"'I am sure, Mr. Rearden,' said the eldest judge, 'that you do not really believe -- nor does the public -- that we wish to treat you as a sacrificial victim. If anyone has been laboring under such a misapprehension, we are anxious to prove that it is not true.'"
The judge talking to Hank Rearden, one of the heroes of Ayn Rand's "Atlas Shrugged," might as well have been the regulators and legal authorities talking to Jamie Dimon, chief executive officer of JPMorgan Chase & Co. Rearden was on trial for selling the metal he had created, in defiance of the state. Dimon is being sued for ... what exactly?
Unlike Rearden, who conceived and produced the strongest, most reliable metal in the world, Dimon didn't invent anything. Yes, he did build something -- twice, in fact. He was at Sandy Weill's side when the former Wall Street executive was amassing the diverse companies that were to become Citigroup. Then Dimon did it again, without Weill, when JPMorgan merged with Bank One, where he was CEO.
Two weeks ago, JPMorgan agreed to pay $920 million in penalties in connection with a $6.2 billion loss in derivatives trading by the bank’s chief investment office in London. The bank admitted to mismarking positions and concealing the losses from regulators. The shareholders took the hit, not the taxpayers. Losing money isn't a crime, at least not yet.
Now the bank is in negotiations with the U.S. Justice Department to settle a slew of investigations into questionable mortgage practices. The price tag: $11 billion.
This is the same Jamie Dimon who didn't need a cash infusion when Hank Paulson summoned chief executives of the nine largest U.S. banks to the Treasury in October 2008, handed them an agreement to sell shares to the U.S. government and told them to sign it; the same Jamie Dimon who managed to steer JPMorgan through the worst financial crisis since the Great Depression and remain profitable; the same Jamie Dimon whom the government tapped to buy Bear Stearns Cos. to prevent potential fallout from its collapse; the same Jamie Dimon who was held up as a model for how a bank should be run.
The very same. Now the Justice Department wants to extract billions from the bank. Dimon, a Democrat, dared to criticize some aspects of the Dodd-Frank Act as too burdensome and the Obama administration's anti-business rhetoric as bad for the economy.
The settlement would resolve multiple investigations into claims that JPMorgan misrepresented the quality of mortgage securities, many of them issued by Bear Stearns and Washington Mutual, which the bank acquired during the crisis; manipulated Libor, the benchmark used to set interest rates worldwide; and hired the children of Chinese politicians to win lucrative banking business. (Why don't the authorities ever look into the hiring of former regulators by the big banks?)
It's unclear whether the settlement would forestall further legal actions. After all, the authorities have been criticized for letting the big shots go scot-free to continue making outrageous profits. Asked at an event a year ago if, knowing what he knows today, he would have bought Bear Stearns, even with $30 billion of support from the Fed, Dimon said, probably not.
At his trial in Rand's novel, Hank Rearden shocked the judges -- and delighted those in the courtroom -- with his refusal to recognize his actions as a crime, enter a plea or defend himself. "I do not recognize your right to control the sale of my Metal," he said.
The judges retired to consider their verdict and returned quickly to announce a fine of $5,000, which was suspended. Somehow I doubt Dimon gets off so easy.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)