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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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Hmm ...

A) disparage a person who cooperates with law enforcement
B) spend 5 seconds thinking of an opening line that doesn't involve animal-based puns

Oh, the difficult journalistic choices you folks have to make!

Let's accept that anything the SEC and Justice Dept. do now is meaningless window dressing. We think about cleaning up the blood, but the patient is still hemorrhaging. At least one Sen. is trying to address the hemorrhage, Angus King, who is trying to resurrect history with bringing back Glass Stegall. History is incredibly instructive. The financial industry undermined the middle class and has remained intact while the average person has been decimated. Thanks to a corrupt and shameless Congress.

Really? Of any way to begin the report, you choose to name him a "rat," for the one action that that actually benefited investors? Maybe, a few more "rats" would have saved the global financial ship from sinking so many peoples bank accounts. But if this so-called "rat" can rid us a few bad apples, and the environment that encourages their behavior...then let the Pied Piper play, and let the rodents dance.

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