Monday, January 06, 2014

Do Investors Want To Be Conned?

JPMorgan Chase must have noticed that Bernie Madoff's magical brokerage accounts exuded the aroma of dead fish. Based on that conclusion, the Feds are expected to impose a penalty of $2 billion. The bank's total financial punishment for recent transgressions, including the London Whale disaster,  amount to $20 billion. {A billion here, a billion there . . . .)

Before you knock JPMorgan and its formerly esteemed CEO, read James Surowiecki's New Yorker column:
[T]he fundamental difference between entrepreneurs and con artists is that con artists ultimately know that the fantasies they’re selling are lies. Steve Jobs, often enough, could make those fantasies come true. Still, that unquantifiable mélange of risk, hope, and hype provides both the capitalist’s formula for transforming the world and the con artist’s stratagem for turning your money into his money. Maybe there’s a reason we talk about the American Dream.
From JPMorgan's perspective, blowing the whistle on Madoff may have seemed like dissing Santa Claus.

Update: If JPMorgan Chase gets penalized for letting Madoff do his thing, what about the SEC? The agency was warned about Madoff but – as the WSJ points out – "allowed him to continue stealing from victims until the fraud collapsed in 2008."

Related post: Was Madoff a "Well-Known" Fraud?

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