Jamie Dimon And The Legitimacy Of The Federal Reserve System

By Simon Johnson

There are two diametrically opposed views of how the largest financial companies in our economy operate. On the one hand, there are those like Charles Ferguson, director of the Academy Award-winning documentary “Inside Job” and author of the new book, “Predator Nation.” Mr. Ferguson takes the view that greed and immorality now prevail to an excessive degree at the heart of Wall Street.

Academics and other experts have become corrupted, the responsible regulators have been intellectually captured, and law enforcement officials refuse to act – despite the accumulation of evidence before their eyes.

“Inside Job” was gripping and emotional; “Predator Nation” contains many more specific details and evidence, as this excerpt dealing with academics (one Republican and one Democrat) makes clear.

The second view is that the people in charge of large banks and bank holding companies have done nothing wrong. To see this view in action, look no further than this week’s debate about whether Jamie Dimon, chief executive of JPMorgan Chase, should resign from the board of the Federal Reserve Bank of New York. The New York Fed oversees his organization, including assessing whether it is taking dangerous risks, so there are reasonable questions about whether this creates a potential conflict of interest.

A balanced account of this debate appeared in American Banker, which kindly agreed to bring the entire article out from behind its paywall. The strongest statement from the pro-Dimon corner comes from Ernest Patrikis, a partner with White & Case L.L.P. and former general counsel of the New York Federal Reserve:

“I don’t see Jamie Dimon’s conflict of interest. What’s the conflict? He’s expected to represent the banks’ view, the lenders’ view.”

Yet even people who are generally sympathetic to banks feel that there is a perception problem with Mr. Dimon’s position. Treasury Secretary Timothy Geithner said exactly that to the “PBS NewsHour” last week.

Kenneth Guenther, the former head of the Independent Community Bankers of America, told American Banker:

“I do think there is a public perception problem when the head of the largest bank gets into a massive highly publicized trading loss, which he articulately condemns, when he’s tied to the Federal Reserve Bank of New York, and the president of the Federal Reserve Bank is vice chair of the Federal Open Market Committee. There is a perception problem. I don’t think there’s any way around it.”

What exactly is a conflict of interest? Narrowly defined, an actual conflict of interest would involve using public office for personal financial gain – and would be a matter for criminal prosecution.

There is only one case that I am aware of in which a director of the New York Fed went to prison for such a violation – Robert A. Rough was indicted in December 1988, on charges that he leaked sensitive interest-rate information to a brokerage firm. He was sentenced to six months in prison.

More broadly, however, in modern America we use the term “conflict of interest” when we believe someone may be promoting private interests while acting in a public role.

Allowing big bankers to become too influential is an important part of what Mr. Ferguson writes about. If you don’t understand the channels through which influence actually works in the United States today, you need to see “Inside Job,” which touched a nerve and won an Oscar precisely because it is profoundly undemocratic when powerful people are able behave in this way.

Elizabeth Warren, a Democratic candidate for the Senate in Massachusetts, said Mr. Dimon should resign from the board of the New York Fed. The recent spectacular trading losses at his company require a full investigation, which should include an examination of how the supervision process broke down. How can this be anything other than awkward for the New York Fed while Mr. Dimon – hardly known as a shrinking violet – sits on its board?

Senator Bernie Sanders, independent of Vermont, would go further, proposing legislation that would remove any bankers from the boards of Federal Reserve banks. For more background, you may want to consult Page 65 and other parts of this report from the Government Accountability Office, which deal with potential conflicts of interest in the Federal Reserve System, or at least read Senator Sanders’s summary of the report.

To be clear, directors of the New York Fed are in principle kept away from bank-supervision matters – a point that was codified in December 2010, following the passage of the Dodd-Frank financial reform legislation.

Under the current bylaws, directors are not involved in appointing, monitoring or compensating the head of supervision, although they have input into the selection and remuneration of the head of research (an important position, as this person helps to shape the Fed’s view on bank capital and all technical matters relative to risk management), and they oversee other management issues. Bill Dudley, the president of the New York Fed, interacts with the board at least several times a month, as you can see from his schedule.

Mr. Dudley, a former Goldman Sachs executive, was originally appointed president of the New York Fed by a board that included Mr. Dimon as a voting member.  The Dodd-Frank legislation stripped so-called “Class A” directors, of which Mr. Dimon is one, from voting on such appointments.  Mr. Dudley was subsequently reappointed by the Class B and Class C directors of the board.  (For more on the different classes of directors, see this page)

Mr. Dimon has also been an outspoken opponent of financial reform of late – including the Volcker Rule (on proprietary trading) and attempts to strengthen capital requirements. He is an intensely political figure, despite the fact that an important footnote in the Board of Governors’ policy on political activity by Reserve Bank Directors says,

In all instances, directors should avoid any political activity that would publicly identify the director as being associated with the Federal Reserve System or would embarrass the System or raise questions about the independence of the director or the ability to perform Federal Reserve duties.

Directors are allowed to lobby and engage in other specific activities. The issue is whether these actions undermine the effectiveness of the New York Fed.

There is recent precedent for New York Fed board members resigning when there is a perceived conflict of interest – and when the legitimacy of the Federal Reserve System would undoubtedly have been undermined if they had refused to resign.

Dick Fuld, the chief executive of Lehman Brothers, resigned (on Thursday, September 11, 2008) shortly before his firm collapsed (on September 15, but its last day of business was Friday, September 12) – and presumably because the New York Fed was at the center of intense discussions about who should suffer what kind of losses or get rescued. Did he resign of his own volition or was he encouraged to resign?

Stephen Friedman, then the former chief executive of Goldman Sachs, resigned in early 2009 when it became clear that he had bought Goldman stock after Goldman became a bank and therefore fell under the supervision of the New York Fed.

Mr. Friedman was chairman of the New York Fed at that time. (To be clear, Mr. Friedman was not involved in any of the decisions that saved Goldman in fall 2008, and I am not accusing him of using his public position for personal financial gain.)

For those of you keeping score at home, Mr. Fuld was a Class B director and Mr. Friedman was a Class C director.

If you think Mr. Dimon should resign from the New York Fed, you can express your opinion by signing this on-line petition, which I drafted. (For more background on why he should resign, see this blog post.)

If Mr. Dimon refuses to resign – as seems likely – he can removed by the Board of Governors of the Federal Reserve System (not by his fellow directors at the New York Fed). The petition is therefore addressed to the Board of Governors.

There is an undeniable perception problem. It is damaging the legitimacy of the Federal Reserve. As Treasury Secretary Geithner implied, this must be “addressed” – a great Washington euphemism – by Mr. Dimon leaving the board of the New York Fed.

An edited version of this blog post appeared this morning on the NYT.com’s Economix; it is used here with permission.  If you would like to reproduce the entire column, please contact the New York Times.

110 thoughts on “Jamie Dimon And The Legitimacy Of The Federal Reserve System”

  1. A plan is under way to not only remove the largest offenders, but dis-prove the notion that bigger is better and bader simply because they can muscle their thoughts through to the smaller entities. Once removed, a newer, gentler version of to big to remove, will take its rightful place in the cog of the machine, with no time to change your mind.

  2. Not impressed by that American Banker article. If the Fed needs to get the view of the banks, is having them on the board of a regulatory agency the only way to do so? The reporter should have asked Ernest Patrikis that. If the Fed would benefit from getting perspective from outside Washington, is having Jamie Dimon on the board of the NY Fed the only way to get that? Should have asked Chip MacDonald that. If its perception and not reality, shouldn’t Karen Shaw Petrou be asked why, after what’s happened, she feels that way?

    We all know what the common sense position is about having a bank president on the board of a banking regulator. There should be more burden of proof placed upon the people insisting that this is fine. Not enough to just cite a perception/reality gap.

  3. This gets back to the creation of the Federal Reserve in 1913/1914. It was a creation of bankers for bankers. A much more substantial change would be to make the FRBNY subject to the Freedom of Information Act. The Board in Washington is, the FRBNY is not. Makes no sense.

  4. One thing I have relized, is that abolishing the Fed is easier said than done, especially with all the intricacies and interests committed to doing their own thing. And even once you did, you then have to rely on the corrupt congress to do the right thing via usury. And with that, nothing on the streets would look any different to me.

  6. During my misspent youth I often could be found at the neighborhood movie theater on Saturday afternoon watching ‘B’ ‘Oaters’, a constant theme in them was mob mentality, usually culminating in, ‘Somebody get a rope!’

    It’s always easy to stir emotions to a fever pitch, but is that a legitimate way for a respected academic to act? First create the perception, then use it to promote your agenda; which in this case seems to have something to do with helping Elizabeth Warren’s senatorial campaign. A candidate who has far more obvious problems with ‘perceptions’ than Jamie Dimon.

    In fact, from what is known about this incident at JPMC, the most likely conclusion is that it’s a pretty well managed bank. Any loss will be borne, not by the taxpayers, but by the shareholders’ equity. Thanks to Dimon’s well documented propensity for listening to his risk management team (where the problem was caught).

    Anyone professing to be concerned with the legitimacy of the Federal Reserve System should be wishing that his tribe should increase. Maybe the guys who elected Dimon (to one of the three seats reserved for their interests to be represented) knew what they were doing.

  7. Where was the “well documented propensity for listening to his risk management team (where the problem was caught)”, relating to these particular criminal or MASSIVELY FRAUDULENT activities??:

    http://www.prnewswire.com/news-releases/jpmorgan-chase-settles-whistleblower-lawsuit-alleging-fraud-in-veteran-loans-for-45-million-142452715.html

    Incidentally, this IS NOT a “B” movie plot, it’s a conspiracy to defraud hard-working Americans of the fruits of HONEST LABOR~~

  9. I am absolutely convinced that after runaway health care costs, TBTF is the next financial disaster facing the country. But here is what scares the crap of out me. Jamie Dimon is a pretty good guy. Maybe the only one on Wall Street. So if you don’t like him, think about the rest. Then remember that Goldman Sachs runs the U.S. Treasury (Timmy is just marking time until he gets his Million Dollar job on the Street.)Think about that for a minute and you’ll get scared too.

  10. Being a pretty good guy isn’t really the issue, imo. He may be a nice guy, he looks like a nice guy to me, but some things his bank have done, as linked above, smack of rank criminality.

    If we had an independent and functioning justice system, I think people like Mr. Dimon would have been indicted and convicted long ago.

    He’s lucky we don’t.

  11. @Bond Man – sorry to hear your conclusion about a non-functioning justice system. That makes USA a non-sovereign country. Which means anything goes – not exactly the way to get a CIVILIZED economy functioning again.

    But duly noted – thanks for the heads up. They will take every single last egg laying chicken and then hope you commit suicide on 12/12/2012 – the big Jonestown finale…

    Did I mention the 1/32 Genghis Khan gene? :-)

  12. It’s foolproof! I write something…and the fool arrives with the proof. In this case Bondman with his two examples of things that have almost no connection to Jamie Dimon, nor risk management.

    The settled lawsuit with the two Georgia brokers–yes, not with the VA; it’s a Qui Tam, lawsuit, meaning that private individuals are lining their own pockets under cover of crocodile tears about the defrauded taxpayer–was about events supposedly going back to 2001 at WASHINGTON MUTUAL.

    Dimon only became CEO of JPMC in 2005 when his firm, Bank One, was purchased. At any rate, their liability stems from the purchase of WAMU a couple of years after this 2006 lawsuit was filed. No doubt known to JPMC’s due diligence people and factored into the price they were willing to pay for WAMU.

    The NY Times piece, had Bondman bother to read it, tells us that a couple of former JPMC employees admitted to paying bribes to some Alabama politicians to get business for their bank. Risk management doesn’t enter into this at all.

  13. ‘If we had an independent and functioning justice system, I think people like Mr. Dimon would have been indicted and convicted long ago.’

    Which is a libel.

  14. If you don’t think criminal conduct isn’t part of risk management, you don’t know chit from shinola.

  15. WAMU, incidentally, STOLE $8K from my elderly mother, who is now part of the class action law suit. More crooks, but you only see snowflakes and champagne.

  16. ‘If we had an independent and functioning justice system, I think people like Mr. Dimon would have been indicted and convicted long ago.’

    Which is a libel.

    ZZZZZZZzzzzzzzzzzzzzzzzzzzzz

  17. The ‘shinola’ is that ‘risk management’ is all about mathematical measurements of market, liquidity, interest rate risks. VaR most commonly, of what is on a firm’s balance sheet or in the portfolio.

    Not about employees misbehaving at branches.

  18. Lest you be left alone talking to yourself, Let me introduce to you, the one and only, Billy Shears…………….

  19. It’s more than misbehaving when criminal fraud sets in, and bribery happens….what is wrong with your moral compass? Do you even have a concept of what morality is all about?

    I tend to doubt it, since you skip lightly over crimes that have harmed both individuals and society, at large.

    Dimon is captain of the ship, the buck stops there. Stop trying to fob off a repeated pattern on underlings, as this reflects a fundamental defect in corporate culture, corporate governance, and corporate risk avoidance, not to mention a compromised management structure.

  22. “It is a blatant conflict of interest for Jamie Dimon, the CEO and chairman of JPMorgan Chase, to serve on the New York Fed’s board of directors,” Senator Bernie Sanders (I-VT) said in introducing the bill. “If this is not a clear example of the fox guarding the henhouse, I don’t know what is.”

    http://www.huffingtonpost.com/2012/05/24/esther-george-jamie-dimon-new-york-fed_n_1543757.html

    The chorus of boos intensifies! Simon, of course, is right the hell on!

  23. Dimon and JPMorgan Chase have done a better job of explaining why too big to fail is too big, period than any policy wonk could possibly do. JPMorgan Chase, Cit, B of A and others with assets over X% of US GDP should be broken up. BTW, it is possible to have large – even very large – banks without all the incompetence and leveraged risk taking that threaten the economy as a whole: just look next door (Canada – no banks failed in the 1930s, none failed in the 2007s. Of course, they couldn’t do all the exciting stuff that makes banking soooooo important and financially rewarding.

    I know Americans HATE to think that some other country got it right and we didn’t, but let’s look around.

  24. I apologize. I should have defined “good guy” earlier. I did not mean that Jamie Dimon walks on water, or that he is the second coming. All I meant was that, compared to all the other heavy weights on Wall Street, Jamie displays some human characteristics. For example, he says small businesses are important in our economy, he says a safety net is extremely important, he says he would be happy to give up some more of his income to help balance the budget, etc. etc.

    From what I have read from a number of sources, the dinner party he organized that Saturday in 2008 was more important in dealing with the crisis (caused by Goldman Sachs) than anything Hank Paulson did. And back when he was CEO of Bank One, he did me a personal favor that he surely did not have to do.
    All I have ever heard from any one else on Wall Street is endless whining about how small their multi-million dollar bonuses are going to be.

    All that said, we are still left with the problem that just FIVE Wall Street banks now have assets in excess of 60% of our entire GDP. That is the problem we really have to address. I understand that Jamie Dimon will be on the other side, but I would rather have him there than Lloyd Blankfein or Hank Paulson, et al, on the other side.

  25. Jamie Dimon was declared CEO of JPMorgan Chase in December 2005. I worked there at that time and he immediately crowed how he was going to raise the stock to levels never seen before. I believe the highest it ever went was in the mid to high 40’s. Feel free to correct if I am wrong.

    In November of 2005 JPMorgan stock was at $37 a share.

    Today it is at $35.

    BTW – he got paid 24 million dollars last year for his stellar performance. I’m thinking he got paid this amount….for “not” losing more money????

  26. And what about the conflict of interest of all those whose paymaster is the Public Sector and might therefore be more prone to regulate in favor of the Public Sector and against the citizen… like requiring the banks to have less capital when lending to the Public Sector than when lending to a small businesses or an entrepreneur? Should they not also resign in that case?

  27. Mr. Dimon has failed. When one has failed, their counsel no longer has merit. That he has not resigned suggests lack of character. That he has not been ousted suggests the inability of the Fed to govern. That failure is tolerated does not bode well for the American economy.

  28. Mr. McDonald,
    Let’s take your points one by one:

    How has Mr. Dimon failed? Please be precise; give examples. I am guessing that your primary example is that JPMC “lost” what appears to be something between $2 and 4 billion in 1Q12. That “loss” occurred in a period when the bank made $ 5 billion over all its operations, net of that “loss”. Do you have any further examples? Perhaps your case is stronger in other areas that you would kindly refer us to…

    You write, “(w)hen one has failed, their counsel no longer has merit”. If I am to accept your advice, I must assume that you have therefore never failed, Good for you; you are truly quite an extraordinary individual. Perhaps you should consider the entire reasoning behind American bankruptcy law. That reasoning is based upon the belief that people can and do fail, but that failure need not be the end for that person and that there is a societal interest in encouraging people to continue to strive and eventually to succeed.

    In order to expunge his “lack of character” perhaps you would really prefer that Dimon not only resign his position at the NYFed but also commit hara kiri. That would solve it!

    “That he has not been ousted suggests the inability of the Fed to govern.” I agree with you that the Fed cannot govern. You and I perhaps disagree only on the evidence of that fact.

    “That failure is tolerated does not bode well for the American economy.”
    I invite you to consider listening to yourself.

  29. The (Fed) emperors stand naked before us, as Ferguson made so amply clear in Inside Job. That’s a real problem given the computerized hyper-drive that now rockets finance along. They can’t regulate what neither they nor the bankers fully comprehend. That makes for a real disaster awaiting us in the not too distant future. Time for a reset on the Fed, it’s charter, and it’s makeup. If that doesn’t happen it will be nothing but the blind leading the blind, to the detriment of the rest of us sitting here at the back of the bus.

  30. Dear Jones…
    Dimon claims to have expertise he in fact doesn’t have. His outfit has been making money the same way the other houses did: through extreme leverage that allows for exorbitant rake-off from over-inflated valuations, and over-hedged assets. That’s where all that cash comes from. And it works for a while, that is until the pustule bursts and the rest of us get to clean up the mess.

    The concern of the regulators and politicians, belated as always, is entirely legitimate. It’s their job to worry about this, remember? What are they supposed to do, wait for the multiplier to kick in? How bout $10-$20 billion, would that bother you? Or would there simply be another self-serving justification on the table?

    The notion that this should be allowed to go on on Dimon’s say-so, till he comes crawling hat-in-hand to the Fed is insulting, but exactly the sort of exalted self-importance we’ve come to associate with the “smartest-guys-in-the-room”.

  31. More Jones…
    It’s also ridiculous to ask for precise examples when Dimon and the others have made it impossible to see through the opaque and unregulated parts of the byzantine system they’ve so willingly bought into. They didn’t even have the smarts to track what went into that trash. The insanely baroque instruments they’ve created, instruments whose interplay in the market they don’t have a clue about, are beyond their understanding and their control.

  32. It’s not simply “perception”. The conflict-of-interest among the NYFed, JPM, Bear Stearns and Maiden Lane is real. The Fed spends public money and does not account for it publicly as required by Article I of the Constitution. Only elected officials are supposed to appropriate funds, and the method is spelled out.

    Not even the Chairman of the Fed is elected.

  33. The Bond Man said: what is wrong with your moral compass? That’s a good question, but the better one would be how do we know if one has a Moral Sense? Once you can answer that with confidence, you can better understand how greed and aversion work to keep you busy within yourselves, juggling a few balls of money. You will tire from that, and give up on things you once believed had merit. Tip of the day: You can’t do everything while you are young, or anything when you get old.

  35. “The New York Fed oversees his organization, including assessing whether it is taking dangerous risks, so there are reasonable questions about whether this creates a potential conflict of interest. ”

    “Reasonable”? “Potential”? That made fall off my chair laughing.

    But, seriously, how can anyone say this with a straight face? How can anyone even discuss whether this should be discussed at all?

  36. From politico.com’s Morning Money:

    SHEILA BAIR: BREAK UP CHASE – Former FDIC Chair Sheila Bair in her column that went up at 5am and appears in FORTUNE on Monday: “Jamie Dimon, the CEO of J.P. Morgan Chase … has made many good decisions for his bank, but Chase’s recent serious missteps have provided reform advocates with loads of ammunition. … If Dimon wants to regain his place in the pecking order, he should take the initiative and shrink Chase to a manageable size. … [P]erhaps the market is overreacting, but let’s face it, no one really knows what is going on inside Chase any more than we understand the risks of the other megabanks. … [B]anks of the size and complexity of J.P. Morgan Chase, Citi, and Bank of America are just too difficult to manage, even for talented managers like Dimon. Whatever economies the megabanks achieve from their size are more than offset by the challenges in managing trillion-dollar institutions”

  37. So, just to put a bow on all this stuff: Our economy — and the integrated global economy — has, as its center, opaque, bloated megabanks running risky operations no one comprehends, creating risks that are pretty much spinning out on their own. This has, and will continue to produce periodic balance-sheet events no one can explain. All they can do is react with sudden alarm. These reactions set in motion new vectors that crash against the megabanks’ risk positions, affecting them in ways no one can comprehend or predict. And so on. And so on … . Pay heed here: the interval between these balance-sheet events is getting smaller. We are approaching a mathematically certain chaotic event.

    Add to this these “banks” — each and every one — have demonstrated at complete inability to restrain recklessness and fraud (e.g., the mortgage crisis … pre-empting the expected Greek chorus … see http://www.austincc.edu/rrobert/mortgagefraud.pdf … from 2004(!), which was completely ignored at the OCC, the Fed, the OTS, …, you name it. A casual stroll thru the OCC’s website will leave you with a knot in your stomach, seeing how little things have changed and how totally inept those people are. Talk about outgunned … ).

    So what are we left with: We’re on standby for the next big crisis. Continuing to drown these balance-sheet events with next-to-infinite money and credit creation only pushes the problem to another dimension(s), the contours of which will be mapped by lurching from one disaster to the next. Not unlike what we’re doing now.

  38. @markets.aurelius: Bair actually led her FDIC Board in making JPM bigger in pushing through the WaMu purchase as a whole bank deal. She also led the FDIC Board in the bailouts of Citi and Bank of America. If they would have shut them down they could have broken them up in 2008/2009. So not sure she has much credibility on these issues

  39. @markets – “….Continuing to drown these balance-sheet events with next-to-infinite money and credit creation only pushes the problem to another dimension(s), the contours of which will be mapped by lurching from one disaster to the next….”

    They’re too stupid to figure out that they can’t even *socialize the losses* anymore – they eliminated all laws, rules, circuit breakers, etc. – and the fact still remains, their war booty is up for grabs among 7 billion people…go figure….

  40. Let’s not be so selective about what we deem “conflicts of interest”

    Solyndra received $528 million of your tax dollars. The company is now bankrupt… more than 1,100 jobs lost. Billionaire George Kaiser, among the top 100 richest people in the world, and one of Obama’s top fundraisers, owned 36.7% of Solyndra through his Family Foundation…….
    or………..

    A $737 million loan guarantee to a company known as SolarReserve. “investment partners,” include the “PCG Clean Energy & Technology Fund (East) LLC.” PCG’s number two is none other than “Ronald Pelosi, a San Francisco political insider and financial industry polymath who happens to be the brother-in-law of Nancy Pelosi.

    If you’re worried about your Chase deposits, move them. If you’re a JPMshareholder, and don’t like what’s happened, sell your stock. If you don’t like Investment banks and retail banks co-mingling, bring back Glass-Steagall……..oh wait……Just days after the Clinton administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant.

  42. @JTA
    Another apologist. The Solyndra loan is chump change next to the $3+ billion in losses that Jamie’s crew so easily blows off. And it’s a bet I’m perfectly willing to make given solid industrial policy. That bet was on the wrong horse. But they had a real product to sell and real expertise, unlike the yokels on Wall Street. Read this for a realistic perspective on what went down:

    http://news.cnet.com/8301-11128_3-20102063-54/solyndra-bankruptcy-was-disaster-waiting-to-happen/

    That’s what entrepreneurs do, they take chances. The US is going to have to fine tune it’s choices if it wants to compete. But this is exactly what I want them to do, instead of shoving trillions in short-term liquidity at the cocaine-snorting greed-heads infesting our financial system. What happened to honest banking and financing?

  43. An interesting article by William D. Cohan appeared in this month’s Atlantic magazine that will be of interest. Cohan reviews the historical record underlying the widely held opinion that it was the April 2004 rules change by the SEC realigning capital adequacy reporting with international standard triggering a massive increase in leveraging from at most 12:1 to over 35:1 and in some cases 63:1 that was the key component of the financial crisis.
    The historical record shows that leveraging has fluctuated widely over the years, from a low of 8:1 in the early seventies to a pre-ruling change high of 35:1 in the 1950s., but with a steadily increasing leveraging throughout the late 20th century. Several financial scholars have noted this as well and question Dodd-Frank’s insistence on 15:1 leverage maximums and proposed limits on financial risk-taking.
    Cohan proposes that a more fundamental cause of the financial crisis was the switch from private to public funding of Wall Street Investment houses and the replacement of a partnership culture, in which each partner’s full net worth was at risk every day, to a bonus culture in which the traders were rewarded for taking huge risks with other people’s money. Although regulatory distortions to the linearity of the financial playing field exacerbated imbalances, without major skin in the game traders had no, and still have no, incentive to exercise prudence.
    Risk management, in today’s context, is inherently misdirected, regardless how well or poorly internally managed.

  45. Thanks for the synopsis of Cohan’s analysis. That’s certainly one piece of a very large puzzle. Whether it’s the “biggest’ one isn’t something that can be quantified. It is one of the key points made over and over again, from Michael Lewis right on down to Charles Ferguson. You can call it a perfect storm if that works. I think it was.

    Here’s another piece: Plummeting computer memory prices (after the Korean cartel was broken up) finally allowed the somewhat bloated code behind Windows to operate at full speed in the early 1990s. It cost $300 for 8MB before that. Afterwards you could buy 64MB for half of that. I was the installer/buyer for the lab where I worked at the time. As someone who was miserly with public money, I finally felt comfortable enough to buy in for all our PCs. It was pretty obvious someone was screwing with the markets. The silicon – up to that point – wasn’t commoditized even though that should have happened long before. PCs were, after all, available starting in 1982.

    Another piece: The public release of the TCP/IP protocols in the 1980s was followed in fairly short order by Tim Berners-Lee’s development of HTML/HTTP for the CERN campus. The rules of the road for the world-wide web had arrived. That code found its way into Netscape, the first legitimate browser. The rest really is history.

    Is it any surprise that securitization comes into its hey-day in the early to mid nineties, or that it goes ballistic as the global network crystallizes over the course of the next 5-10 years? I don’t think so.

  46. @ Oregano

    Leverage ratios are meaningless without reference to the volatility and liquidity of the markets in which these banks are invested or trading in. Leverage itself in modern markets is a red herring: 35:1 leverage in the 1950s markets, where banks are making consumer and industrial loans by intermediating savers’ deposits (in a close-to-zero volatility funding market supported by the Fed), are an entirely different matter than 35:1 leverage in MBS, CDS, synthetics, CDS-squared and tranch markets and whatever god-awful drek JPM was putting on in the 2000s. JP still has the advantage of intermediating consumer deposits and access to the Fed’s discount window, but its counterparties still are overwhelmingly funding in the overnight repo market, which, it turns out, can shut them down in a heartbeat. Then they’re all left holding each other’s drek, hoping to stuff “customers” with it. See http://www.nber.org/papers/w15223.pdf for the detail.

  47. @ Norm,

    The amount of $ is reletive, so please don’t tell me it’s chump change. Is stealing a little, not as bad as stealing more? It’s who’s $ we’re talkingabout. And we wouldn’t be talking about it at all had it worked. Obama stole our $, JPM lost shareholder $ …… which they’ve done a nice job of making the last 3 years, which we made a nice penny on when we issued their warrants, and which they don’t owe anyone else. JPM was taking risk…that’s what investment banks do. The solar trade blatantly, deliberately, ripped us off. A bad trade and a criminal offense are not the same thing.

    As far as “the cocaine-snorting greed-heads “, I can only assume you’re referring to all those who borrowed far more they could ever repay, and are now placing their obligations elsewhere. When did the US ever cease being about the flow of funds? Pay what you owe, and we’re all good.

  48. General Motors discloses news regarding a related party transaction in 2011 involving wife of CFO in filing …………. Pernilla Ammann, the wife of GM’s CFO Dan Ammann, is an officer and partner in an advertising agency that received approximately $600K for services provided to a GM subsidiary in 2011……., but not all the required procedures were followed.”

    I guess these are the “the cocaine-snorting greed-heads “ you’re refering to?

  49. I’ve seen that handsome occupy wall st bunch…….no “ cocaine-snorting greed-heads “ in there

  51. “I can only assume you’re referring to all those who borrowed far more they could ever repay, and are now placing their obligations elsewhere.”

    No, I’m referring to the con-men who inhabit Wall Street, the ones catalogued so savagely by the psychotherapist who treats them for their drug habits and their sexual neediness, the guy highlighted in Ferguson’s ‘Inside Job’.

    And don’t give me that stuff about the mortgage holders, please. Wall Street was looking for that epic high, and they found it by recruiting the walking dead for their collateralized debt obligations. Moreover, they hired mortgage hustlers who lied through their teeth and then evaporated into the night like the grifters they were. Here’s a neat anology: the “financiers” were out on the street corner handing out credit like smack dealer’s hand out dime bags for free to get the customers hooked. You bet there’s lots of complicity. But we’ve got the engine and the wheels. What do you think makes the car go?

    You can try to rewrite this narrative all you want. The story long ago escaped the control of the “business elite” who dreamed this crap up.

  52. @Norm, “…That’s what entrepreneurs do, they take chances. The US is going to have to fine tune it’s choices if it wants to compete. But this is exactly what I want them to do, instead of shoving trillions in short-term liquidity at the cocaine-snorting greed-heads infesting our financial system. What happened to honest banking and financing?…”

    We need an Energy Policy to coordinate all the moving parts – infrastructure, manufacturing, consumerizing (is that a real word :-)) ?) military technology….risks shrink down to solving one problem at a time when you know where you are going….

    The 180 direction turns are breaking necks – from feeding the world to arming the world…and then gambling with what was slated to go to labor costs instead of distributing the $ to labor….

    Indeed, let’s make up our minds.

    Great analysis about the evolution of computational speeds and the role that plays in extractions to place the bets…

  53. “their drug habits and their sexual neediness”

    Are you confusing Wall St with Washington DC? Jamie Dimon has a trade go poorly, and he’s a drug addict? Bill Clinton nailed a 20 year old intern, in the oval office, and half the country lined up to save him.

    I think you’ve watched “Wall St” , the movie, 1 time too many., and have no idea what happens on Wall St., the address.

    The addict’s problem is his. Stand up, and take ownership. Sorry if that means you can’t live in 3,500 square feet, with 3 flat screens, and drive a BMW, but that’s life. Pay what you owe, and this never happens.

  54. There’s no confusing Washington and Wall Street, is there? At this point, they are one and the same. That’s what this is all about.

    And I’m not much of one for fiction, that’s why I liked Ferguson’s epic and why the suits hated it. It is all too real. You must think I grew up yesterday if you expect me to believe that the suits are cut from a different cloth than the rest of us. I was in Vietnam and the craziness knew no class boundaries. The high-powered world of bogus finance is certainly no different: lots of drugs, lots of sex, lots of denial. I’m also not much of one for credit. Everything we own is paid for. We planned it that way.

    I watched as this entire criminal enterprise started to come apart. That’s when I went back to my “roots” – systems analysis, database design, and ecological modelling. It didn’t take long to realize that quants are completely out of their league. I’ll leave you to figure out what that means for their paymasters.

    Here’s what’s going to happen. The people who thought they knew what they were doing are about to eat a very large slice of humble pie, courtesy of the real explorers…

    http://www.nature.com/nature/journal/v469/n7330/full/nature09659.html

  55. Anyone who doubts that JPMorgan can use extremely sharp elbows and get away with outrageous things need only talk to some of the small traders who had accounts at MF Global when it went bankrupt. Starting with the chapter chosen for the bankruptcy (JP was at the table where that decision was made, but the traders were denied representation).

  57. The overriding issue is NOT a “conflict of interest” – but criminal activity. Collusion, tax evasion, insider trading, bribery, Ponzi operations and a long and festering litany of lesser crimes that must be redressed for there to be any legitimacy and legality in the global financial system and it’s operators, regulators, and predatorclass profit takers.

    The laws of karma are immutable and eternal. There will be a reckoning and a balancing!

    There may be some reason to allow banksters positions of authority within the structure of that thing we call the fed in a consultant capacity – but no descisionmaker within that thing we call the fed should have any affiliation, connection, or interests in the banks.

    If we allow predatorclass banksters to control thatthingwecallthefed – then we are certain to suffer the same kind of criminal activity and catastrophic failure that shaped the current failed, toxic, boombust global economy we hazard and endure today.

    If we disallow this systemic criminal activity within thatthingwecallthefed – then the predatorclass den of vipers and thieves that rule and wantonly profit from the current failed, toxic, and destructive global financial system will be held accountable and their terrible wrongs will be righted.

    We know how this will end!

  59. A warlock burning instead of a witch burning – “Get Martha!”

    Don’t lie to the Feds…

  61. @Simon Johnson: “Academics and other experts have become corrupted, the responsible regulators have been intellectually captured”

    Is not Simon Johnson himself an academic? What sets him free from being corrupted or intellectually captured? That he knows how to put the blame on the “banksters” who have always been around?

    Sincerely, anyone who, after so many years discussing this issue, is not yet capable to understand the distortions produced by capital requirements based on perceived risks already cleared for by the market… has, at least in my mind, some explaining to do.

  62. Long before signing any petition to have a Jamie Dimon resign from whatever probably little he has to do at the Fed, I would sign a petition to have all bank regulators, as a minimum minimorum, parade down 5th Avenue wearing cones of shame… to see if we at least get some type of accountability back into the system.

  63. Since we’re all so concerned with Truth, Justice and the American Way, isn’t it about time Elizabeth Warren resigned from the Senate race in Massachusetts for her fraudulent behavior in getting hired at Harvard?

    http://justoneminute.typepad.com/main/2012/05/elizabeth-warrens-ride-on-the-diversity-train.html

    ‘…for at least six straight years during Warren’s tenure, Harvard University reported in federally mandated diversity statistics that it had a Native American woman in its senior ranks at the law school. According to both Harvard officials and federal guidelines, those statistics are almost always based on the way employees describe themselves.’

  64. Unfortunatley this bogus petition started by Simon is more about politics than it is about “doing the right thing”. Simon’s ultimate goal is to curry favor with Elizabeth Warren so that he can serve on more committes and chairs if she happens to become US Senator.

    Most of the arguments made by Simon are bogus and his timing is clear.
    – There are no new facts today about Mr. Dimon than there were in January.
    – Mr. Dimon runs a business, that will make and loose money as it is supposed to
    – When his business ran into a loss, Mr. Dimon, came clean and disclosed it
    – Mr. Dimon’s company will still make a profit this quarter and this year.
    – The only business in America where there are no losses are in Academia – Tenured professors like simon are guranteed a lifetime of income regardless of the quality of their work after they receive tenureship.
    – Keep in mind that when students at MIT were paying tuition, Simon was receiving his salary from MIT, while at the same time publishing two books all for his own personal benefit and enrichment.
    – draw salary from MIT and, instead of spending time on educating students, write a book for your own personal gain – what a nice gig!!

    It is despicable that Simon would want to deprive the New York Fed of the expertise and experience that Mr. Dimon brings to the table.

    Politics under the guise of morality is what is destroying this country.It is very dangerous that the Academic elite like simon practice this thuggery and abuse their positions as tenured educators.

  65. Here is one more “COW PIE OF DISTORTION”:

    “It is very dangerous that the Academic elite like simon practice this thuggery and abuse their positions as tenured educators.”

    This is what happens when you piss off a righty, lower primates slinging slop, hoping something sticks.

  66. Poor Desi Girl, she has no idea what tenured faculty actually do! 95% of them show up for class and then go home and watch TV from a recliner. But 5% actually do research into how things work and share their findings with the world (and their students) in books and journals.

    I spent a quarter of a century as a tenured faculty member and published twenty books, so I have some experience with how the system actually works. Try The Great Recession Conspiracy (available anywhere ebooks are sold) to find out how the economy really works.

    Desi Girl should read Simon and James’ books. She might learn something interesting about how things work.

  68. Charles Ferguson appeared on the Dylan Ratigan show on May 25th, pursuant to an inspired rant by Mr. Ratigan relating to the bankster frauds happening EVERYWHERE, not just here.

    Mr. Ferguson was patient, then when cued, implored facetiously of Mr. Ratigan that he speak what he really feels……funny moment in TV history!

  70. Glass-Steagall did work, for decades; now, we have governments pledging citizens to strict austerity, real declines in living standards, so that BANKS which caused this worldwide fiasco can still receive bailouts, so that derivative contracts can be satisfied.

    Anyone with a shred of decency can see just how WRONG this is.

    Banks that are insolvent need to close. Banks that did not foolishly follow the derivatives casino game, can and would step into the void.

    The crisis continues because the ECB, EC, and IMF don’t realize the key to pulling out of this is INFRASTRUCTURE INVESTMENT, not pouring money into the black hole of bankster derivative games.

    It’s just gross, imo, that ANYONE can condone this conduct…..

  71. Too bad the scholar works go unnoticed, and in addition, just the politics alone would sabotage those efforts.

  72. Who speared the London Whale, why, he did:

    Chess master at 18, inveterate gambler at Vegas, seems like the perfect skill set…lol.

  73. How low can you go?

    People like Steve Rattner IMAGINE their own personal Paradise to be an *ism* where global labor for life maintenance – the BASIC RIGHT of every HUMAN BEING to make their lives LESS MISERABLE through HONEST WORK – is controlled and punished through the manipulation of *minimum wage* as decreed by the HIGH MORAL GROUND occupied by global War Lords, Drug Lords and Slave Lords.

    So, yeah, good question – why is someone like Steve Rattner given the air space to spew his GARBAGE? Why just ask why Prof Johnson deserves the privilege?

    Meanwhile, Italy has gotten very interesting – the siege on the Vatican by the Vidians is on…

    http://www.huffingtonpost.com/2012/05/07/americans-rome-vatican-crackdown-nuns_n_1495871.html

    http://www.huffingtonpost.com/2012/05/26/paolo-gabriele-arrested-pope-butler-scandal-vatican_n_1547557.html

    Those derivatives contracts can’t be honored – they’re made up delusional bs – right up there in the hysterics range of the human desire to get something for nothing – it’s all Jonestown psychos…when they lose *power*, they kill. We have a duty to CONTAIN THEM before that point.

    Hot-spotting…just don’t LIE to the FBI – although I think we are talking about the kind of an inner sanctum sanctorum here that gets someone in the FBI to do the lying FOR THEM…and the Patriot Act to imprimatur another special rule for special people – the privilege to LIE.

  74. The global GDP is $50-60trillion. The Ponzi scheme that is the derivatives market is in the quadrillions, and unregulated. Nothing changed since 2008 except an increase in the size of the off shore accounts of the predatorclass den of vipers and thieves (and Dimon is one of this despicable breed) who are directly responsible for this horrorshow.

    Anyone who brutes the patent lie that derivatives are useful or pretends that these toxic Ponzi products are legal is profiteering in these products off the backs of the other 99.9%.

    There is no way to reconcile the simple math. The entire global financial system is a malignant cancer devouring the lifeblood of the worlds population to wantonly enrich and empower a predatorclass den of vipers and thieves, .1% of the population. These perverse unholy dynamics are certain to create unsustainable friction – and inevitably – the system will blow. There is no other end possible. Predatorclass vipers and thieves stupidly imagine in their opulent palaces, obdruate and uncaring about the rest of humanity – that they will be immune and safe from the effects of the horrorshow they, sustained, and singularly profit from.

    But they are sorely mistaken. There will be s reckoning and a balancing – and there will be blood.

    We will ALL get what we deserve.

  75. @TonyForesta “The global GDP is $50-60trillion. The Ponzi scheme that is the derivatives market is in the quadrillions, and unregulated”

    What’s wrong with you… all the real losses the world has recently sustained are because of lousy mortgages awarded, lousy loans to Icelandic banks, lousy bank loans by Spanish banks to the real estate sector in Spain, lousy loans to a Greek government… none of these had anything to do with derivatives, and all to do with lousy bank regulations that permitted all of the above to take place against only a meager 1.6 percent of bank capital.

    Have the failed regulators hired you to distract the attention away from them? If not…focus !

  76. ‘The Ponzi scheme that is the derivatives market is in the quadrillions, and unregulated.’

    The latter is clearly not true, it is regulated through banking and securities law. As for the ‘quadrillions’ claim, that is absurd ‘notional’ value. But, as I’ve said before here, if it WERE true then the $2 billion JPMC ‘lost’ is even punier in comparison.

  77. The conflict of interest occurs only because the biggest banks, or the CEOs of the biggest users of the Fed, are given auto-entry to directorships. That makes the Fed a trade association at best; a cartel at its worst. This construction advances the economic interests of the Fed’s dual mandate, but disfavors the social mission. No surprise.

  78. Tony said: There is no other end possible.

    Perhaps for you my friend, but for others, the ends are limitless.

  79. @filbt “but for others, the ends are limitless”

    Absolutely, and for that to happen, all what is required, is that we retain our right to think for ourselves and do not succumb to being hired or pro-bono parrots of other’s political agendas.

  80. Per, and what do you think a CDS, MBS, and all the others, are, if not derivatives? And, do you recall these instruments as being leading in the financial crash, and the lingering ill-effects pursuant to the crash?

    And Per, you elected the right path, I can say at least that much.

    And to that funny monkey Patrick, (with the blog minus the commentators), lol, believing derivatives are actually REGULATED, whatcha been smoking?

    Hi to Tony Foresta, always the interesting post to read….

  82. http://en.wikipedia.org/wiki/Vidiian

    where there is a will, POOF! a new *business model” appears to show the way…how low can you go – “the ends are limitless”….

    Who is picking up the check for perpetual war in the Middle Ease…? We know who is getting richer – to infinity and beyond….

  84. Not exactly hangin out with the life extension crowd there are ya Annie? You know, the 150’s and beyond, or did we not publish that infinity fer ya so you can’t believe it??

  86. @filbt – that’s your claim to fame now? Living to 150 and beyond as a Vidiian….always dreaded asking the question – “How low can you go?

    Guess it’s true that they ate babies back before modern technos came along…

  87. A thousand thanks The Bond Man. Backatyou!

    http://www.washingtonsblog.com/2012/05/top-derivatives-expert-finally-gives-a-credible-estimate-of-the-size-of-the-global-derivatives-market.html

    Since there is NO transparency or regulation in the derivatives markets and none of the socalled mastersoftheuniverse can quantify their “baroque” positions there is a wild and scary unknownunknown in the exact to the toxic Ponzi that is the derivative market ranging from $645trillion as Annie note to well into the quadrillions. Quadrillions! One would need Crays to even begin to calculate to complexity of these numbers and as Dimon’ most recent catastrophic failure proves these FAILED socalled leaders of FAILED institutions pimping and bruting FAILED models are clueless, incompetent, and – lets not forget wanton FAILURES!

    Subtract the $17trillion in government largess afforded these den of vipers and thieves (all wrenched of the backs of taxpayers) – and these FAILED institutions and their FAILED models and FAILED models would no longer exits in their present forms. Sadly – nothing has changed – the temperature is reaching criticality – and all the kings horses and all the kings men cannot put this toxic horrorshow back together again. Ashes ashes, all fall down!

  88. I hope Simon Johnson is impressed with the rocket scientist IQs he attracts. Say someone who links to a WSJ article that clearly states;

    ‘Disclosure of institutions’ derivative exposures to other firms has historically been inconsistent. Banks, for example, report positions in more detail than insurance firms that got into the business of writing derivatives tied to corporate bonds, mortgage securities and interest rates.’

    Which ought to be a clue that somebody IS regulating derivatives. It just isn’t the Commodity Futures Trading Commission. Which makes sense given that interest rate, credit default and currency swaps are neither commodities nor futures.

  89. Someone else is not impressed with the Dishonest Injun;

    http://blog.american.com/2012/05/elizabeth-warren-gets-glass-steagall-wrong/

    ‘Well, Warren isn’t a senator yet, and that’s a good thing because she doesn’t have an understanding of Glass-Steagall that we might expect from a Harvard law professor. The first thing she has to understand is that Glass-Steagall still applies to banks. The only thing that changed in 1999 was that banks were allowed to affiliate with securities firms, but Glass-Steagall still forbids banks themselves to engage in underwriting or dealing in securities.

    ‘Well, if Glass-Steagall still applies to banks, how is it that JP Morgan Chase could make those trades that cost the bank $2 billion? They can do it because even under Glass-Steagall banks were able to buy and sell (that is, trade) loans and securities backed by loans. How could it be otherwise? Loans are banks’ stock in trade, and it would be as crazy to forbid them from buying and selling loans and securities backed by loans as it would be to prohibit Exxon Mobil from buying and selling oil.’

  90. @ The Bond Man

    Take apart all the cars in the neighborhood and place them in different sacks and you got car backed sacks… They might not function, you might not be able to piece them easily together, but they are still no derivatives, they are real.

    And with respect to the CDS… if there are no defaults there are neither real losses… only gambler profiting and losing between each other

  91. @ Per, right. But this creates huge holes in the accounting equation, and the need for interminable BAILOUTS.

  92. @ Patrick, it’s bad SALESMANSHIP to even mention the CFTC, considering the conduct of Gary Gensler relating to MF Global.

    And quit pestering Simon, your superior.

  93. How dare you, Patrick, in your feeble lam- richard attempt to impugn Ms. Warren with your cheap SWIFTBOATING crusade. Have you anything better than to harp on this non-story?

  94. That’s what wingnuts, apologists, hagiographers for the predatorclass den of vipers and thievedo sisters and brothers – they can’t do simple math, they can’t defend their wayward and partisan positions or falsely vaunted prophets – so they brute and pimp a litany of naked lies relentlessly and repeatedly and slime opponents.

    Again, I’m optimistic Per – there will be a reckoning and a balancing – and there will be blood.

    Once predatorclass blood starts flowing we will see the kind of real change the 99.9% seeks and deserves.

    All you socalled mastersoftheuniverse might want to peruse a little history and get back to me. Throughout history, time and time again – whenever thefew

  95. Forgive the double post, but I write in haste at work on headsets, – but history proves that whenever thefew systemically rob and pillage themany – the end is violent revolution.

    In a world where there are no laws – there are no laws for anyone predatorclass biiiiaaatches!

  96. There is little doubt that the FED’s various boards certainly should have some bankers on them. However, I believe that none of the major banks should be on these boards.

  97. Agreed Bayard. There may be some legitimacy to having banker “consult” on the finer workings of the banking industry. We value their expertise. But allowing criminals, catastrophic FAILURES, and incompetent predator vipers and thieves to cloak, excuse, shield, ignore, and advance catastrophic FAILURE is a recipe for disaster. Dimon and his ilk should be on jail, NOT on the board of the NY Fed.

    Conflicts of interest are the least of our problems. These fiends are accountable, responsible, and culpable for CRIMES !

    There will be a reckoning and s balancing, and there will be blood !!!

  98. @TonyForesta “There will be a reckoning and a balancing – and there will be blood”

    Yes you, and some few other, have definitively shown us that what you want is “reckoning and blood”, but how that will improve the lot of the 99.9 percent is hard for me to understand, especially since that “reckoning and blood” might be ordered and carried out by some who have not the faintest idea about what happened; or as usually happens by those interested in substituting for the current 0.1 percent.

    Little me, also worrying about the 99.9 percent, I would more than gladly settle for some bloodless better bank regulations which can help to create jobs, especially for the youth, and which can assist the environmental sustainability… in an economic sustainable way.

  99. I can certainly understand Tony’s rage; there has been enough arrogant stupidity and manipulation in the last couple of decades to radicalize even the most sober of us. And, Per, you have to admit that it takes a heck of a lot to motivate the average American citizen to take action. And you may have noted that we’re a rather Calvinist society with a penchant towards righteous vengance at the most inappropriate times. Usually, though, it’s motivated by intransigence. However, I do agree with you that the bones of the system are not necessarily rotten; just the flesh attached to it has become corpulent and inert. The solution is not a crash diet but a firm resolve towards permanent change. However, we’ll have to change more than just a few regulations pertaining to double-counting risk. Other misincentives will need to go, as well, and that will cause some pain as the FIRE sector returns to its original purpose of intermediating tangible improvements to the human condition – all humans.

  100. @Oregano “However, we’ll have to change more than just a few regulations pertaining to double-counting risk”

    Absolutely… but those other changes needed are often used as distraction by those more looking to impose their political agenda, or put themselves in power, than to solve the crisis.

    You see the door the regulators opened, namely the possibility for some bureaucrats, in a highly non-transparent way, being able to determine what is risky and what is not… is such a delicious instrument for the control freaks that they just cannot gather the strength to resign from using it.

  101. Here you go, the kids are just playing a GAME, one that they made up that no one else knows about and one where they change the rules, and cheat lie steal and murder, in order to win – which in their eyes, they just did. They won against the bank. I always said they’d be better off being raised by wolves – would have learned more about consequences when the rest of the pack rips them apart for putting the whole pack in danger of extinction:

    http://www.cnbc.com/id/47580319

  102. @ Annie, let’s hope the whole pack (BANKSTER FRAUDS) IS in danger of being wiped out (Sent Packing) , for the good of human beings, everywhere.

  103. “Chess master at 18, inveterate gambler at Vegas, seems like the perfect skill set…lol.”

    It is worth a chuckle – in between the primal screams! Reading the story just has me shaking my head. To have built a system that incorporates this sort of winner-take-all predation, or that allows traders like Iskil to try and subtly game the market for multi-billion dollar takes, is completely insane. Add in one enormous pile of naked CDSs and you’ve got permanent chaos that awaits us all.

  106. Sure what’s 2 billion among friends? It’s just 2000 million dollar homes, no problem – we “can rip the face” off 2000 aged football players, starlets and leading men…we made them, we can break them…without us establishing Hollowood, there would be no movies, music, literature….or big sports stadiums…there would be no entertainment without us! Talent? Meh. We make *talent*…we make Presidents!

    They always have an excuse for why the victim was asking for it, don’t they?

  107. Patrick, you forgot Th. Jefferson:

    http://www.earlyamerica.com/review/summer/letter.html

    That’s a link to Jefferson’s letter to Madison in 1787, written in the wake of Shay’s Rebellion. (It might be worth your while to scroll thru this — ignoring the ads on either side. Too, look up Shay’s Rebellion. And the Declaration of Independence … and its history.)

    Societies formed in revolution are a different sort of thing. The members of societies so formed know — to the core of their being — government exists at the pleasure of the governed, not those who have usurped its necessary functions and directed its effort to maintaining their ill-gotten gain. But such things are not new to the world (see Proverbs 1:19).

  108. @Markets, “Societies formed in revolution are a different sort of thing. The members of societies so formed know — to the core of their being — government exists at the pleasure of the governed, not those who have usurped its necessary functions and directed its effort to maintaining their ill-gotten gain.”

    You are correct, but there is no need to get biblical :-)) about common sense experience. Common sense tells you that what happens when power is concentrated in a single personality – a Big Giant Head, so to speak – is that the flaws are magnified and released upon society affecting the life-maintenance of people who do not have that particular flaw. So we are all sickened and imprisoned by one power – like our monkey brain money god with just enough math skills to figure out – More misery for others = More $$$$ for ME ME ME

    And that’s no way to live as EXPERIENCE proves over and over and over again.

    Frankly, I’m surprised at this development in USA. Seems to me there are two main causes for this malaise of the biblical past finding a foothold in 21st century USA – the *culture* of a pool of immigrants who have no previous experience with self-rule, and the censorship employed by moguls who bought the air waves and keep channeling their crap at us. And of course, the ever present how-low-can-you-go in the deployment of brute force. Censorship IS brute force. And they are on record censoring voices who spoke up against torture. They used psychobabble to justify the censorship – they said the *tone* was not proper, the dissenting voices were too harsh. And that psychobabble bs continues, Carly on MTP this past Sunday said that no one should be judging motives and character. Unbelievable, right? So who do we torture and why?

    Waste of time – bottom line is they are nutz. And stupid. And human. And democracy protects all of us by limiting the damage any single flawed human can inflict on a COUNTRY.

    People’s personal greed is a prison of their own making. No big leap for the rest of us to house them in a *home* that reflects and channels their “inner you” – an actual prison.

  110. Many experts are available to represent the anti-regulatory position on the NY Fed Board. It’s not just that Dimon is anti-regs or a banker or even a powerful banker. It’s that he’s the CEO of a bank that’s TBTF. That’s TBTS (Too Big to Swallow.)

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