JPMorgan Chase CEO Jamie Dimon, a longtime Democrat for those who don’t know, endorsed a higher top marginal tax rate and an increase in the capital gains rate in a speech at the Council on Foreign Relations yesterday. He also blamed the sluggish recovery on over-regulation and uncertainty and endorsed Bowles-Simpson as an economic salve. “This economy would have been booming” if Congress passed Bowles-Simpson, Dimon said. You need to put the endorsement of marginally higher taxes in the context that they exist in service to a fairly nasty and counter-productive austerity program.

Dimon also discussed Bear Stearns, the subject of a lawsuit over their issuance of mortgage backed securities last week. He said that JPMorgan Chase has lost between $5 and $10 billion as a result of the Bear Stearns deal, and that he would put the fact that the government asked his firm to swallow Bear Stearns in 2008 “in the unfair category.”

But Dimon saved his best petulance for a discussion of the Fail Whale trades, the multi-billion dollar trading loss out of the company’s London office.

In one of his last visits to Washington, Dimon faced a barrage of questions from members of Congress about JPMorgan’s $6 billion “London Whale” trading loss in the spring. While Dimon remains contrite about the loss, he insists lawmakers overreacted.

“We made a stupid error,” he said. “Businesses make mistakes, they learn from it and get better. Only when I come to Washington do people act like making a mistake should never happen. Only with academics and politicians is it not allowed.”

What he calls a mistake, others would call a criminal action, as the bank failed to honor internal controls mandated under the Sarbanes-Oxley Act, instead allowing traders to provide the valuations for its financial disclosures to shareholders.

It appears that JPM is attempting to make the case that rogue traders, with criminal intent, mismarked the books. That may be so and relevant criminal charges against those traders should be pursued. But that strategy does not protect management. If there was mismarking, especially to the extent that occurred here, it is the responsibility of management to know or have procedures in place to alert them to the potential for fraud.

Sadly, the government appears to be buying the “rogue traders” line, or at least the media is helping them out a bit. Andrew Ross Sorkin’s Dealbook shop at The New York Times feeds information about an investigation into the Fail Whale trades focused squarely on the traders:

Federal authorities are using taped phone conversations to build criminal cases related to the multibillion-dollar trading loss at JPMorgan Chase, focusing on calls in which employees openly discussed how to value the troubled bets in a favorable way.

Investigators are looking into the actions of four people who previously worked for the team based in London responsible for the $6 billion loss, according to officials briefed on the case. The Federal Bureau of Investigation could make some arrests in the next several months, said one person who spoke on the condition of anonymity because the inquiry was ongoing.

The phone recordings, which were turned over to authorities by JPMorgan, have helped focus the investigation, the officials said. Authorities are poring over thousands of conversations, in English and French. They are also relying on notes that employees took during staff meetings, instant messages circulated among traders and e-mails sent within the group.

JPMorgan Chase clearly wants to sell out its former traders and confine the blame to them. I never look a gift prosecution of corrupt bankers in the mouth, but the law stipulates that the top executives, including Jamie Dimon, are responsible for any fraudulent valuations delivered to shareholders. Period. Sarbanes-Oxley makes this incredibly simple. But JPMorgan has tossed the government a few bad (and small) minnows, and the government has so far taken the bait.

Incidentally, some of the traders in question are from France, which will make it nearly impossible to get them extradited to face charges. So if there are prosecutions, they would fall on individuals who cannot be put behind bars!

If JPMorgan Chase “submitted inaccurate financial statements to regulators,” as the report indicates, top management is responsible under Sarbanes-Oxley. Criminally responsible, in fact. Anything less simply ignores the clear duty under the law.