JPMorgan Illegally Let Lehman Bros. Count Customers’ Funds As Its Own
April 7th, 2012Via: Washington Post:
JPMorgan Chase illegally allowed Lehman Brothers, the investment bank whose 2008 bankruptcy brought the financial system to the brink of collapse, to count customers’ money as its own, according to federal regulators.
The arrangement boosted the amount that Lehman could borrow from JPMorgan, where the customers’ money was deposited, regulators charged Wednesday.
Then, at the height of the financial crisis, JPMorgan refused to release the customer funds for about two weeks, until regulators ordered it to do so, regulators charged.
The charges were spelled out in an enforcement action against JPMorgan by the Commodity Futures Trading Commission (CFTC).
Without admitting or denying wrongdoing, JPMorgan agreed to pay $20 million to settle the civil case.
The matter adds another dimension of alleged lawbreaking to the history of Lehman’s downfall. It was also another vivid illustration that, even in highly regulated modern financial firms, basic controls can break down.
Last fall, the big brokerage firm MF Global collapsed with as much as $1.6 billion of customer funds missing and unaccounted for. There, too, it appears that clients’ money was treated as if it belonged to the firm.
Related: Comment Posted on U.S. Commodity Futures Trading Commission Website
Research Credit: alvinroasting
