The tentative $13 billion settlement between J.P. Morgan Chase and the Justice Department is an extortion scheme to benefit the Obama administration's political supporters and likely will backfire the next time government needs the financial industry to bail it out of a crisis, Wall Street Journal editorial writers say
"Federal law enforcers are confiscating roughly half of a company's annual earnings for no other reason than because they can and because they want to appease their left-wing populist allies," the Journal said in an editorial Monday.
The agreement would settle the allegation that the company issued faulty mortgage bonds, but, the Journal argues, the securities were issued before the 2008 financial panic and were not all Morgan products, but also issued by Bear Stearns and Washington Mutual.
The government pleaded with J.P. Morgan to take responsibility for those products to help them ease the crisis, the Journal noted.
Fast forward five years, and now the feds are punishing the company and Morgan CEO Jamie Dimon for coming to their rescue.
"We'd like to see Mr. Dimon fight the charges, but the political reality is that he and his bank don't have much choice . . . The government will only turn the screws harder if he resists," the editorial said.
For justice to be truly served, former Democratic Rep. Barney Frank and others — who blocked reforms to Fannie Mae and Freddie Mac and the Federal Reserve for establishing the easy-credit scheme — would have to be held accountable, the Journal continued.
"The lesson is how government has used the crisis to exert political control over even the most powerful private financial companies. The real lords of American finance are Attorney General Eric Holder, Treasury Secretary Jack Lew and their boss in the White House," the Journal said.
The newspaper also observed that proceeds from the settlement could be used in a political shakedown scheme to financially aid advocacy groups that support Obama and the Democratic Party.
"Perhaps the administration will have the checks arrive in swing Congressional districts right before the 2014 election," the editorial concluded.
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