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Yves Smith, Matt Taibbi, and Bill Moyers talk on the financial "Follies of Big Banks and Government"

Yves Smith, Matt Taibbi, and Bill Moyers talk on the financial Follies of Big Banks and Government

Matt Taibbi:
The question I wanted to ask is, was, really more about the criminality. I mean, none of the members in either the House or the Senate really got into the issue of all the different offenses that these banks have committed in the last few years. You know, or, an ordinary person, if he commits welfare fraud, never gets a food stamp again in his life.

So given that these banks have systematically and repeatedly committed fraud, repeatedly been caught, you know, in situations like Jefferson County, municipal bid rigging, why should we still give them billions and billions of dollars in emergency lending from the Fed, bailouts, all of this aid from the government? How come there’s no consequences for them and there are consequences for ordinary people?

Yves Smith: I would have asked questions more having to do with what’s the justification for complex banking at all? That why do we need, why shouldn’t banks be run on the utility basis? Why should we have people like Dimon and his, the members of the CIO unit, most of which he’s fired, what the justification for literally that hundreds of millions of bonuses were paid collectively to those people.

And now he says they didn’t know what they were doing. There’s no justification for this, the sort of level of compensation that we generally have on Wall Street. And I would like to see that myth starting to be punctured in more public places.

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Jamie Dimon May Come Out Swinging Tomorrow, But His Fast Ball Isn’t What It Was

“Which Jamie Dimon will appear before the Senate Banking Committee in Washington on Wednesday?” asks Reuters BreakingViews columnist Rob Cox in a Slate piece.  “The self-effacing JPMorgan boss offering apologies for his bank losing at least $2 billion on bum trades?,” he asks? “Or the combative JPMorgan leader who just a year ago publicly challenged the chairman of the Federal Reserve over regulation?”

Cox recommends the latter, which is why the piece is titled “Jamie Dimon Should Come Out Swinging in the Senate.”  He worries that “a mealy submission from Dimon may help effectively nationalize the American banking industry for good.”  He asks us to “[c]onsider the implicit message the senators who called Dimon before them are sending: that banks must answer to the nation for any losses they incur – and that watchdogs and regulations should somehow be able to prevent them.”

I did. This required me to consider his claim that a mealy submission from Dimon may help effectively nationalize the American banking industry for good (meaning “permanently,” not “beneficially”).  He’s saying that the reinstatement of the Glass-Steagall statute or a meaningful implementation of the Volker Rule—separating investment banking from retail banking and barring federally-insured banks from speculating with depositors’ money (which is what JPMorgan did)—would amount to nationalization of the American banking industry.  And he’s saying that a law capping the size of federally-insured banks would do that. 

After all, the reason for the Senate Banking Committee hearing tomorrow is that Congress is considering enacting laws that would do those very things—laws that would return the banking industry to some semblance of what it was for the period between 1933 and the 1990s, before bank-merger mania and the repeal of the relevant parts of the Glass-Steagall Act so changed the nature of the American banking industry.  You know, to the way banks were during that long postwar period of economic stagnation caused by the nationalized banking system we had back then, until de-nationalization returned the industry to the free-enterprise system.  In recognition of the fall of Communism, I guess.

I also considered the horrors of a return to that Commie banking system of the postwar era, when watchdogs and regulations somehow were, in fact, able to prevent most large banks from failing and their depositors from needing that FDIC insurance.  I shuttered.  No, sir!  Wouldn’t want to see that!

An effective Volcker Rule and the reenactment of Glass-Steagall might,of course, cause banks to start using those deposits to lend money to businesses, since credit-default-swap speculation no longer would be an option for them.  But we wouldn’t want banks to start acting like banks rather than hedge funds again, would we?

Dimon may come out swinging, but I expect that it will be the Democratic senators who will hit it out of the park. Dimon’s fast ball isn’t what it was.

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