JP Morgan Allowed Lehman To Use Customer Money As Collateral

Washington Post:

Last fall, the big brokerage firm MF Global collapsed with as much as $1.6 billion of customer funds missing and unaccounted for. There, too, it appears that clients’ money was treated as if it belonged to the firm.
The customer deposits at issue in the Lehman matter, which totaled from about $250 million to more than $1 billion at any one time, were supposed to have been held for customers who were using Lehman as a broker for futures and options trades.
Federal law declares that such funds should not be commingled with those of the firm, the commission said.
“The laws . . . impose critical restrictions on how financial institutions can treat customer funds,” CFTC enforcement director David Meister said in a statement. “As should be crystal clear, these laws must be strictly observed at all times, whether the markets are calm or in crisis.”
JPMorgan refused to release the funds in September 2008, partly because they were tied to Lehman’s borrowing from JPMorgan, the CFTC said. JPMorgan also cited “its inability to verify” that the funds belonged to customers, the commission said.

Let's see.  Bear Stearns, Lehman Brothers, MF Global.  What do they have in common?  Oh yeah, they were banking heavily with JPMorgan before they failed.  In at least two cases, JP Morgan looks to have accepted customer money as collateral.  I won't say they were thieving, but where there's smoke, there's often fire.