The Best and the Brightest?
Why We Need Serious Bank Regulation
Here we go again! JP Morgan Chase has already admitted to squandering two billion dollars on risky investments that CEO Jamie Dimon – who is rumored to be the smartest banker in America – has already confessed was “stupid” and “self- inflicted.” But now it is rumored that the real deal on the losses is that when the final tally is made the loss will be four billion.
In a frantic attempt at damage control they decided to kick Ina Drew, head of the Investment Office, to the curb. But at the stockholders meeting in Tampa a few days later Dimon was not only retained as CEO but was awarded a 23 million dollar compensation package! They left no doubt that the bank has hitched their star to his leadership.
Yet as President Obama has pointed out, it is precisely because Mr. Dimon is so highly regarded as a “smart” banker, some say the brightest bulb in the box, that we need to fully enact the regulatory regime he has put in place to police the activities of banks in order to prevent these things from happening. But the Republicans who control the House say No dice!
The “free market” ideologues in the Grand Obstructiionist Party claim to see nothing in this that would justify tightening the reins on bankers. And they are supported in this position by their presumed presidential candidate Mitt Romney….a corporate raider who is contemptuous of the public interests and thinks there should virtually be no government regulation of the private sector.
Far from being alarmed by the four billion dollar debacle, and calling for more effective regulation of the banking sector, Mitt The Stiff coolly pointed out that although the losses at JP Morgan Chase are “substantial;” it only concerns the bank and their investors. He came close to saying “the public be damned!”
The problem with Mitt’s attitude and analysis is that if JP Morgan Chase gets in serious trouble and is in danger of collapse, it is we, the taxpayers who are innocent by-standers that will be called upon to bail them out. And we will have no choice but to go along with the program, because refusing to do so will be tantamount to cutting off our nose to spite our face.
The kind of economic sophistry spouted by Mitt and his ilk on the right, militant ideologues on the left, and anarchist of both ideology stripes, who argue that we should just let such banks fail, is dangerous nonsense that would unleash the dogs of chaos in the US economy. Alas this cure would prove more deadly than the disease.
Failure by a bank as big as JP Morgan Chase, with 2.3 trillion in assets and a 71 trillion derivatives book, could bring down the entire banking system in the US and the collapse would quickly spread world-wide. They are literally too big to fail! That’s why the refusal of the House Republicans to fund the agencies tasked with regulating the banks amount to criminal negligence of the public interests.
The Republican pledge to undo the regs all together should they gain control of the Senate and the White House borders on treason! This policy could bring on the fall of our country; millions of Americans would again suffer catastrophic financial losses before fully recovering from the last economic disaster ushered in by the liaise faire policies of the Republicans.
The prescription for restoring a healthy banking system advocated by Elizabeth Warren, a Harvard Law Professor who played a critical role in designing the Obama Administration’s regulations, is that Congress restore the Glass –Steagall Act. “With the Progressive Change Campaign Committee,” she says, “I’m calling on Congress to put Wall Street reform back on the agenda and to begin by passing a new Glass-Steagall Act. This was the law that stopped investment banks from gambling away people’s life savings for decades — until Wall Street successfully lobbied to have it repealed in 1999.”
This prescription is echoed by securities lawyers, other banking professionals and some Democrats. But the Republicans will have no part of it; they only intend to give lip service to regulating the bankers when it is convenient. Left to their own devices they fully intend to allow investment bankers to gamble with the nation’s economy using exotic financial instruments such as Derivatives and Credit Default Swaps.
These are the practices that drove the economy off the cliff under the Bushmen, and they are the principle culprit in the present JP Morgan Chase debacle. As I write reports on the financial channel CNBC are suggesting that another 100 billion in investments could be at stake due to the shock waves from the present blunder that is shaking investor confidence. Should that happen who knows where it will all end? It is too ghastly to contemplate….so most people choose not to.
Alas, while the rest of us are forced to bail the banks out when they fuck up and face collapse, nobody bails out the hard working citizens who are forced to bear the loss. They are just shit outta luck as my grandfather would say. The Afro-American community was especially devastated by the Bush Depression – which President Obama prevented from becoming the worst depression in American history – 65% of aggregate black wealth was wiped out. My sister Melba is a classic victim of the banker’s folly.
Melba is a model citizen; she did everything right. She went to college and earned three degrees; she worked for over forty years as an educator; she save her money and invested it wisely….or so she thought. Just a few years into her retirement, while serving as the principal caretaker of our 90 year old mother, she was victimized by the amoral and reckless behavior of the bankers that wrecked the American economy. In a matter of months she lost a half million dollars; her life’s savings was wiped out!
As I spoke with Melba in her lovely home down on the Jersey shore a couple of days ago, she spoke with a barely concealed rage as she recounted Governor Chris Christie’s attempts to renege on the agreement’s her union negotiated in good faith with the state regarding retiree’s benefits – and which she paid into for 40 years.
It is especially galling because he has given away billions in tax breaks to the filthy rich! She lamented the fact that she couldn’t even write her losses of her taxes, and she has no doubt that she is the victim of a vast conspiracy of the investor class and their shills in government to fleece the working class and make us pay for their mismanagement of the economy.
Melba is also convinced that the bankers and the political puppets that refuse to seriously regulate their reckless activities and protect the public interests – which all politicians are sworn to do – are the worse liars and criminals in America. So do I…that’s why I have publicly insisted that a just punishment for the bankers who crashed the economy is to be executed on primetime television by firing squads manned from volunteers recruited by those whose lives have been injured by their heartless crimes.
Jamie Dimon of JP Morgan Chase escaped any blame for the Bush crash, mainly because he was wise enough to stay out of the securitized sub-prime loan fiasco, but the present multi-billion dollar losses is a warning sign that he too bears watching. There are some experts on our financial system who think Dimon has just been lucky, because JP Morgan Chase has engaged in all kinds of risky, unethical and even illegal behavior under his stewardship.
Professor Amar Bhide of Tufts University – where Dimon received his undergraduate education – has gone on the public record arguing that this unsavory record makes Dimon unfit to head a massive financial institution of critical importance to the stability of the US economy. Furthermore, aside from the questionable ethics of many of his activities, Professor Bhide questions the extent to which Dimon even understands the extremely complex business of derivatives trading.
“Jamie has never been a trader or a front line manager of a big trading firm,” he says, “it is absurd that such a man should be in charge of a 71 trillion dollar derivatives book.” Hence it goes without saying that if Jamie Dimon is the best and the brightest of America’s bankers, that is the best argument for implementing the Dodd-Frank financial regulations immediately.
It is also the best argument for defeating Mitt Romney and taking back the House in the coming elections. Americans have the power to do it with their votes, but it is far from a fait accompli because millions of Americans are too caught up amusing themselves with bread and circuses to pay proper attention to these complex matters.
Thus “Boobus Americanus” is fairly clueless about what the late great novelists/essayist James Baldwin once called all that boring “politics and economics jazz;” a comment that horrified political theorist Harold Cruse. For as Thomas Jefferson warned at the inception of our participatory democracy: “An ignorant electorate will elect and return the worst people to power!” That’s why the future of this nation is at stake in the coming elections.
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Playthell George Benjamin
Harlem, New York
May 19, 2014