[ by Larry Goldfarb ]

The case brought by the NY State Attorney General, Eric Schneiderman, against JPMorgan for actions of its acquired party, Bear Stearns, sheds light on a significant problem within the financial industry.  The state attorneys general think the SEC is filled with political hacks, is rife with cronyism, and couldn’t find systemic corruption if it appeared on its doorstep.  Yes, they are good at finding insider trading and they seem to jump on cases that have massive public support like the Goldman Sachs Mortgage Inquiry, but where it requires turning over the earth, the Commission runs for cover.

Thus, the state attorneys feel that in the absence of an effective regulator, they have to take action.  Yes, the state officials are not completely aware of the deals that have been struck -- like the Bear / JP Morgan --and typically are not as sophisticated as the regulators that they are superseding.  But at least they seem to get action.  For instance, can you name one bank or brokerage executive that was indicted because of the financial crisis.  Yes, the SEC doesn't indict but the justice department does and they both work for the same master.  How about Angelo R. Mozilo of countrywide.  Aside from paying a small fine, he is living the good life on some desert island somewhere

In short, the way to stop NY State from harassing the good people at JPMorgan is too create an effective regulator.  If they don't we are going to have bigger problems than dealing with nuisance law suits.