Having agreed this week to pay $920 million in fines to resolve federal and international investigations into its $6 billion "London Whale" trading loss, JPMorgan Chase has reportedly reached "some closure" in the case and is ready, in the words of its chief executive, Jamie Dimon, to move forward in a process of "simplifying" the bank.
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While JPMorgan may feel some closure, there is scant closure for the American public, which deserves accountability for bank recklessness that continues to endanger the economy and which understands that without accountability true financial reform is impossible.
Under the settlements, JPMorgan will pay fines that amount to very little for a bank that earned $6.5 billion in the last quarter alone. It has also admitted to violating securities laws on corporate governance and internal controls. The Securities and Exchange Commission rightly extracted the admissions as a condition of settlement. But unless federal prosecutors follow up with charges against the bank or its officers under the Sarbanes-Oxley accounting law or other federal statutes, those concessions are mostly an embarrassment. They are not, in themselves, punishment for past improper conduct and are unlikely to deter future bad behavior.
The bank has escaped more serious charges of lying to investors and regulators, evidence of which was presented in an earlier Congressional investigation and is even broached in the settlements' narrative of events, with regulators making references to "senior management" withholding information from the bank's board and from regulators. If board members and regulators were misled, it stands to reason that investors were also wrongly kept in the dark.
As for the "senior management," no actions were taken against any individuals and no executives were named in the settlements. But five were identified by title, some of whom are still at the bank — including the former chief financial officer, who is now a vice chairman, and Mr. Dimon.
The S.E.C. as well as federal prosecutors and the F.B.I. in Manhattan are reportedly still investigating the losses. Unfortunately, their records in pursuing big banks and top bankers are poor.
Mr. Dimon said this year that he exhorted the bank's executives and managers to be forthcoming and diligent in facing up to the London Whale losses as they came to light. That response misses the point: executives have to be held responsible for the disastrous results that arise out of bad management.
The London Whale settlements open the door to the possibility of other investigations that can lead to real accountability, but whether regulators and prosecutors will follow through remains a question.
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