JP Morgan Chase F..ked Up

Jamie Dimon must be furious! His minions f..ked up. His argument for weakening the Volcker Rule and other regulations just got quashed by the "sloppiness" of his own trading unit.

Maybe Bank of America is too big to be humbled by such a monumental loss, but this was just one trading strategy, supposedly to "hedge" risk of another trading strategy.

Why shouldn't banks be allowed to make bets with their own money? This's why. It's why Glass-Steagall, or something very similar needs to be re-enacted: banks should not be allowed to gamble; only trading companies, without individual depositors should be allowed to gamble like this--and allowed to fail.

Why would that make a difference? BOA wouldn't be so big if it didn't have millions upon millions of depositors, insured by FDIC. If BOA were to fail, because of further "sloppy" gambles, the whole financial system would again be in danger of implosion, a revisit to the disaster of 2008, but probably worse, since BOA is much, much larger than Bear Stearns, etc.

Why shouldn't the federal government regulate these combination banking and trading institutions? Why shouldn't it regulate to minimize risk of another collapse? Is it really good policy to allow these hybrid institutions to maximize risk for the whole economy?

The very fact that this is still a question, says a lot about our political economy. We have only recently climbed a little way out of the hole caused by this kind of financial speculation, yet the power of money is such, that someone like BOA CEO Jamie Dimon, strongly connected to that aforementioned collapse, still has the credibility to argue against increased regulation--and to be listened to, until his own institution proves him dramatically wrong.

The game our elites are playing is dangerous. Banks gamble with money; oil and gas companies gamble with our climate and our water. Isn't that what exploitation of Canadian tar sands, gas and oil fracking in the Northeast US and oil exploration in newly melting Arctic Ocean waters all represent?

They gamble with our future, not just financially and environmentally, but the future viability of US power. If the oil and gas companies have their way, not only will the seas rise by over 50 feet, according to James Hanson, but the US will be stuck in a dinosaur economy, when the rest of the world is racing to create alternative energy.

Maybe that's comparable to Rome's inability to adjust to the new cavalry-driven warfare practiced by Huns and Germanic tribes. For about two generations, the Romans were able to buy them off, buying their services--until they were driven into bankruptcy.

"Patriots," our drive to pump--and burn--even more hydrocarbons--and billions of dollars, will not only destroy the climate, it will bankrupt the Empire! We'll need an even larger military to protect our dependence on imported oil.

The Dirty Bargain

The Greeks didn't sign onto it: now their debt has been driven to junk bond status.

The closer you get to Wall Street, or the City of London, the more likely you are to see the bargain in action.

In 1933, FDR closed the banks. When they reopened, government had created rules that maintained financial stability until the 1970's. The result: financial crises were negligible and under control.

Beginning in the 70's, there was a sustained and successful attack against those rules, culminating in the repeal of Glass-Steagall, which had kept taxpayer-insured money separate from investment banking speculation. Since the 70's, we've had a series of financial crises, culminating in the 2007-8 collapse. That's no coincidence.

Unfortunately, neither W, nor Obama "took over" the banks. They revived the banks with trillions of government dollars. Now, banks are so strong they can weaken, or stymie any thoroughgoing financial reform: there will be no Glass-Steagall, and banks will be too big to fail. Governments will have to bail them out when risk-taking gets them in trouble.

In addition, the elites are able to control enough of the information people depend upon, that they have changed the conversation: it's no longer recovery, and jobs, but solvency and cutbacks. Deficit reductions and cutbacks don't come at the expense of the banksters who got us into this mess, but at the expense of the victims: the people thrown out of work, or working 60 hour weeks just to pay the bills.

And it isn't just the banksters. It's the elites generally. Health reform comes at the expense of the insured, who will see their premiums soar, even though the reform will hand providers a whole new government-subsidized market.

What are some of the elements of this "bargain?" When decision-makers propose raising a stock-transfer tax, their government's bonds will be besieged. When politicians suggest raising taxes on the wealthy to pay for the needed recovery, capital flees the country.

Have you noticed that huge amounts of capital have washed up in the US? Despite Obama's stimulus, with a deficit and debt rivaling that of Greece in GDP terms, US Treasury rates are still extremely low. There has been no need to raise rates to find buyers. That's because formerly liberal leaders like Obama and Cuomo have bowed to the bargain: no new taxes on the wealthy. Republicans would never raise those taxes in the first place.

The "tea party movement" is a political expression of the media power of capital. People who are hurting--the financial system robbed them blind--are persuaded that big Government did it.

The Tea Party is Wall Street's insurance, but if a genuinely progressive movement gained power, we'd face a capital strike like the one that brought down Greece.

The financial/corporate elites, the selfish class I've written about on this site, now rule most of the world: through extortion.