Following the crash in 2008 and the subsequent involuntary bailout by American taxpayers, market watchers have issued ongoing warnings that too little has been done to correct Wall Street’s gambling habit. An apparent financial obsession that nearly wrecked the world’s economy. Now comes word that JPMorgan Chase, posted a $2 billion loss over a period of just 6 weeks. The Guardian reports that the bank expects to take another $1 billion in losses in the second quarter. This is the same bank that accepted $25 billion in bailout money from the U.S. Government and then used a chunk of it to expand their business by buying Bear Stearns and Washington Mutual. The bailout was sold to cash-strapped American taxpayers as a way to fix the problem by buying up toxic mortgage-related securities and to enable the banks to start making loans again. Small business and individual loans. Instead, bankers used the money to expand, making banks that were already “too big to fail,” even bigger. Some, had the gall to simply sit on the money, apparently seeing it as a gift, rather than circulating it back out into the community to get the economy moving again.
The George W. Bush/Henry Paulson bank bailout might be compared to the George W. Bush/Dick Cheney/Donald Rumsfeld invasion of Iraq. In both cases the Bush Administration’s reason for acting kept shifting from one talking point to another, until finally, any sign of reasonableness was lost.
JPMorgan Chase, is one of five big banks that were parties to a $25 billion settlement with charges of “botched loan modifications, wrongful foreclosures and unnecessary fees tacked onto the accounts of struggling borrowers.” The other four were Wells Fargo, Citigroup, Ally Financial and Bank of America.
This is the thanks the American people were given for the bailout.
The newscasts didn’t do much with the story of JPMorgan’s $2 billion hit. Can’t blame them, as the wall streeters appear to be making up the rules of their high stakes game as they move forward, or backward, such as the case may be. Hopefully the Fed will get up off it ample backside and at least attempt to determine what’s going on, as the the market value of other major banks fell following the announcement by JPMorgan Chase.
Politically, it’ll be interesting to see if and how the Republicans try and spin this to make President Obama look bad, which won’t be difficult as this is happening on his watch. Our collective national amnesia is sure to blunt the impact of the fact that both the banking mess and the bailout got started during the administration of George W. Bush. The Republicans, are sure to make this Obama’s problem, even though they’ve done nothing to break up banks that continue to be too big to fail, as banking industry lobbyists continue greasing the political wheel on Capitol Hill. A process which, experts say, threatens to take our economy to the brink yet again. According to McClatchy News, “Commercial banks spent nearly $62 million last year on lobbying, another record total for an industry that has become one of the most active voices in the political arena.
Beyond that, how many are there in Congress who actually understand synthetic credit, the various kinds of derivatives, credit-default swaps and all the rest of it? How can Wall Street be under the rule of law, if the law as written fails to adequately cover the apparently fluid nature of what the streeters are doing and government oversight is limited? Is anybody looking out for the American people? Without the rule of law, aren’t we left with the law of the jungle?
Among those who think Mr. Obama should act, is former Labor Secretary and current Chancellor’s Professor of Public Policy at Berkeley, Robert Reich, who wrote in late October of last year, “Economically it would be smart for Obama to go after the Street right now because the Street’s lobbying muscle has reduced the Dodd-Frank financial reform law to a pale reflection of its former self. Dodd-Frank is rife with so many loopholes and exemptions that the largest Wall Street banks – larger by far than they were before the bailout – are back to many of their old tricks.”
Are you comfortable with the knowledge that another even bigger crash could be just around the corner?
One can’t help but think about history repeating itself, and the move in 1902 by then President Theodore “Teddy” Roosevelt, to break up J.P. Morgan’s Northern Securities Corporation. PBS reports, “Morgan condemned the president, not just for what he had done, but for the ungentlemanly way in which he had done it — publicly and without warning. A new paradigm had been established in Washington, and Roosevelt would go on to file suit against more than 40 major corporations during his presidency.
“Too big to fail” is nothing new.