By Pam Martens: September 24, 2012
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U.S. Treasury Secretary, Timothy Geithner
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JPMorgan Chase, the Wall Street mega bank now under
criminal probes for losing billions of FDIC insured deposits in risky
derivative trades, for years has been one of the dinner hosts of an
unseemly industry trade and lobby group established by none other than
the Federal Reserve Bank of New York, its own regulator.
On the evening of October 8, 2009, representatives of
the largest Wall Street banks enjoyed cocktails and dinner at 270 Park
Avenue in Manhattan, the headquarters of JPMorgan Chase. Bill
Hirschberg of Barclays was there; Jeff Feig of Citigroup; Troy Rohrbaugh
of JPMorgan; Fabian Shey of UBS and numerous others.
The group is called the Foreign Exchange Committee and its sponsor is
the New York Fed, the same body tasked with policing these firms to
root out illegal conduct.
The host of this event, JPMorgan, is under investigation in the Libor matter as is Citigroup, which also sent a representative. Barclays, which was in attendance, has already admitted to and settled the charges with fines of $453 million by U.K. and U.S. regulators. UBS is said to have a whistleblower providing evidence to investigators. Traders from ICAP have been implicated by the Canadian Competition Bureau, as have JPMorgan and Citigroup.
As JPMorgan faces multiple probes on multiple continents, its Chairman and CEO, Jamie Dimon, sits on the Board of Directors of its regulator, the New York Fed. Coming up on October 3 at 4 p.m. will be another Foreign Exchange Committee event hosted by JPMorgan Chase with the group’s sponsor, the New York Fed, no doubt in attendance.
On this particular evening, there is the suggestion that
more than foreign exchange may have been discussed. In attendance was
Michael Cross, a high ranking official from the Bank of England who has
been centrally involved in the Libor matter. In Libor-related emails
that were released, Cross shows a bias toward self-regulation. In an
internal June 2, 2008 email, Cross stated that “a panel of senior
bankers overseeing the BBA process (from within the BBA) is a way to
go.”
The BBA refers to the British Bankers Association, a trade association that oversees Libor, the interest rate setting mechanism for financial products used globally. The public learned earlier this year that the rate has been rigged for years by an international banking cartel.
Thomson Reuters is the company that assists the BBA in
calculating and announcing Libor interest rates. ICAP is an
inter-dealer broker implicated in the Libor rate-fixing matter.
The host of this event, JPMorgan, is under investigation in the Libor matter as is Citigroup, which also sent a representative. Barclays, which was in attendance, has already admitted to and settled the charges with fines of $453 million by U.K. and U.S. regulators. UBS is said to have a whistleblower providing evidence to investigators. Traders from ICAP have been implicated by the Canadian Competition Bureau, as have JPMorgan and Citigroup.
There are no publicly available minutes from this
meeting. According to the newly enacted charter of the Foreign Exchange
Committee posted at the New York Fed’s web site, “Any information
disclosed, opinions expressed, or statements made during Committee
meetings shall be treated as strictly confidential by members, unless
the Committee has authorized release.” (The charter is new but the group
has been meeting for decades.)
Whether the banking cartel was meeting this night to discuss the
allegations of rigging Libor with their regulator behind closed doors is
not known. The New York Fed, which sent seven officials to the meeting,
had known about Libor misconduct since 2007 but did not make the matter
public. Nor did it refer the matter to the U.S. Department of
Justice. Timothy Geithner, then President of the New York Fed, is now
the U.S. Treasury Secretary.
Conveniently, the U.S. Treasury Secretary was given the
power under Dodd-Frank financial reform to decide if foreign exchange
trading should be exempted from derivatives regulation. In April of last
year, Geithner requested the full exemption.
On May 20, 1999, Paul Kimball, Chair of the Foreign
Exchange Committee, testified before the House Agriculture Subcommittee
on Risk Management, Research and Specialty Crops that “The
over-the-counter foreign exchange market in the U.S. needs no additional
regulation.”
On February 20, 2009, the group wrote to another
regulator, FINRA (Financial Industry Regulatory Authority) effectively
telling it to mind its own business when it came to setting leverage
limits for retail customers wanting to trade foreign exchange. The
group wrote: “As an initial matter, we would like to note that since
foreign currency transactions are not securities and are not subject to
the federal securities laws, we therefore question the basis for FINRA’s
legal authority to regulate the terms of transactions in this market.
While we recognize that FINRA may be able to regulate the sales
practices of broker-dealers, even in connection with non-securities, we
are not aware of the foundation for FINRA’s authority to control the
actual terms of non-securities transactions.”
The same could certainly be said for the New York Fed in
setting up an industry lobby and self-governance group in the field of
foreign exchange. The Commodity Futures Trading Commission (CFTC) is
the regulatory body tasked with regulating futures and derivatives. How
the New York Fed carved out a niche for itself and the largest Wall
Street firms in the gargantuan $4 trillion a day foreign exchange market
should command the interest of Congress.
In August 1976, the Committee on Banking, Currency and Housing released a report titled: Federal Reserve Directors: A Study of Corporate and Banking Influence. The report drills down to the core of the problem:
“The big business and
banking dominance of the Federal Reserve System cited in this report can
be traced, in part, to the original Federal Reserve Act, which gave
member commercial banks the right to select two-thirds of the directors
of each district bank. But the Board of Governors in Washington must
share the responsibility for this imbalance. They appoint the so-called
‘public’ members of the boards of each district bank, appointments which
have largely reflected the same narrow interests of the bank-elected
members. The parochial nature of the boards affects the public interest
across a wide area, ranging from monetary policy to bank regulation.
These are the directors, for example, who initially select the
presidents of the 12 district banks—officials who serve on the Federal
Open Market Committee, determining the nation’s money supply and the
level of economic activity. The selection of these public officials,
with such broad and essential policymaking powers, should not be in the
hands of boards of directors selected and dominated by private banking
and corporate interests.”
As JPMorgan faces multiple probes on multiple continents, its Chairman and CEO, Jamie Dimon, sits on the Board of Directors of its regulator, the New York Fed. Coming up on October 3 at 4 p.m. will be another Foreign Exchange Committee event hosted by JPMorgan Chase with the group’s sponsor, the New York Fed, no doubt in attendance.
Source: Did JPMorgan Host a Secret Meeting on Libor, With 7 Members of the NY Fed
VIA WhatReallyHappened.com
