Say What?

We were pulled up short when a financial expert on a national radio show put forth the most nonsensical causal scenario for the 2008 economic collapse imaginable. It began with, “As we know, the cause of the collapse” –as if to imply that what followed was verifiable fact, set in stone. Actually what followed was nonsense. It was an effort by the reckless too-big-to-fail banks to shift the blame for their disaster to, well, anyone but them. It was even less plausible than the ongoing effort to pin the economic train wreck on some imaginary Clinton era mandate forcing banks to knowingly lend to people who they knew would never be able to repay the loans. Right; and even if this pipe dream were true, would it have taken eight plus years for those mortgages to sour?

While Bill Clinton had a role in running our economy off the cliff, it had nothing to do with any mortgage mandate. In 1999 Clinton signed into law a bill repealing the Glass-Steagall Act that had protected us from this kind of nonsense for sixty plus years. So Clinton played a minor part in passing a bill nicknamed the “Citigroup Relief Act.” At the time, Congressman John Dingell argued on the House floor that this bill would result in creating “too-big-to-fail banks and that should they get into trouble taxpayers would have to bail them out.” With help from another ill advised law, the 2000 “Commodity Futures Modernization Act” exempting the banks and others from State gambling laws it took less than a decade for Dingell’s prophecy to play out.

First let’s get things straight. While there are minor players in the 2008 tragedy, the too-big-to-fail banks bear 99.99% of the blame. Had they not been on the brink of failure, in need of a taxpayer bailout, there would be no recession. They put themselves in this position by bundling mortgages that they referred to as “Crap,” strong-arming the rating services into stamping them AAA, and selling them to anyone dumb enough to buy them. These banks pushed the little folk in the mortgage pipeline for more and more sub-prime mortgages until the whole house of cards collapsed. Everyone got hit, including some of the too-big-to-fail banks, and just as John Dingell predicted we had to bail them out. That left the big banks in good shape and the rest of us literally holding the bag; an empty bag.

So what are the Wall Street bankers up to? Why this propaganda campaign to shift the blame for the horrific recession we are still struggling to overcome? That is pretty clear. They are engaged in the same risky stuff that got us into this mess in 2008 and they want to keep right on doing it. Ethics be damned, they think that pouring millions into the pockets of the Washington crowd will stave off sensible regulation like the Volcker rule. They may be right; an outrageous lie combined with the big bucks may do it in an election year.

Let’s hope they’re wrong.

Banking 101

The “K” Street Banker Boys are pouring millions into the political arena in a desperate effort to hold on to the massive Las Vegas style gambling enterprise that characterizes too much of our banking sector today. Banking differs from Vegas in two important ways, however.

1)  When the bets the Wall Street Bankers place against the suckers (AKA “us”)  go against them, they just run to the taxpayers (us) who cover their losses. So they can’t lose. That’s too-big-to-fail banking.

2) The banks managed to get themselves immunized from the state lottery laws, so they can bet on anything. For instance, they could legally bet whether you will make your mortgage payment on time when they have no connection to you or your mortgage.

This set some of our biggest financial institutions onto a path focused on profit and the outrageous bonus structure that this gambling hall culture has spawned. A culture defended haughtily by JPMorgan Chase “Whiner-in-Chief” Jamie Dimon, who chose newspapers to justify the banker’s insane paychecks.

Duded out in his trademark 1950’s “Ducktail” do, Jamie is quoted, “Obviously our businesses have high capital and high human capital,” implying that nobody in newsprint land could compare. What nonsense. And, their capital –cash, that is– is not theirs, it’s ours, the billions we gave the banks to stabilize our economy. So what are they doing with our money? They are rolling the dice again, confident that we will bail them out again, when the dice come up snake-eyes again.

 “Proprietary Trading,” as the bankers like to call it, was a principle cause of the recession. This practice is a recipe for disaster. Here and there the milk-toast mild Dodd Frank Act does have a tooth left. The one dealing with proprietary trading, called the Volcker Rule, is facing a firestorm from the banking lobby. It would pretty much take gambling out of the banking business, push the bankers back into the real world where they can fail, and when they do, fail without taking the country down with them.

When Bill Clinton signed “The Commodity Futures Modernization Act” opening up Wall Street to gambling, Washington unleashed a chain of events that resulted in the collapse of the world economy eight years later. Wall Street began leaping one ethical barrier after another and today everyone but the bankers is suffering.

The folks who actually toil day in and day out for a living, like those struggling to find a workable journalism model, shouldn’t have to put up with sneers from a second-rate punk like Jamie Dimon. Banking at every level has but one reason to exist, to provide the capital that sustains our economic life. Dimon and his lot are clueless when it comes to that kind of banking.