How JPMorgan Ripped Off Its Customers Through Securities Lending

[Joanne98]

Here’s just another way that the banks enrich themselves with someone else’s capital, essentially.

Here is the deal: Funds lend some of their stocks and bonds to Wall Street, in return for cash that banks like JPMorgan then invest. If the trades do well, the bank takes a cut of the profits. If the trades do poorly, the funds absorb all of the losses.

The strategy is called securities lending, a practice that is thriving even though some investments linked to it were virtually wiped out during the financial panic of 2008. These trades were supposed to be safe enough to make a little extra money at little risk.

JPMorgan customers, including public or corporate pension funds of I.B.M., New York State and the American Federation of Television and Radio Artists, ended up owing JPMorgan more than $500 million to cover the losses. But JPMorgan protected itself on some of these investments and kept millions of dollars in profit, before the trades went awry.

When you have a regulatory system set up at the behest of the banks, when you have a Congress unwilling to challenge the banks and in many cases bought off by them, when you have a legal system that works to the advantage of those with wealth and power like the banks, you’ve given a license to the banks to steal. This is as much stealing as a thug on the streets holding a gun to your head for your wallet.

http://news.firedoglake.com/2010/10/18/how-jpmorgan-ripped-off-its-customers-through-securities-lending/