The $9 Billion Witness JPMorgan Failed to Silence

Journalist Matt Taibbi of Rolling Stone recently exposed the story of Alayne Fleischmann, the Department of Justice's key witness supporting the $9 billion (claimed to be $13 billion) mortgage & securities fraud related settlement of November 19, 2013. Fleischmann provides a long and detailed account of the circumstances leading up to the DoJ's resolution of JPMorgan Chase's culpability in relation to what Fleischmann describes as "massive criminal securities fraud" within the bank's mortgage operations divisions.

Fleischmann describes, during the time she worked for Chase ensuring the quality of loans, a pattern of intentional ignorance towards the quality of loans which Chase intended to acquire and repackage as securities it would portray as of higher quality than the true nature of the loans which Chase was in fact aware of. Elements within Chase even went so far as to enact a policy governing the employees tasked with ensuring the quality of loans requiring such employees to voice any concerns or questions verbally to the head of the division, so that no written evidence of the Bank's knowledge as to the quality of loans would be retained. Fleischmann remembers, "If you sent him an e-mail, he would actually come out and yell at you. The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing. So to have exactly the opposite of that – that was very worrisome." Fleischmann discusses in detail the various disturbing, and even criminal, conduct of Chase while she was an employee. 

Even more troubling than the apparently morally bankrupt conduct of Fleischmann's former employer, Fleischmann portrays a regulatory framework within which white collar criminal bankers thrived. She describes inattentive regulators at the Securities and Exchange Commission, a judicial system willing to allow Chase to bury the evidence Fleischmann had amassed, and even goes so far as to indict Attorney General Eric Holder as the "chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up." She alleges that Chase was bargaining with the DoJ just as Citigroup and Bank of America had in an effort to purchase the government's secrecy with a small (relative to the alleged scope of the fraud) cash settlement. Taibbi of Rolling Stone characterizes the efforts as "the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption."

Fleischmann explains that she too was bound to secrecy by the DoJ settlement, and that she stands to lose a lot due to her honesty: "I could lose my license to practice law. I could lose everything. But if we don't start speaking up, then this really is all we're going to get: the biggest financial cover-up in history." Fleischmann makes some truly disturbing claims that we should pay attention to regarding the structure and function of the residential mortgage banking industry and what she claims to be an overly-accommodating body of regulators.