“All money is a matter of belief.” —Adam Smith
JP Morgan Chase has lost $2 billion. Woops. The largest bank in America lost this money with
a bullish bet on an index of investment-grade corporate debt, later paired with a bearish bet on high-yield securities, achieved by selling insurance contracts known as credit-default swaps.
If your eyes are glazing over at this stew of highfalutin jargon, all you need to know is that this is the exact same kind of bubble-burst created by layers of fantasy money gambled against fantasy money that caused the 2008 financial meltdown and the Great Recession. It is also the same kind of dangerous crossover between high risk investment banking and more mundane commercial banking that caused the housing bubble. When that bubble burst millions of people were thrown out onto the street. If it had been on a larger scale, it would once again have put Washington in the position of having to decide whether to loot the middle class for staggering sums in taxpayer bailout money, or allow banks to topple leading to a depression. The Dodd-Frank Act reined in some of this dangerous speculation. But Wall Street’s legions of lobbyists invaded Washington and came away with the booty of deeply watered-down laws like so many barbarians sacking Rome.
Capitalism is the fire that fuels growth. But fire needs to be contained to be useful. We need to regulate finance to harness its creative power for the good of society, while preventing it from unleashing its destructive potential. A fire can keep your house warm and put hot meals on your table if you contain it in your fire place. That same fire will burn your house down if you let it spread to the walls. Those who argue that we should not regulate Wall Street are arguing that we should light our walls on fire to keep our house warm.
Wall Street is inherently dangerous, and needs to be tightly regulated. There are some here in our nation’s capital who would like to see greater control of the banks to stop them from taking America’s piggy banks to the casino and there are those who would like to light the walls on fire. As you consider who you’re going to vote for in November, it is of the utmost importance to this nation’s future that you consider who is on which side of this debate.
President Obama, who has mobilized an FBI investigation into the losses, said,
“Without Wall Street reform, we could have found ourselves with the taxpayers once again on the hook for Wall Street’s mistakes…We’ve got to finish the job of implementing this reform and putting these rules in place.”
In response to Obama’s decision to investigate, House Speaker Boehner said,
“There’s no law against stupid trades.”
Thus spake the profit.
In the same interview Boehner went on to say that Dodd-Frank should be gutted and Romney’s “prescriptions” for the economy are better than Obama’s. Romney prescribes the Paul Ryan plan and has called it “marvelous.” The Economist—not exactly a bunch of Occupiers—has called Ryan’s plan “extremely generous to the rich,” and describes it as a “gigantic transfer” of money to the rich. It would make deep cuts to Medicaid and Medicare, including cutting out a board whose sole purpose is to cut down the costs of Medicare. The nonpartisan Congressional Budget Office estimates that under the plan the cost of Medicare would more than double for the average taxpayer over the next 18 years.
The Ryan scam—er, plan—would also overturn regulations enacted since 2008 and water down older ones. This is consistent with Romney’s contention that Dodd-Frank, a set of tepid regulations, is
“a failure of freedom.”
Because when the Founders declared the rights to life, liberty and the pursuit of happiness, they were clearly referring to hedge funds. Romney has the same approach to Wall Street regulation as the George W. Bush Administration, which makes sense, since his financial advisors are the same as Dubya’s. With Romney at the helm, the same band of pirates who keelhauled the middle class in 2008 are planning to swing aboard the ship again.
Here’s a modest proposal to keep Wall Street from holding the middle class hostage again.
Sweep the Tea Party from Congress in November and keep Romney away from the White House so he doesn’t light our walls on fire. Give the Democrats the mandate to construct real regulation.
Reinstate the Glass-Steagall Act, part of the New Deal, which erected a wall between investment and commercial banking.
Implement the Volcker Rule, which would prohibit banks from trading with federally-insured deposits at the taxpayers’ risk.
Break up the big banks. Wall Street gambles with too big a chunk of our economy and plays ball in Washington with too much cash. These are monopolies and need to be cut up into smaller banks that will take smaller risks and have healthier fear of consumers and regulators.
Investigate, arrest, prosecute, imprison. The powerful executives on Wall Street are not above the law and the con artists among them need to go to jail. Washington needs to start posting some heads on the battlements as a warning. No one has gone to jail for the staggering fraud that precipitated the 2008 meltdown. If the FBI finds that JP Morgan Chase broke the law, it needs to tell CEO Jamie Dimon: Go directly to jail. Do not pass GO. Do not collect 2 billion taxpayer dollars.
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