A scene from the Oscar-nominated movie The Big Short depicts the important role of credit ratings agencies during the Great Recession. It shows Melissa Leo as an employee of Standard & Poor’s (one of the big three credit ratings agencies) explaining to Steve Carell (who plays a hedge fund manager) why S&P continues to give AAA ratings to mortgage-backed securities (consisting of junk loans). The answer given by her is: “They’ll just go to Moody’s.”
The role of the credit ratings agencies during the financial crisis remains highly criticized and mostly unaccountable. The agencies have been blamed for exaggerated ratings of risky mortgage-backed securities, giving investors false confidence that they were safe for investing. While criticizing the ratings by credit ratings agencies in an op-ed for The New York Times, columnist Paul Krugman wrote, “The skewed assessments, in turn, helped the financial system take on far more risk than it could safely handle.” In 2011, the Financial Crisis Inquiry Commission found that these ratings agencies “were key enablers of the financial meltdown.”
Reforms for credit ratings agencies have been given importance in the 2016 presidential primary debates. In his financial reform proposal, Bernie Sanders aims to change the business model used by the credit ratings agencies to a nonprofit model, keeping it independent of Wall Street. On the other hand, in her vision of financial reforms, Hillary Clinton keeps the credit ratings agencies untouched.
NEW YORK–(BUSINESS WIRE)–Zamansky LLC is investigating claims against JPMorgan Chase on behalf of victims of financial advisor Michael Oppenheim (“Oppenheim”) of Livingston, New Jersey. On March 17, 2016, Oppenheim pled guilty to embezzlement and securities fraud in a $22 million investment fraud that stretched over seven years. Oppenheim admitted that he lied to his clients by claiming to have invested their money in low-risk municipal bonds, and he sent them doctored account statements that purportedly reflected those investments and the profits earned, funneling the money into his own high-risk investments that fared poorly.
Oppenheim had approximately 500 clients with $89 million in assets under his management. According to U.S. Attorney Preet Bharara, Oppenheim used his client’s funds to obtain cashier’s checks and then deposited the cashier’s checks in at least three online brokerage accounts he controlled at financial institutions other than JPMorgan Chase. He used that money to trade in accounts he controlled, and to pay for personal expenses such as a home loan and bills.
JPMorgan Chase has been labelled as the most corrupt bank in the US, according to the book “JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook,” as reviewed in an article by Forbes. The book has been co-written by Helen Davis Chaitman and Lance Gotthoffer.
Many workers on Wall Street have previously been accused of getting away with corruption. In the last four years alone, JPMorgan Chase & Co. (NYSE:JPM) has paid around $35 billion in settlements and penalties for illegal practices. The book explains massive fraudulent activities that have place in the financial system in the past. Specifically, JPMorgan has been criticized for allegedly taking help from other financial institutions to profit from fraudulent practices, according to Forbes’ review of the book.
According to the news publication, the book states that JPMorgan never bought securities for its customers and left billions of dollars at its deposits. From that funding, Jamie Dimon—chairman, president and chief executive officer of JP Morgan Chase—funded his trading operations in London, pointing toward the London Whale trading scandal.
One of Donald Trump‘s closest allies on Wall Street is a now-struggling German bank.
While many big banks have shunned him, Deutsche Bank AG has been a steadfast financial backer of the Republican presidential candidate’s business interests. Since 1998, the bank has led or participated in loans of at least $2.5 billion to companies affiliated with Mr. Trump, according to a Wall Street Journal analysis of public records and people familiar with the matter.
That doesn’t include at least another $1 billion in loan commitments that Deutsche Bank made to Trump-affiliated entities.
The long-standing connection makes Frankfurt-based Deutsche Bank, which has a large U.S. operation and h as been grappling with reputational problems and an almost 50% stock-price decline, the financial institution with probably the strongest ties to the controversial New York businessman.
But the relations at times have been rocky. Deutsche Bank’s giant investment-banking unit stopped working with Mr. Trump after an acrimonious legal spat, even as another arm of the company continued to loan him money.
Other Wall Street banks, after doing extensive business with Mr. Trump in the 1980s and 1990s, pulled back in part due to frustration with his business practices but also because he moved away from real-estate projects that required financing, according to bank officials. Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley are among the banks that don’t currently work with him.
At Goldman Sachs Group Inc., bankers “know better than to pitch” a Trump-related deal, said a former Goldman executive. Goldman officials say there is little overlap between its core investment-banking group and Mr. Trump’s businesses.