What A Destructive Wall Street Owes Young Americans
By Ralph Nader | March 14, 2014
Wall Street’s big banks and their financial networks that collapsed the U.S. economy in 2008-2009, were saved with huge bailouts by the taxpayers, but these Wall Street Gamblers are still paid huge money and are again creeping toward reckless misbehavior. Their corporate crime wave strip-mined the economy for young workers, threw them on the unemployment rolls and helped make possible a low-wage economy that is draining away their ability to afford basic housing, goods, and services.
Meanwhile, Wall Street is declaring huge bonuses for their executive plutocrats, none of whom have been prosecuted and sent to jail for these systemic devastations of other peoples’ money, the looting of pensions and destruction of jobs.
Just what did they do? Peter Eavis of the New York Times provided a partial summary – “money laundering, market rigging, tax dodging, selling faulty financial products, trampling homeowner rights and rampant risk-taking – these are some of the sins that big banks have committed in recent years.” Mr. Eavis then reported that “regulators are starting to ask: Is there something rotten in bank culture?”
The “rot” had extended long ago to the regulators whose weak laws were worsened by weak enforcement. Veteran observer of corporate criminality, former Texas Secretary of Agriculture and editor of the Hightower Lowdown newsletter, Jim Hightower writes:
“Assume that you ran a business that was found guilty of bribery, forgery, perjury, defrauding homeowners, fleecing investors, swindling consumers, cheating credit card holders, violating U.S. trade laws, and bilking American soldiers. Can you even imagine the punishment you’d get?
How about zero? Nada. Nothing. Zilch. No jail time. Not even a fine. Plus, you get to stay on as boss, you get to keep all the loot you gained from the crime spree, and you even get an $8.5 million pay raise!”
Hightower was referring to Jamie Dimon, the CEO of JPMorgan Chase, “the slick CEO who has fostered a culture of thievery during his years as a top executive at JPMorgan, leading to that shameful litany of crime.”
Shame? Dimon doesn’t know how to spell it. “I am so damn proud of this company. That’s what I think about when I wake up every day” he said in October, 2013.
Millions of young Americans (called Millennials, between ages 18 and 33) should start agitating through demonstrations, demand petitions and put pressure on the bankers and members of Congress. First the plutocrats and their indentured members of Congress should drop their opposition to a transaction tax on Wall Street trading. A fraction of a one percent sales tax on speculation in derivatives and trading in stocks (Businessweek called this “casino capitalism”) could bring in $300 billion a year. That money should go to paying off the student debt which presently exceeds one trillion dollars. Heavy student debt is crushing recent graduates and alarming the housing industry. For example, people currently between the ages of 30 to 34 have a lower percentage of housing ownership than this age group has had in the past half century.
A Wall Street transaction tax was imposed in 1914 and was more than doubled in 1932 to aid recovery from the Great Depression before it was repealed in 1966. But the trading volume then was minuscule compared to now with computer-driven trading velocity. A tiny tax – far less than state sales taxes on necessities – coupled with the current huge volume of trading can free students from this life-misshaping yoke of debt.
Some countries in Europe have a securities transaction tax and they also offer their students tuition-free university education to boot. They don’t tolerate the same level of greed, power and callous indifference to the next generation expressed by the monetized minds of the curled-lipped Wall Street elders that we do.
What about young people who are not students? The Wall Street tax can help them with job-training and placement opportunities, as well as pay for tuition for technical schools to help them grow their skills.
A good many of the thirty million Americans stuck in a wage range lower than the minimum wage in 1968, adjusted for inflation, (between $7.25 and $10.50) are college educated, in their twenties and thirties, and have no health insurance, no paid sick leave and often no full-time jobs.
A youth movement with a laser-beam focus, using traditional forms of demonstration and connecting in person, plus social media must come down on Wall Street with this specific demand. Unfortunately, while Occupy Wall Street started an important discussion about inequality, they did not advance the transaction tax (backed vigorously by the California Nurses Association), when they were encamped near Wall Street and in the eye of the mass media in 2011. A missed opportunity, but not a lost opportunity. Fighting injustice has many chances to recover and roar back.
It is time for, young Americans to act! Push Congress to enact a Wall Street speculation tax to help roll back your student debt and give you additional opportunities that are currently denied to you by the inside bank robbers who never had to face the sheriffs. They owe you.
As William C. Dudley, the eminent president of the Federal Reserve Bank of New York recently said of Wall Street – “I think that they really do have a serious issue with the public.” Yes, penance and future trustworthiness enforced by the rule of law.
nowhere.
Young America, you have nothing to lose but your incessant text messages that go nowhere.
Start empowering yourselves, one by one, and then connect by visiting Robin Hood Tax.
Obama’s ‘Raise’ for Federal Workers is a Bad Joke
By Dave Lindorff | This Can’t Be Happening | January 30, 2014
President Obama, five years late, in his fifth State of the Union speech, decried the terrible income gap in the US, a gap which has worsened during his years in the White House. Saying he was tired of the obstruction of his policies by Republicans in Congress, he said he would take action on his own, and as evidence offered up the puny “fix” of raising the minimum wage paid to employees working on federal projects from its current $7.25 to $10.10 per hour. This executive order, which could have been done when he took office in the depths of the Great Recession back in 2009, would be not immediate but would be phased in over the next three years.
What a pathetic joke!
As the New York Times pointed out the next day in its report on the president’s speech, the “raise” he was offering would only apply to “a few hundred thousand” workers. If we assume that “few” to be 300,000 people, and that each of those people works a 40-hour week 50 weeks per year, that would mean that in the first year, when the incremental increase will be 95 cents/hour, each worker currently earning $7.25 per hour will earn an extra $1900, for a total gain by all the impacted workers of $570 million.
Just to give a sense of how little that $570 million is, it works out to just over one-third of the unit cost of one F-35 Joint Strike Fighter [1]. That’s the Pentagon’s latest new fighter jet, designed and built by Lockheed-Martin, the one that has no enemy to fight and that is probably too flawed and too costly to ever risk in battle anyhow.
What is really obscene about the president’s token wage-increase gesture is that the $10.10 wage that he is saying the federal government will ultimately pay to its contract workers in three years would, in constant dollars, still be less than what the federal minimum wage was back in 1968, almost half a century ago! Heck, if the president had really wanted to show the obstructive Republicans and the American people that he meant business about going it alone, he could have used that same executive authority to grant those impoverished workers an immediate raise to $15 per hour — the rate that voters approved as a minimum wage last November in Seattle, Washington, and that labor activists say would actually go a ways towards alleviating rampant US poverty.
Even worse is the reality that we wouldn’t even be talking about this pathetic offer, or about a current federal hourly wage of $7.25, if Obama, back in 2009, fresh off a huge election win and with Democratic Party control of both houses of Congress, had honored his campaign pledge to re-establish fairness in the National Labor Relations Act by passing “card check” legislation, making it possible for workers to unionize their workplaces by simply having a majority of workers sign cards saying they wanted a union. As things stand, and as the Obama the candidate denounced on the stump, employers are able to use the NLRA to delay union elections for years, during which time they typically engage in a campaign of lawless intimidation, illegally fire union organizers and end up defeating union drives, suffering no penalty afterwards (labor law limits employers found guilty of violations to having to pay back lost wages. There is no provision in the law to hit violators with penalties.)
Had Obama not reneged on his promise to the workers who voted him into office, dropping, right after his oath of office was taken, all efforts to reform the labor laws relating to union organizing, and had he instead, back when he had a Congress that, as a (then) popular new president he could have pressed for passage of the needed legislation, we would not today have only 11.3 percent of Americans in unions (and only 6.7% of workers in private-sector businesses!).
The reality is that even as the percentage of unionized American workers has continued to decline from over 30 percent in the 1950s to 11.8 percent in 2011 and 11.3 percent today, Bloomberg News reports [2] that the percentage of those workers who tell pollsters they would prefer to be in a union has continued to grow, with a majority of workers saying they would prefer to be working in a unionized workplace. In fact, the percentage of workers saying they would prefer to be unionized is higher than it has been since 1980. (As for those right-wing claims that unionized workers don’t like their unions, the same polling shows that 90 percent of union members would vote for their union if given the chance.)
Obama screwed his worker supporters from day one, when he decided to “delay” reforming the labor laws to make the unionization process fairer and illegal anti-union tactics by employers more difficult. Now he’s down to insulting them with his latest pathetic offer of a puny “raise” for the lowest paid federal contract employees.
Meanwhile, it is in his power to take another action which would, albeit indirectly, profoundly impact the wage and wealth gap currently afflicting this country. He could reverse his 2009 instructions to his lickspittle Attorney General Eric Holder not to criminally prosecute the executives of the giant financial corporations that robbed the American people and trashed the US economy, throwing it into what continues to be the greatest economic collapse since the Great Depression. Prosecuting the financial tycoon/crooks and clawing back their hundreds of billions of dollars in ill-gotten gains would not only dramatically level the wealth divide by hacking away the high incomes; it would also send a message to the whole corrupt capitalist class that ill-gotten gains would no longer be ignored.
Sadly, though, instead of prosecution of the criminal syndicate that is the banking industry, the Obama administration, when it has even bothered to prosecute larger institutions, has only levied fines on these companies — always without even requiring them to admit to guilt — fines that barely even dent the banks’ record profits, and that usually can be deducted from income, thus making them effectively subsidized by the very taxpayers who have been injured by the industries crimes.
The latest such outrage was the non-prosecution settlement reached by the Attorney General’s office with JPMorgan Chase, the nation’s largest bank. Under that settlement, JPMorgan Chase pays $20.5 billion in fines for its conscious and deliberate role in enabling the $65-billion ponzi scheme of Bernie Madoff, all of which was conducted through an account at JPMorgan Chase. There was no effort to prosecute JPMorgan Chase Chairman and CEO Jamie Dimon, who headed the bank through years of the entire Madoff scam, and AG Holder didn’t even insist, as he could have, that the bank dump Dimon as Chair and CEO. So Dimon continues in his role as head of the bank despite what has to be seen as either his complicity in an unprecedentedly huge criminal conspiracy, or his incomprehensively inept leadership.
And just to show how little the banking industry fears the Obama administration and its “Justice” Department, within less than two weeks of this outrageous “settlement,” the JPMorgan Chase Board of Directors voted to raise Dimon’s salary and bonus package by 75% to $20 million. No doubt the board members voting for this raise think Dimon earned the extra $8 million for keeping them all out of jail, along with himself.
It used to be that Democratic presidents would coddle and enrich the wealthy and powerful, while tossing crumbs to working people. Obama has taken this favor-the-rich tradition further. He openly serves the rich and powerful and then insults the intelligence of the working people who voted him into office.
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Harsh Prosecution for the Little People and the Big Guys Skate
By Dave Lindorff | This Can’t Be Happening! | January 9, 2014
The US Department of “Justice” has a distinctly nuanced concept of that term, taking a tough, no-holds-barred stance when it comes to individuals — especially little people without much power or influence — and trying at all costs to avoid prosecution when it comes to the powerful, and to big corporations — especially big financial corporations. That schizoid approach to prosecution is personified in the recent actions–and inaction–of the DOJ’s man in Manhattan, US Attorney for the Southern District of New York Preet Bharara.
You remember Preet. He’s the guy who came down so hard on a deputy consul general of the Indian Consulate in New York who was accused by his office of “human trafficking.” Specifically, 39-year-old Devyani Khobragade stands accused of lying to US visa officials in New Delhi when she applied for a visa to bring an Indian maid to the US to work in her home, allegedly claiming to them that she would be paying the woman some $4500 a month, when the maid, who left the job, claimed she was paid just $573 monthly. The US prosecutor (himself a naturalized citizen and native of India who grew up in the US) had Khobragade arrested as she dropped her two children off at school, brought her to the federal lock-up in Manhattan, where she claims she was strip searched and cavity searched several times, and finally released her on $250,000 bond, to face felony charges that could potentially result in 10 years’ jail time. (Khobragade has denied the charges and claims that the maid in question was extorting her family.)
Explaining his tough approach to the case, Bharara has stated that Khobragade’s treatment under arrest was not harsh, and that she was simply subjected to “routine procedures of the US Marshal’s Service” for persons being placed in detention following arrest. In fact, he claimed she had been extended “special courtesies” such as being allowed to make multiple phone calls to assure that her children would be cared for in her absence, and being offered coffee by her arresting officers. Bharara also defended his department’s tough approach in this case saying that human trafficking is a serious crime and that “Foreign nationals brought to the United States to serve as domestic workers are entitled to the same protections against exploitation as those afforded to United States citizens.” He went on to declare that the alleged lying to visa officials and the alleged “exploitation of an individual” were something that “will not be tolerated.”
Some might immediately point out that exploitation of low-paid American workers is rampant — including in Bharara’s jurisdiction of New York–and that the Justice Department largely ignores it. (US workers routinely are defrauded out of overtime, get paid below minimum wage, are denied unemployment benefits they are owed, are forced to work in dangerous conditions, and are abused on the job and the “Justice” Department does nothing.) But even putting that huge hypocrisy aside, there’s the matter of Jamie Dimon and JPMorgan Chase.
This past week, Preet Bharara also announced that his office had reached an agreement with the nation’s largest “too-big-to-fail” bank on a fine and penalties of $2.5 billion for violating the Bank Secrecy Act. Specifically, JPMorganChase was accused of turning a blind eye to the record-breaking pyramid scheme of Wall Street scammer extraordinaire Bernie Madoff, who bilked clients out of a staggering $65 billion over two decades, largely working through one account he had at JPMorganChase.
Now, you’d think that for a crime that large and egregious, someone — and ideally it would be bank head Jamie Dimon — ought to have been frog-marched in cuffs out of JPMorganChase headquarters, and then brought down to the same lock-up Bharara had Khobragade taken to, there to be similarly given the “routine” treatment of strip searches and cavity searches that she got. (After all, Dimon became the bank’s president and chief operating officer back in July 2004, later becoming chairman and CEO too, and over that period the bank concedes there had been plenty of internal warnings about Madoff, who was essentially using the bank to execute his massive fraud.)
Nope. Didn’t happen.
In fact, while the the US Attorney’s Office claims Bharara and his prosecution team technically “filed” criminal charges against the bank (though not against any bank officials), when they met in a “congenial” setting with Dimon and his attorneys, it was agreed that there would be no criminal prosecution at all. Instead, the bank agrees to a fine of $1.7 million plus a payment of $350 million to the Comptroller of the Currency as well as some $500 million in compensation to victims, and said it would accept a “deferred prosecution agreement,” giving the bank two years to “overhaul its controls against money laundering.” After that time, all is to be forgotten, and the charges will be dropped. Under this sweetheart agreement, the bank did not have to plead guilty to anything as part of this deal, but was allowed instead to “stipulate to the facts of the case.” This is even though JPMorganChase admitted that its own office in the UK, in 2008, sent a detailed warning explaining to senior managers that Madoff’s whole operation appeared to be a scam. (Wouldn’t you get a deal like that after an arrest for pot possession or for DWI!)
Bharara insisted, at a press conference announcing the settlement and the agreement to drop any criminal prosecution against the bank, that it was a good deal. He went to great lengths to insist that the bank’s failure was “institutional,” implying that it would not be appropriate to prosecute individuals. He refused to comment on the suitability of Dimon to continue running the bank, though his office could easily have insisted on Dimon’s departure as part of any non-prosecution settlement. He also several times repeated that there were “concerns” about possible “collateral consequences” of a criminal prosecution. At one point, when questioned by a reporter, he explained that those “consequences” might include “employees being laid off, the bank failing, or shareholders losing money.” Of course, JPMorganChase failing would merely mean that the institution would be broken up, with the pieces being taken over by other institutions under supervision of the Office of Comptroller. Lost jobs? What about all the jobs lost because of Madoff’s scams? And as for shareholders, aren’t they the owners of the bank, who are supposed to be insisting that it is well run and acting in accordance with the law, not to mention looking out for fraud? If they weren’t doing that, then they deserve to lose money!
What’s really going on, though Bharara struggled mightily to avoid having to admit it, is that if you’re big enough and powerful enough, you don’t get criminally prosecuted by the DOJ.
Remember that phrase “Equal justice under the law”? It’s engraved on the front facade of the US Supreme Court an is supposed to be a fundamental American principle. Apparently it’s just a slogan though. If you’re the nation’s largest bank, or the boss of that bank, it doesn’t apply to you. Just ask US Attorney for the Southern District of New York Preet Bharara.
Maybe we should just change the name of Bharara’s parent agency to US Department of Injustice. At least that would be honest.
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Pity JP Morgan/Chase
By CHRISTOPHER BRAUCHLI | CounterPunch | December 20, 2013
One has to feel sorry for JPMorgan Chase. Several months ago it thought it had not only paid a sufficient amount in fines to make up for its bad behavior but it had also engaged in a form of penance for some of the bad things it had done. Little did it know.
The penance was reformation of its practices with respect to payday loans. Before the reforms, JPMorgan Chase (and many other institutions dealing with payday lenders) permitted payday lenders to automatically withdraw repayment amounts from the borrowers’ bank accounts and agreed to prevent borrowers from closing their accounts or issuing stop payment orders so long as the payday lender was not fully repaid. As a result a borrower who did not have enough money in the bank to repay the lender the amount due on a given date was charged an insufficient fund fee by the bank each time the lender submitted a request for payment in many cases generating hundreds of dollars in fees imposed on the borrowers. That practice came to an end in May 2013. The fines it paid, in addition to its act of penance were described by Kevin McCoy of USA Today.
Between June 2010 and November 2012 JPMorgan Chase paid more than $3 billion in fines and settlements that related to, among other things, overcharging active-duty service members on their mortgages, misleading investors about a collateralized debt obligation it marketed, rigging at least 93 municipal bond transactions in 31 states, and countless other misdeeds. In August 2012 alone it paid a fine of $1.2 billion to resolve a lawsuit that alleged it and other institutions conspired to set the price of credit and debit card interchange fees. In January 2013 and February 2012 it paid $1.8 billion to settle claims that it and other financial institutions improperly carried out home foreclosures after the housing crisis. Not only did it pay large fines. Jamie Dimon, its unfailingly cheerful, beautifully coiffed CEO, took a pay cut which, including deferred compensation, reduced his daily salary from $63,013 to $31,506. Sadly, those events were not to be the end of its troubles. Indeed, as it turns out they were merely the tip of the iceberg.
In July 2013 it paid $410 million for alleged bidding manipulation of California and Midwest electricity markets. In September 2013 it paid $389 million for unfair billing practices, in September it paid $920 million for actions of the “London Whale” disaster, and in October 2013 another $100 million with respect to the same fiasco. Then came the really big news. On November 19, 2013 it was reported that JPMorgan Chase was going to pay $13 billion to settle what in non-legal terms would be described as a whole bunch of claims that had to do with the mortgage crisis of a few years back. Included in the $13 billion is $4 billion for consumer relief, $6 billion to pay to investors and the remaining $3 billion is a fine. December 13 it was announced that the bank was entering into a $2 billion deferred prosecution agreement with the government because of its role in the Bernie Madoff Ponzi scheme. According to the settlement the bank ignored signs that suggested Bernie Madoff was conducting a Ponzi scheme and cheating his investors.
The payment of almost $20 billion in fines would be enough to spoil the holidays for almost anyone. Happily for the bank, there was a silver lining to its financial cloud. Although $13 billion is a lot of money, Marianne Lake, the Chief Financial Officer of the bank explained that taxpayers will help the bank pay the fine. She explained that of the $13 billion, $7 billion is tax deductible. In addition to that bit of cheery news, no one has to plead guilty to anything bad in connection with the Madoff fine. Although the bank is agreeing to a deferred prosecution no one such as Jamie Dimon, is going to jail. There will, of course, be some public shame for the bank, kind of like being placed in the stocks in a public square. The court filing in which the settlement is finalized will list in detail all the criminal acts committed by the bank for which it will not be punished. There is not a criminal anywhere in the world who would not happily accept a public recital of the crimes committed instead of entering a formal plea of guilty with the attendant risk of going to jail. A bit of embarrassment beats a bit of time in jail every time. Just ask Jamie Dimon or other officers at JPMorgan Chase.
CHRISTOPHER BRAUCHLI is a lawyer in Boulder, Colorado. He can be e-mailed at brauchli.56@post.harvard.edu.
The insolvent United States banking system: lessons from J.P. Morgan Chase
Why the banks must be nationalized
By Horace Campbell | PAMBAZUKA NEWS | 2012-05-17
Since September 15, 2008 the United States economy has been like a ticking time bomb with the unregulated activities of the banks the fuse that is slowly burning. This fuse has affected the international banking system and while citizens of the United States are focused on an electoral contest, the issues of the future of the U.S banking system, the future of the dollar and the future of the Euro are bringing home the reality of the capitalist depression. Two weeks ago, Paul Krugman released a book entitled, End this Depression Now. This book sought to galvanize action by the US government to stimulate the economy based on the twentieth century Keynesian ideas of stimulating growth. Increasingly, it is becoming clearer that far more drastic political measures will be needed if the international financial system is to be protected from the gambling of the top bankers in the United States. Wealth creation and a new economic system are needed to meet the needs of human beings.
This reality was brought home last Thursday, May 10, when it was revealed that J. P Morgan Chase, the largest bank in the United States had been involved in the most risky type of speculative trading that was not supposed to be undertaken by a federally insured depository institution. The nature of the speculative trading is still covered up by the media but from what has been coming out there were bets placed by a derivative trader who was placing US$100billion bets that the US economy would recover. One report called the operation ‘trades in the synthetic derivatives hedging business.’
Whether this is the real cause of the attention to JP Morgan Chase will only come to light when the media and the representatives of the people call for the removal of Jamie Dimon, the CEO of this bank and takes over the bank. While the information on the $3 billion loss is as opaque as the business world of the financial system, the nature of the risk that was being undertaken is reserved exclusively for the big banks and offers multi- million dollar profits in this ether world that is called financial capitalism.
JPMorgan Chase is currently one of the biggest banks in the world supposedly with $2.1 trillion in assets and more than 239,000 employees. I used the word ‘supposedly’ because JP Morgan Chase was one of the recipients of more than$26 billion of Troubled Asset Relief Program (TARP) funds after the collapse of Lehman Brothers and the American International Group (AIG) in September 2008. Troubled Assets was the term coined by the US government to hide from the world the state of the insolvency of the US banking system where the big banks had overextended themselves in the housing bubble issuing what was then called mortgage backed securities. These banks are still mired in the toxic mess from the orgy of speculation of that era and JP Morgan compounded its own risky position by taking over the bad bank, Washington Mutual.
The Bank JP Morgan Chase grew bigger and riskier after absorbing two of the failed banks at the center of the MBS debacle. JPS acquired Bears Stearns and Washington Mutual. Hence on top of its own involvement in the casino economy, JP Morgan Chase had taken on two failed banks in an attempt to save the US financial system.
The Tarp instrument was the means through which the US government had ‘bailed out the banks and investment houses in 2008. JP Morgan Chase was involved in the same credit default swaps (CDS) that was at the core of the gambling that brought down the system in 2008. The speculative activities of the Banks have increased since 2008 and now the press is seeking to lay the blame on one derivatives trader in London. According to the media, speculation by a derivatives trader in London has produced a $2 billion trading loss for JP Morgan Chase. It is still not clear the extent of the loss but we know that it is in the same category as the losses at MF Global last year. These losses add to the scandal after scandal and are supposed to be on par with the other debacles of 2008 when two major Wall Street institutions, Bear Stearns and then Lehman Brothers went bankrupt. This year the progressive forces must renew the call for the nationalization of the big banks which are supposed to be too big to fail.
THE ARROGANCE OF THE BIG BANKS
The rise and impending collapse of J P Morgan Chase is a cautionary tale about the fortunes (or currently misfortunes ) of the US banking system. Older readers will remember the name Chase Manhattan Bank and the era when David Rockefeller and this bank stood at the apex of US capitalism. Today Chase Manhattan no longer exists and has been absorbed through the mergers and acquisitions of the years of neo-liberal capitalism. Then there was the other major US capitalist whose fortunes were made when there were the most brutal forms of exploitation of workers. This was the banker and industrialist, John Pierpont Morgan. The career of JP Morgan was symbolic of the merger of industrial and bank capital to create financial capitalism at the turn of the twentieth century. Today at the start of the 21st century JP Morgan Chase is the result of the combination of several large U.S. banking companies over the last decade including Chase Manhattan Bank, J.P. Morgan & Co., Bank One, Bear Stearns and Washington Mutual. Going back further, the predecessors of the current banking behemoth include major banking firms among which are Chemical Bank, Manufacturers Hanover, First Chicago Bank, National Bank of Detroit, Texas Commerce Bank, Providian Financial and Great Western Bank.
JP Morgan Chase is a textbook case of what happened to US banks during the era of neo-liberalism when the Glass Steagall Act was repealed separating investment banking from federally insured deposit banks. Much attention has been paid to the two poster children of the new casino type operators who claim to be bankers, Jamie Dimon of JP Morgan Chase and Lloyd Blankfein of Goldman Sachs. These two are just at the top of the massive political structure that squeezes the mass of the citizens of the world for the top 1 per cent. In the book ‘13 Bankers: The Wall Street Takeover and the Next Financial Meltdown’, the authors Simon Johnson and James Kwak have detailed the evolution of the neo-liberal world that was spun by these bankers. According to Johnson and Kwak, the bankers created new money machines with new schemes such as securitization, high yield debt, arbitrage trading and derivatives. On top of these serial innovations we now have a new one called value at risk. Later we will be told what is synthetic derivatives hedging business. These “serial innovations created the new money machines that fueled the rapid, massive growth in the size, profitability and wealth of the financial sector over the last three decades.”
It is the accrued power of these bankers that now threatens the global system of capitalism. After the tremors of the financial markets in 2008 these same banks that called for deregulation called for bail outs because they were too big to fail. For a while, there had been word of the depth of the hole in other banks and we are still waiting for the information on Bank of America which is still under wraps with Wikileaks. Only two months ago, the Federal Reserve completed a “stress test” of the 19 largest US banks, which gave all of them a green light in terms of solvency and approved increased dividends or stock buybacks for 15 of the 19 banks. This exposure of JP Morgan exposes the fraud of the so called stress tests.
Although the banking system was propped up and we are informed in the media that these banks recently passed ‘stress tests,’ the news about the risky bets of JP Morgan is a stark reminder that the time bomb is ticking. Since that fateful week in September 2008, far from resolving the crisis of the US financial system, the bailout of Wall Street that had been orchestrated by the Federal government has resulted in a further centralization of financial assets in a handful of giant institutions that dominate American society. The further centralization now means that five of the 13 banks—JP Morgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — held $8.5 trillion in assets at the end of 2011. The big five have increased their viselike grip on the US economy over the past five years: in 2006, their financial holdings amounted to 43 percent of US gross domestic product. By the end of 2011, that figure had risen to 56 percent.
JP MORGAN AT THE FOREFRONT OF OPPOSING REGULATION
JP Dimon is the CEO of JP Morgan Chase. He has been the most active among the bankers in manipulating the system playing both sides of the political game and arguing against the regulation of the banks. Jamie Dimon was paid over US $23 million last year and now it is coming out that it is the accounting scams that produced the paper profits that enabled the big bonuses for Dimon and the traders who were urged to make riskier bets. Dimon has been the most active in the press and in his visits to the Obama White House. He has argued for the ‘markets’ to take their course when his bank has been in operation in a world that is beyond the reach of markets. While the world of these bankers is beyond the ‘market’ these are the financiers who promote the myth that the development of a generalized market (the least regulated possible) and democracy are complimentary to one another. The same bankers who argue that the economic sphere and the political sphere are separate and that the market does not need the state are the same bankers who are expending billions to lobby so that the limited regulations proposed by the Dodd-Frank legislation of 2010 are not affected. The Dodd-Frank legislation included one particular clause called the Volcker rule that was supposed to ban proprietary trading by the lords of the universe.
Jamie Dimon has been described by Barack Obama as one of the smartest bankers in the United States. Obama was simply exposing the subservience of the federal government to the bankers who are the same group pouring millions into both campaigns. The bankers are ensuring that whichever party wins in November, the US banking system will be protected. Barack Obama timidly called for regulating JP Morgan while actively engaging the soliciting of funds from one of the most notorious ‘private equity’ firms in New York. The close relationship between the private equity firms and the bankers constitute the power of the top one per cent and the US government acts to serve this one per cent. After the big scare of 2008 there was fear internationally that there would be a run on the dollar. It was this fear that induced the members of the US government to pass the Dodd-Frank Legislation to prevent the obscene conflict of interest of the banks and investment houses. The expedient which was supposed to prevent the conflict of interest was the Volcker rule, named after the former Treasury Secretary of an era before financialization. The rule placed trading restrictions on financial institutions. In the 2010 legislation, the Volcker rule separates investment banking, private equity and proprietary trading (hedge fund) sections of financial institutions from their consumer lending arms. Banks are not allowed to simultaneously enter into an advisory and creditor role with clients, such as with private equity firms. The Volcker rule aims to minimize conflicts of interest between banks and their clients through separating the various types of business practices financial institutions engage in.
JP Dimon has been the leader in opposing the Volcker rule because his organization has been at the forefront of the practice where a hedge fund is operating inside a commercial bank. Commercial banks are federally insured and are different from investment banks. Under the rules of the so called market, bankers are not supposed to take deposits from customers and then use the same deposits to make speculative bets. This was not supposed to happen but when the banks became huge money machines, they operated above the law. This is how a bank such as JP Morgan controls assets that are worth 20 per cent of the GDP of the USA.
BANKS MUST BE NATIONALIZED
Jamie Dimon sits on the Board of the Federal Reserve of New York. This is the most important position of the US financial system because this is the reserve system that holds the foreign reserves of 60 per cent of the economies of the world. JP Morgan Chase is a particularly critical financial institution, since in addition to its vast holdings; it serves as one of the two main clearing banks in New York City, along with Bank of New York Mellon, handling financial transactions for all other banks. Any challenge to its solvency immediately puts a question mark over the whole financial system. Central bankers all over the world are following with interest the call for Jamie Dimon to be removed from the Board of the Federal Reserve of New York because of conflicts of interest. The Federal Reserve Bank of New York carries out foreign exchange-related activities on behalf of the Federal Reserve System and the U.S. Treasury. In this capacity, the bank monitors and analyzes global financial market developments, manages the U.S. foreign currency reserves, and from time to time intervenes in the foreign exchange market. The bank also executes foreign exchange transactions on behalf of customers.
Tim Geithner now Treasury Secretary was the former President of the Federal Reserve Board of New York. It was under Geithner when billions were handed over to the bankers after 2008. Then Geithner was trying to save the US financial system so that foreigners will not pull their reserves out of the dollar. As Treasury Secretary, Geithner was reported to have had secret meetings with Jamie Dimon in March this year when news first surfaced of the synthetic trades.
Elizabeth Warren, now running for a Senate seat in Massachusetts, has called for the resignation of Jamie Dimon from the Federal Reserve Board of New York. Every citizen will understand that there is a conflict of interest [involved in] sitting on a board that is supposed to regulate the operations of JP Morgan Chase. But conflict of interest has never been a problem for the US capitalists. They changed the rules to suit themselves. However, this was before the era when other societies had alternatives. From China to Venezuela and from Argentina to Japan, central bankers are seeking ways to exit from the contagion of the speculative trading of US bankers.
Last year the world was exposed to the realities of the insolvency of the US financial system when there was the debate on the debt ceiling. Now it has been revealed that the debt ceiling will have to be raised again. This is sending shudders down the spine of financial institutions around the world.
The political struggles over the future of the US financial system are maturing. In order to pre-empt utter disaster the President of the Federal Reserve Bank of Dallas has called for the big banks to be broken up. The big banks continue to act on the assumption that the US dollar will be the reserve currency of international trade, especially now that the Euro is in disarray. These big banks are of the view that the US government will continue the devaluation of the US dollar without a response from the rest of the world. It is this understanding which has influenced the bankers to believe that the US government will intervene to bail them out when they make speculative bets that the US economy will improve. Many refuse to accept that this is a depression.
Sober elements understand that the banks must be broken up and this was stated explicitly in the annual report of the Federal Reserve Bank of Dallas. The letter from the head of the Dallas Federal Reserve is entitled, Choosing the Road to Prosperity Why We Must End Too Big to Fail—Now. In this letter, Richard Fisher from the Dallas Federal Reserve argues that the situation of the big banks is a disaster in waiting. Fisher would force the big banks to reorganize and get much smaller. And he would require “harsh and non-negotiable consequences” for any bank that ends in trouble and seeks government aid, including removal of its leaders, replacement of its board, voiding all compensation and bonus contracts and clawing back any bonus compensation for the two previous years.
It is now understood by these sober elements in the USA that the Big Banks may be not only too big to fail, but also too big to save.
The politicians in the USA are compromised and refuse to see the reality. It is the task of the progressive forces to keep the discussions on the JP Morgan losses on the table in order to educate the people on the nature of the depression. The major media houses such as the New York Times are attempting to manage this story saying that this $3-4 billion loss is a drop in the bucket. From the financial papers there is the buzz that one’s loss is another person’s gain. This is cold comfort to the poor all over the world who are suffering in the midst of this depression. In 2008 the government socialized the losses while the profits were privatized. The bailout was one of the biggest transfers of wealth from the poor of the world to the rich. These bankers now need another bail out and the US government will have to increase the debt ceiling.
For the moment the Occupy Wall Street Movement has made it impossible for the government to bail out the banks again. However, far from bailing out the bankers, speculators such as Corzine of MF Global and Jamie Dimon should be prosecuted. It is not enough to say that what JP Morgan was doing was inappropriate from a federally insured depository institution. It is time for the people to call for these banks to be taken over and the big bankers removed.
It is now time for audacity and more audacity. Nationalization and political education at the moment is more important than the elections. Bankers like JP Morgan profit from war and these forces want another big war so that the capitalists can recover. The peace and justice forces must be more vigilant. The JP Morgan Chase debacle heightens the desperation of the top one per cent in the USA.
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The Israeli minister of military affairs has lashed out at the United Nations Human Rights Council (UNHRC) for its condemnation of the recent Gaza carnage, saying Tel Aviv and the US should immediately withdraw from the Geneva-based body.
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