite. He said, essentially, "Well, we
had no idea that these things were happening. We got caught up in the
fact that housing prices were just going continually upward."
AMY GOODMAN: So, talk about the settlement. What happened next?
MATT TAIBBI: Well, so, the settlement
happened in—I guess, a year ago about this month. And what’s
interesting about it is, Alayne, by that point, had already talked to
civil investigators in the U.S. Attorney’s Office in Sacramento, and she
talked to some very talented lawyers there who seemed very anxious to
press this case. And they were about to release a very detailed civil
complaint against Chase in September of last year, and just hours before
that press conference, when they were going to announce that,
reportedly, Jamie Dimon, again, the CEO of Chase, called up the
assistant attorney general, asked to renegotiate, and they canceled the
press conference, and they went back into negotiations. And a few months
later, they had a settlement in which they paid a lot of money, but
none of the facts came out in that.
AMY GOODMAN: Just like if you were in trouble, you could make that call.
MATT TAIBBI: Yeah, I could call
up—yeah, I could call up the mayor or the president and have a court
case go away. I mean, that’s exactly what happened in this case, is they
basically put in a phone call to the very top of the criminal justice
system.
JUAN GONZÁLEZ: And what happened to
your contacts with the Justice Department, if you could talk about that,
that process? How detailed did they want to get into the information
that you had?
ALAYNE FLEISCHMANN: Well, my first contact, it was actually after four years. I was working in Calgary, and I got a call from the SEC.
AMY GOODMAN: Because you come from Canada.
ALAYNE FLEISCHMANN: Yeah. He
introduced himself as an investigator from the Enforcement Division. And
as I sort of paused for a minute, jokingly, he then said, "You weren’t
expecting to hear from me, were you?" And after that, they set up my
first interview with the SEC, which was very short. It was only maybe an
hour, hour and a half. They were only interested in one deal. And even
though I kept bringing up GreenPoint and they had the letter that I had
written, they weren’t actually interested in that. And the SEC
settlement was based on that other deal.
And then, it wasn’t until later, about December 2012,
that I first met with the DOJ investigators. And it was very clear that
this was going to be very different. As soon as they walked in, you
could tell they knew these securities up and down, and they were really
anxious to go forward with it and felt very comfortable going forward
with the case. So, in that meeting, it was a very detailed meeting, sort
of hours of going through how the process works and what happened. And
then I had an actual deposition in about May of 2013, where they nailed
down a lot more of that.
And you could see at that stage—first, I got to find
out for the first time ever how many of these loans had actually gone
into—had been sold to investors in sort of one pool, and it was hundreds
of millions of dollars’ worth of them, with nothing actually disclosed
about the problems with the loan. And then, second, I got to really see
what their case was, and they clearly realized they had an incredible
case there.
AMY GOODMAN: Testifying before the
Senate Judiciary Committee in 2013, Attorney General Eric Holder
suggested some banks are "too big to jail."
ATTORNEY GENERAL ERIC HOLDER: I am
concerned that the size of some of these institutions becomes so large
that it does become difficult for us to prosecute them when we are hit
with indications that if you do prosecute, if you do bring a criminal
charge, it will have a negative impact on the national economy, perhaps
even the world economy. And I think that is a function of the fact that
some of these institutions have become too large. Again, I’m not talking
about HSBC; this is just a more general comment. I think it has an
inhibiting influence—impact on our ability to bring resolutions that I
think would be more appropriate.
AMY GOODMAN: Matt Taibbi, respond to what Attorney General Eric Holder has testified.
MATT TAIBBI: Well, again, I mean,
it’s a crazy thing when the leading law enforcement official in the
nation comes out and says, "Well, some companies are just so big that we
can’t prosecute them no matter what they do." In that case, he was
speaking—he was testifying in the wake of a settlement the government
had entered into with HSBC, which is the biggest bank in Europe and the
biggest bank in Great Britain, which had admitted to laundering over
$800 million for a pair of Central and South American drug cartels. And
if you can’t send someone to jail for laundering $800 million of drug
money, you know, because the company is too big, clearly something is
very seriously wrong. But yet, this became sort of the unofficial
official policy of the Justice Department. And this greatly affected the
way they dealt with companies like JPMorgan Chase, like Citigroup, like
Bank of America. They tried to find a way to effect some kind of
resolution that didn’t involve criminal charges, didn’t involve
penalties to individuals, and also didn’t put the facts of any of what
they had actually done out into the public.
JUAN GONZÁLEZ: And in that vein, this
is—you know, it’s the old Monopoly board game all over again, get out
of jail free. Instead of paying $200 to get out of jail, you pay $2
billion to get out of jail. But the amounts of money that these
governments are getting as a result of this—I mean, I just checked with
the New York state comptroller. New York state alone, this year, is
getting out of its bank settlements with Wall Street a windfall of $5
billion. That’s just New York state. Other states are getting their
share, and of course the federal government is getting huge infusions.
And so, they suddenly have all this cash. And then they also had this
other stuff that you’ve talked about, which is consumer relief—
MATT TAIBBI: Right.
JUAN GONZÁLEZ: —apportions. So, the
governments actually get cash settlements, but then they supposedly
negotiate additional money for the citizens, a consumer relief. Could
you talk about that?
MATT TAIBBI: Well, OK, there’s a
couple of things here. First of all, these settlements, they always come
up with a big number, but the number is always actually—when you
actually look at the accounting, it turns out to be smaller than they
announce. In the case of the Chase settlement, the number they announced
was $13 billion. But there’s a couple of really important factors here.
One is that $7 billion of that—it’s $7 billion, right?—was
tax-deductible, which means that all of us, American citizens, anybody
who pays taxes, actually picked up the check for about $2.4 billion
worth of the settlement. So we paid part of that settlement, which is
crazy. I mean, the ordinary person, if we get a speeding ticket, we
can’t deduct that when we go to pay our taxes. But these people cratered
the world economy, and they get to write a tax deduction for it.
Four billion dollars of the settlement was what they
call consumer relief. And what this really boils down to, I mean,
there’s some loan forgiveness, where they’re allowing people to pay less
principal towards their home loans, but mostly it comes down to letting
people have a little extra time to pay off their payments. And it’s not
always the bank that is actually doing that; it’s often the investors
in those loans who are actually giving the relief. So, it’s not really
the bank paying $4 billion. It’s just a number.
AMY GOODMAN: I want to turn to President Obama speaking in September, when Attorney General Eric Holder announced that he would resign.
PRESIDENT BARACK OBAMA: He’s helped
safeguard our markets from manipulation and consumers from financial
fraud. Since 2009, the Justice Department has brought more than 60 cases
against financial institutions and won some of the largest settlements
in history for practices related to the financial crisis, recovering $85
billion, much of it returned to ordinary Americans who were badly hurt.
AMY GOODMAN: Matt Taibbi, your response?
MATT TAIBBI: Well, I mean, the first
thing I would say is, OK, they brought a bunch of settlements and they
collected a bunch of money, but there isn’t a single individual, in this
entire tableau, who is actually individually paying any kind of penalty
for any of these misdeeds. All of that money came out of the pockets of
shareholders. No executives had to pay a fine. No executives had to do a
single day in jail. There were not even charges filed against any
individuals. And—
AMY GOODMAN: What was the actual crime you feel Jamie Dimon committed that you feel he should be in jail for?
MATT TAIBBI: Well, I can’t stand here
and tell you that Jamie Dimon committed a crime. But certainly there
are people in these companies, and in cases like Alayne’s case, who
would be targets of criminal fraud prosecutions, and probably at a lower
level than Jamie Dimon. I think it would be hard to prove, although who
knows? Because they didn’t try. In a normal drug case, what you would
do is you would take everybody who was guilty, and you would try to roll
them up the chain and see how far you could go. And that’s exactly what
they did not do in this case. They didn’t aggressively go after
everybody. They didn’t follow every lead. Instead, they just sort of
went into a back room, decided on a number and made the whole thing go
away. And yes, that is a kind of justice, it’s a kind of resolution, but
I think it’s insufficient.
JUAN GONZÁLEZ: In fact, as you note
in your article, after the settlement agreement with JPMorgan Chase, the
stock of the company went up dramatically, the stock price of the
company went up dramatically, and Jamie Dimon ended up getting a huge
raise from his board of directors.
MATT TAIBBI: Yeah, yeah, in the first
weeks after the settlement was announced, the market capitalization of
JPMorgan Chase went up 6 percent, which translated into about $12
billion worth of value. So that’s most of your settlement right there.
Actually, it’s more than almost—more than the entire settlement, if you
look at it as a $9 billion settlement. And yes, Jamie Dimon, just a few
weeks after being dinged for the largest regulatory fine in the history
of capitalism, got a 74 percent raise by the board of—by the Chase
board.
AMY GOODMAN: And we’re going to
break. When we come back, we’ll hear Senator Elizabeth Warren asking
questions of Jamie Dimon about that raise. Stay with us.
AMY GOODMAN: This is Democracy Now!,
democracynow.org, The War and Peace Report. I’m Amy Goodman, with Juan
González. We’re talking about "The $9 Billion Witness: Meet the woman
JPMorgan Chase paid one of the largest fines in American history to keep
from talking." Today we’re talking with that woman. Alayne Fleischmann
is with us. Alayne Fleischmann, a whistleblower who worked at JPMorgan
Chase, she’s speaking today on Democracy Now! in this broadcast
exclusive, featured in Matt Taibbi’s piece that came out in Rolling
Stone this week, Matt Taibbi also with us. Well, earlier this year,
Democratic Senator Elizabeth Warren criticized the size of Jamie Dimon’s
salary.
SEN. ELIZABETH WARREN: In 2013 alone,
JPMorgan spent nearly $17 billion to settle claims with the federal
government, claims relating to its sale of fraudulent mortgage-backed
securities, its illegal foreclosure practices like robo-signing, its
manipulation of energy markets in California and the Midwest, and its
handling of the disastrous London Whale trade. And at the end of the
year, JPMorgan gave its CEO, Jamie Dimon, a 75 percent raise, bringing
his total compensation to $20 million. Now, you might think that
presiding over activities that resulted in $17 billion in payouts for
illegal conduct would hurt your case for a fat pay bump, but according
to The New York Times, members of the JPMorgan board of directors
thought that Jamie Dimon earned the raise, in part—and I’m quoting
here—"by acting as chief negotiator as JPMorgan worked out a string of
banner government settlements."
AMY GOODMAN: That was Senator
Elizabeth Warren. I’d like Alayne Fleischmann, the whistleblower within
JPMorgan Chase, to respond. I mean, do you think part of what you
exposed to the government earned Jamie Dimon this increase of 75
percent?
ALAYNE FLEISCHMANN: And I suppose
it—the question is whether you’re concerned about making money or
whether there’s criminal activity going on at the bank. There’s actually
an excellent website called JPMadoff.com with some lawyers who were
involved in the Madoff case, where they’ve been tracking, actually, all
of JPMorgan’s fines for fraud and illegal activity. And they’re actually
at $29 billion now in the last four years alone. So, the question that
needs to be asked is: How is it that you can be a CEO, over $29 billion
worth of fines, and get a raise? It also clearly shows that there’s no
deterrent to all of these fines. It’s just happening over and over
again. And if there aren’t any individuals held accountable, there’s no
reason for any of them to actually stop doing these very serious crimes.
JUAN GONZÁLEZ: Well, and not only that, if all of those fines are continually occurring—
ALAYNE FLEISCHMANN: Yeah.
JUAN GONZÁLEZ: —where are the crimes that are the basis of being fined?
ALAYNE FLEISCHMANN: Well, yeah, and
so that’s one of the really important points, too, is there’s very
little difference between civil securities fraud and criminal securities
fraud, or even how you can do this as a wire fraud case. Once you have
that strong of a civil fraud case, the only real difference is that you
need a little more intent level—they had to have really intentionally
been doing the fraud—and you have to prove it to a higher standard. You
know, you have to show beyond a reasonable doubt that this is what they
were doing. But when you look at these cases, these are some of the
easiest white-collar crime cases that you’re ever going to see.
And one of the things that I think has been sold to
the public is, well, these are really complex and difficult, or we don’t
really know who did what. First, in my case, and what I’ve seen in
these other cases, there are all sorts of documents that show exactly
who was making the decisions and who knew what. The idea that they’re
too complex, you know, these securities themselves that are sold to
investors are complex, but the fact that the investors were lied to
about the quality of the loans, that’s actually really easy. And the
fact that obviously if you have people who can’t afford their loans,
there’s going to be no money coming out of these loans, is also
something that’s not a difficult thing to understand.
AMY GOODMAN: Alayne Fleischmann, why didn’t you go to the press back then? And what made you decide to do it now?
ALAYNE FLEISCHMANN: Yeah, I, for a
long time, believed that this come out, that the government would do
their investigation and come forward with it. It’s actually taken a
really long time for me, because for me it’s a little bit of an
incredible thing to believe. But after watching all of these cases over
and over again, at some stage I’m in the position where if I keep silent
and the statute of limitation runs, or they do one of these agreements
where they whitewash everything, then it’s too late, which is what’s
happened over and over again so far. So, I’m trying to change the
pattern and come out first, so that they have to either follow these
properly, the way they would for any other criminal defendant, or
explain why they’re not doing it.
JUAN GONZÁLEZ: And, Matt Taibbi, the
reality that all—despite all the claims of the Obama administration that
they’ve pursued all these civil cases, that they never really went
after the people who practically wrecked the world economy, and how that
relates into this election result that we just had, where obviously
Americans across the board, from Democrats to Republicans to
Independents, are still furious about their economic situation and the
failure of holding these people accountable?
MATT TAIBBI: Yeah, I think it’s hard
not to make a connection between the total lack of enthusiasm that we
saw for the Democratic Party this past week and, for instance, their
behavior in pushing investigations of the financial services community.
And we saw it with the Occupy protests. I talk to people on Wall Street
all the time. I mean, all my sources come from Wall Street. And they all
say the same thing, that Barack Obama had an incredible opportunity in
late 2008, just after he took office. With his communication skills, he
could have gone to the American people and explained to them exactly
what happened and said, "This is why the economy is bad. This is why
you’re losing your job. There was massive criminal activity. It’s not
just an accident." And then he could have gone and put a few people in
jail and really put some teeth behind those words. Instead, they swept
it all under the rug. And people, even if they don’t completely
understand what happened, they sense that nothing was done. And I think
it’s important to understand that.
AMY GOODMAN: I presume, Alayne
Fleischmann, that you had a confidentiality agreement when you left
JPMorgan Chase. Are you violating that? What made you decide to take the
risk?
ALAYNE FLEISCHMANN: Yeah, and there
are different arguments about whether I am or am not violating it,
because of the criminal nature of what I’m bringing forward. For me, at
some stage, it’s just sometimes you’re involved in something that’s
bigger than you personally. Even right now, there are still all sorts of
suits out there by private investors, retirement funds, pension plans,
trying to get their money back. And they don’t—in a lot of cases, they
don’t know that I have information. So I actually now have, in my email,
contacts coming in, asking for help from me, so that they can get this
money that was really stolen from their investors, these retirees, back
to those people. So, for me, that’s more important than anything that’s
going to happen to me.
AMY GOODMAN: Are you concerned about repercussions?
ALAYNE FLEISCHMANN: At some stage, I
think I decided that this was more important. And at the end of the day,
I’ll be OK. You know, I’ll figure something out, and I’ll get through
this. But I think we’re at a stage where unless a lot of people start
coming forward and say, "We care about this. We now know what’s
happening, and we want someone to do something about it," that this is
all just going to pass into history.
AMY GOODMAN: The government contacted you again this summer?
ALAYNE FLEISCHMANN: Yeah, in August they contacted me.
AMY GOODMAN: That call that they made.
ALAYNE FLEISCHMANN: Yeah.
AMY GOODMAN: And do you feel this can reopen, this information, these cases?
ALAYNE FLEISCHMANN: I did meet with
them, and I was happy to see that it was an enthusiastic group. The
concern I have is that what we’ve seen is that even when they’re really
strong cases—you look at the JPMorgan-Madoff case, HSBC—they still, no
matter how strong it is, they just get hushed away. So, yeah.
MATT TAIBBI: And this is an important
distinction, too, is that it’s often not the line investigators who are
the problem. The people who actually work these cases, the career
prosecutors who are doing this digging, oftentimes they’re very talented
and aggressive lawyers who really know what they’re doing. The problem
is, the political wing of the Justice Department can take those cases
and do whatever they want with them. And we saw, in Alayne’s case and in
many other cases, that they take these excellent investigations, and
then they just turn them into these slap-on-the-wrist settlements. And
that’s what she’s worried about, I think.
AMY GOODMAN: Well, Matt, it’s great
to have you back reporting, to see your piece, but it’s in Rolling
Stone, it’s not at First Look. You had left Rolling Stone to be part of
this new news organization. You were launching, like The Intercept at
First Look, The Racket. You tweeted out that this piece was coming out
in The Racket when you launched, The Racket launch, if you will.
MATT TAIBBI: Right, right.
AMY GOODMAN: But it didn’t happen.
MATT TAIBBI: No, it didn’t. You know,
I think all I can really say about that is that I’m really devastated
by the way everything turned out. It was a really horrible situation all
around. I’m very, very sorry for the staff that is still there, the
people that I hired who took a leap of faith to come work for me. And in
a way, I’m—as happy as I am to be back at Rolling Stone, which I always
loved, I’m sad that this piece isn’t out in Racket. I mean, I think it
would have been a great piece to launch with, but it just didn’t work
out that way, and that’s unfortunate.
AMY GOODMAN: Will Racket launch?
MATT TAIBBI: I don’t know. I don’t
know. I’m not at the company anymore, so you’d have to direct that
question to them. I think they—you know, they absolutely should. They
have a very talented group over there and some great young writers, and
there’s no reason that they couldn’t.
JUAN GONZÁLEZ: I just wanted to close
by asking you about how you would judge the tenure of Eric Holder
in—now, obviously, that he’s going to be leaving—in terms of his
particular role in going after these banks, and just this whole idea of
bankers being able to call directly to the Justice Department to
negotiate their deals and stop prosecutions at the lower levels.
MATT TAIBBI: Well, you know, it’s
funny. For years now, I’ve been covering a lot of this stuff. And I’ve
spoken to a lot of people in law enforcement. And there are really two
types of people that I talk to who are prosecutors. One is the kind of
old-school law enforcement type that want to get the bad guy at all
costs, and they’re really career civil servants who just want to do
their jobs and want to see justice happen. And then there’s this new
kind of person who’s appearing in government now, who comes out of the
corporate defense sector. These are people who grew up as corporate
lawyers defending companies like Chase and Bank of America. And that’s
who Eric Holder is, very pointedly. He spent a long time at a company
called Covington & Burling. And this type of lawyer, this type of
law enforcement official, is much more interested in coming up with a
settlement that everybody feels good about when they walk out of the
room, as opposed to the old-school kind of justice where the bad guy
gets his or her comeuppance in the end. And I think his tenure was very
representative of a big sea change in the way we do white-collar crime
in this country.
AMY GOODMAN: Well, I want to thank
you both for being with us. Matt Taibbi, again, we will link to your
piece at Rolling Stone. It’s called "The $9 Billion Witness: Meet the
woman JPMorgan Chase paid one of the largest fines in American history
to keep from talking." And thank you to that woman, Alayne Fleischmann.
Thank you so much for joining us. Alayne Fleischmann, the JPMorgan Chase
whistleblower, former deal manager at JPMorgan, where she says she
witnessed "massive criminal securities fraud" in the bank’s mortgage
operations during the period leading up to the financial crisis. And
congratulations on your book coming out in paperback, Matt. Thanks so
much, everyone, for being with us.
n
a sharp Republican rebuke to President Obama’s proposed actions on
immigration, Senate Minority Leader Mitch McConnell accused the
President, on Thursday night, of “flagrantly treating immigrants like
human beings, in clear defiance of the wishes of Congress.”
ongressional
Republicans on Friday expressed outrage at the new leadership style
that President Obama has demonstrated in the aftermath of the midterm
elections, and demanded a return of the “passive and unassertive Obama
to which we have grown accustomed.”
resident
Obama is under increasing pressure to work closely and coöperatively
with a group of people who are suing him in federal court, the people
suing him confirmed today.
