Moral Hazard

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JP MORGAN & CHASE CO. TURNS BLIND EYE TO PONZI SCHEME: MORAL HAZARD PROBLEM Banks have been at the forefront of the financial system for as long as they have existed and have captured the attention of stakeholders on both controversial grounds as well as being undisputed with regards to the many helpful services they provide. JP Morgan & Chase is one such bank, surrounded by hostile news articles and excessive scrutiny but rightfully so as it has of recent been the topic of much controversy as turning a blind eye to the moral codes established by the Securities and Exchange Commission (SEC) and assisting Ponzi Scheme masterminds in swindling unsuspecting investors. On January 7th, 2014, JP Morgan was accused of assisting its high…show more content…
At face value one would conclude that JPM officials did so because they had gains from such inaction. It was discovered that the current Chief Executive Officer (CEO), Jamie Dimon and twelve other current and former executives and directors knew about the Bernard Madoff ponzi scheme but failed to disclose this information. As Board of Directors and Executives it was within their primary job description to maximize the profits of the company thereby reaping higher returns for their shareholders. So one might assume their inaction was for the benefit of shareholders and much to the detriment of the unfortunate Madoff victims. To combat this assumption it turns out large amounts of money of the value of $300million was invested in Bernard Madoff accounts in the form of pension funds. Some officials knew that the unscathed performance of Madoff securities were too good to be true as their prices consistently climbed up in spite the financial crisis. However, still they pawned its own shareholders’ funds with the hopes of jumping on the same band wagon as Madoff and reaping further profits. Another angle at probing the case was that the CEO, directors as well as executives were only looking out for themselves. Evidently they had direct benefits in the form of handsome compensation packages for retaining high profile clients such as Madoff and Wise which
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