Ex-JPMorgan employees charged. Who else should be worried by the London Whale?

The head office of JPMorgan Chase rises over Park Avenue in midtown Manhattan on July 13, 2012 in New York City.

Turns out the London Whale is actually more of a rat. Bruno Iksil, the former JPMorgan Chase trader known for the bank's messy $6 billion trading loss, has been helping federal prosecutors.

And today, Preet Bharara, the U.S. Attorney in New York, filed charges against two other ex-JPMorgan employees for allegedly cooking the books to hide the extent of the mounting losses.

The criminal complaints hint that prosecutors could target more senior JPMorgan employees who knew about the London Whale trade. But if not, there are two views as to whether charging only lower downs will instill fear in banks and bankers.

“My answer is absolutely,” says Bob Hartheimer, a regulatory and financial-services consultant to the banking industry. His take represents view 1. “It doesn’t make a difference what the level the employee is but the seriousness of the charges.”

Which in this case are serious, he notes. “False books and records, wire fraud, false SEC filings.”

But then there’s the other point of view -- that until you make top executives top hurt, nothing will change. In that corner is William Black, a professor of economics and law the University of Missouri and author of the book, “The Best Way to Rob a Bank is to Own One.”

“It’s quite correct that they’re going to need to go to the C suite,” he says, “to the CEOs and CFOs before anyone is going to take them remotely seriously.”

U.S. Attorney Preet Bharara made it clear today that because of the economic harm a single bank can cause, we need to aim high. “Prosecutors need to be even more aggressive, regulators need to be even more vigilant and…companies need to pay closer attention to the culture they create.”

But the University of Missouri’s Black notes that the two ex-traders charged today are “small potatoes.” And, he adds, “Their real crime, from JPMorgan’s perspective, is that they lost JPMorgan’s money.”

He doesn’t think this case will have any serious impact, but he is glad the Justice Department is prosecuting someone.

“The proof,” he says, “is in the pudding, and so far they haven’t delivered even a shoddy Jell-O dessert.”

About the author

Sally Herships is a regular contributor to Marketplace.

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