JP Morgan Chase, the Foreign Corruption Practice Act and the corruption of America
JP Morgan Chase is facing serious scrutiny for bribing Chinese officials. But why is this different from other big banks bribing U.S. government officials? It shouldn't be, Reich argues. Corruption is corruption and bribery is bribery, regardless of international borders, he says.
The Justice Department has just obtained documents showing thatJPMorgan Chase, Wall Street’s biggest bank, has been hiring the children of China’s ruling elite in order to secure “existing and potential business opportunities” from Chinese government-run companies. “You all know I have always been a big believer of the Sons and Daughters program,” says one JP Morgan executive in an email, because “it almost has a linear relationship” to winning assignments to advise Chinese companies. The documents even include spreadsheets that list the bank’s “track record” for converting hires into business deals.Skip to next paragraph
Robert is chancellor’s professor of public policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Clinton. Time Magazine named him one of the 10 most effective cabinet secretaries of the last century. He has written 13 books, including “The Work of Nations,” his latest best-seller “Aftershock: The Next Economy and America’s Future," and a new e-book, “Beyond Outrage.” He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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It’s a serious offense. But let’s get real. How different is bribing China’s “princelings,” as they’re called there, from Wall Street’s ongoing program of hiring departing U.S. Treasury officials, presumably in order to grease the wheels of official Washington? Timothy Geithner, Obama’s first Treasury Secretary, is now president of the private-equity firm Warburg Pincus; Obama’s budget director Peter Orszag is now a top executive at Citigroup.
Or, for that matter, how different is what JP Morgan did in China from Wall Street’s habit of hiring the children of powerful American politicians? (I don’t mean to suggest Chelsea Clinton got her hedge-fund job at Avenue Capital LLC, where she worked from 2006 to 2009, on the basis of anything other than her financial talents.)
And how much worse is JP Morgan’s putative offense in China than the torrent of money JP Morgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians — making the Street one of the major backers of Democrats as well as Republicans?
The Foreign Corrupt Practices Act, under which JP Morgan could be indicted for the favors it has bestowed in China, is quite strict. It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of “securing any improper advantage.” Hiring one of their children can certainly qualify as a gift, even without any direct benefit to the official.
JP Morgan couldn’t even defend itself by arguing it didn’t make any particular deal or get any specific advantage as a result of the hires. Under the Act, the gift doesn’t have to be linked to any particular benefit to the American firm as long as it’s intended to generate an advantage its competitors don’t enjoy.
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