An Institutional Flaw At The Heart Of The Federal Reserve

By Simon Johnson.  This is a long blog post, about 2,800 words.

On the “PBS NewsHour” in late May, Treasury Secretary Timothy Geithner indicated that the continued presence of Jamie Dimon, the chief executive of JPMorgan Chase, on the board on the Federal Reserve Bank of New York creates a perception problem that should be addressed. He used the diplomatic language favored by finance ministers, but the message was loud and clear: Mr. Dimon should resign from the board of the New York Fed.

Mr. Dimon has been an effective opponent of financial reform over the past four years. He remains an outspoken advocate of the view that global mega-banks can manage their own risks, and he has stated publicly that the new international and national rules on capital requirements are “Anti-American.”

Mr. Dimon now finds himself at the center of a number of official investigations into how his bank could have lost so much money so quickly in its London-based trading operation – including whether adverse material information was disclosed to regulators and to markets in a timely manner.

(The Wall Street Journal reported this week that serious concerns about the London trading operation had been raised – but not made public – two years ago; the New York Times has reported similar concerns. On Wednesday, the Senate Banking Committee interviewed Mr. Dimon; the event was inconclusive, perhaps because JPMorgan Chase is a major donor to some members of the committee.)

On Monday, Lee Bollinger, chairman of the board of the New York Federal Reserve Bank and president of Columbia University, weighed in to contradict Mr. Geithner in no uncertain terms. The Wall Street Journal reported Mr. Bollinger’s view: Mr. Dimon should stay on the New York Fed’s board, and critics attacking the Fed have a “false understanding” of how it works. (Please note the correction to the original Wall Street Journal story, with an important change to the reporting of what Mr. Bollinger said.) This is a remarkable statement in part because Mr. Geithner is himself a former president of the New York Fed, so it is hard to see how he would have a false understanding of how the Fed works.

More generally, however, Mr. Bollinger’s intervention is inadvertently helpful, as it opens the door to a more productive conversation about the exact nature of the institutional weakness that lurks at the heart of the Federal Reserve System and that threatens our financial stability more broadly.

I stick up for the Federal Reserve System in many settings, including on Capitol Hill. We need a central bank that can provide emergency liquidity support when needed. That is a major lesson from the financial disaster and banking collapses that were an integral part of the Great Depression.

A significant number of Americans assert that the central bank should be abolished. With respect, I have argued elsewhere that this view is misguided. But the anti-Fed view continues to gain traction, and versions of it are increasingly manifest among mainstream Republicans (as well as some people on the left of the political spectrum).

The problem is that sensible liquidity support can easily become inappropriate subsidies, particularly when some financial institutions are considered too big to fail. Outsiders will never observe the real-time information on which central banks make decisions, so we need to be able to trust the people running our central bank, otherwise the system will go badly wrong — again.

As Esther George, president of the Kansas City Fed, put it recently, the “integrity, dignity and reputation of the Federal Reserve System” need to be preserved. As in ancient Rome, “Caesar’s wife must be above suspicion.”

Mr. Bollinger’s intervention brings a fresh spotlight to a deep governance problem at the heart of the Federal Reserve System – prominent financial sector executives and their close allies are much too involved in how the New York Fed operates. This is partly an anachronistic holdover from the original Federal Reserve Act of 1913 – and reflects the political milieu of that time, in which bankers had to be persuaded to accept a central bank (for more background and a lot of relevant technical detail, I recommend Edwin Walter Kemmerer’s “The ABC of the Federal Reserve System,” published in 1920).

But it is also an all-too-accurate reflection of where we stand today with regard to global mega-banks and the large, nontransparent and highly dangerous subsidies they extract from the rest of society by being too big to fail.

The people who run global mega-banks get the upside when things go well – they are paid based on their return on equity unadjusted for risk, so they prefer a lot of debt piled on top of very little equity. When things go badly, the downside is someone else’s problem – in the first instance, typically, the Federal Reserve’s.

The New York Fed has a special role – as the eyes and ears of the Federal Reserve System on Wall Street. It is also the repository for much of the expertise of the system on the complexities of modern capital requirements.

The board of directors of the New York Fed has, in part, the following mandate:

“In the exercise of its management oversight responsibilities, a Reserve Bank’s Board of Directors reviews and establishes with management the Bank’s annual goals and objectives, reviews and approves the budget, and conducts an independent appraisal of the performance of both the Bank (including its efficiency and productivity) and its president and first vice president. The Reserve Bank directors supervise, through a general auditor whom they appoint, and who reports directly to them, the maintenance of an effective system of internal auditing procedures.”

In the run-up to 2007, the complacency of the entire Fed System can be traced in part to the cozy relationship between the New York Fed (headed then by Mr. Geithner) and the Wall Street elite. We cannot let this happen again. Yet all too often with regard to financial reform today, we find the Fed lagging rather than leading the thinking and the implementation that Dodd-Frank calls for on many issues.

A version of the pre-2007 governance problem is playing out in full view, this time through interactions between different “classes” of directors at regional Feds. There are three directors in each “class”; nine directors in all at each regional Fed (the Federal Reserve provides this primer on its structure).

Class A directors are elected by member banks to represent banks. As a matter of practice, bankers have taken these positions – although there is no presumption that any of them should head a too-big-to-fail institution and no legal requirement that any should actually be bankers.

An elegant solution to the current problem would be to replace Mr. Dimon with a distinguished former banker, for example John Reed – previously chief executive of Citigroup and more recently a critic of very large banks. (Mr. Reed and I are both on the new systemic risk council created by Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation. This general idea, but not Mr. Reed’s name, was suggested to me by a leading financial journalist.)

The awkwardness raised by the existence of Class A directors was recognized most recently by Congress during the debate on the Dodd-Frank financial reform legislation, as a result of which such directors are no longer involved in selecting the heads of the regional Federal Reserve Banks. They are also not allowed to be engaged in the selection and oversight of supervisory personnel. But this just shifts the exact locus of the problem.

Class B directors are elected by member banks “to represent the public.” This is a very strange concept; it’s hard to understand how it made sense even in 1913.

The heart of the matter is Class C directors, who are appointed directly by the Board of Governors also “to represent the public.” At most regional Feds today, these directors are typically the chief executive or chief financial officer of a significant regional business). At the New York Fed, however, the three Class C directors are all heads of nonprofits, at least two of which – Columbia University and the Metropolitan Museum of Art – have high-profile fund-raising efforts.

Only Class C directors (and Class B directors, if they are not involved in running a savings institution supervised by the Fed) are involved in the selection, appointment and compensation of Reserve Bank officers involved in supervision.

The Federal Reserve – both at the Board of Governors level and in New York — sets high ethical standards for its directors in generally.  But there are apparently no rules that effectively constrain the nature of interaction among directors.

According to a statement reported on Tuesday by The Guardian, a British newspaper, the JPMorgan Chase Foundation donated about $2 million to Columbia University in recent years. (I’m not sure this includes pledges and continuing support; we may learn more about this in the days ahead.)

There are many problematic issues associated with Mr. Dimon’s position on the board of the New York Fed, but he is kept well away from supervision. However, he is allowed to give money to Mr. Bollinger’s university. (I understand that the New York Fed allows a Class C director to solicit donations from a Class A director only in his “professional role” as president of Columbia University, not as a fellow board member. This strikes me as a meaningless distinction.)

If they saw such an arrangement at work in any other country, American officials would recoil in horror – as they did, for example, when the inner workings of countries such as Indonesia and Russia came into sharper focus during the 1990s and when the nature of governance in Greece became more widely appreciated recently.

Why then is such behavior tolerated not just in the United States, within the inner sanctum of arguably the single most powerful institution in the country?

To anyone who does not work at the Federal Reserve, this kind of monetary transfer to an organization run by a Class C director is obviously inappropriate. I’m surprised it is allowed under the ethics rules of Columbia University. (When I asked to put questions to Mr. Bollinger, I was told that he was traveling and unable to talk with me directly.)  However, through a representative, he did email a statement, part of which reads:

“The Federal Reserve Act embodies the policy judgment by Congress that by creating distinct classes of directors selected from different constituencies and diverse parts of the economy, and with different degrees of association with the financial industry, the Board will be constituted in a manner that allows it to effectively serve the public’s interest in expressing views on the state of the economy.  Significantly, neither the Board nor any of its individual members have any involvement in the Fed’s supervisory responsibilities over financial institutions, nor does the Board have any authority over supervised institutions such as JPMorgan.  Supervisory responsibilities are conducted by New York Fed officials under authority provided by the Federal Reserve Board.  Prior board chairs to have been drawn from New York’s major business, civic, cultural and educational institutions.  As required by statute, the chair is selected from among the Board’s Class C directors, appointed by the Board of Governors to represent the public.”

The board of the New York Fed may well express “views on the state of the economy.”  But it is also formally in charge of the organization in many respects.  If it were not, it could have been changed to a purely advisory group long ago.  Mr. Bollinger chairs not just the board but also its management and budget committee (MBC), which has specific oversight functions that are made quite clear on the New York Fed’s website).  Mr. Dimon is also a member of this committee.  Section 4 of the Committee’s charter reads in part:

“Except as otherwise prohibited in the Bank’s bylaws, the MBC is responsible for reviewing and endorsing the Bank’s strategic plan, the framework forcompensation of the Bank’s senior executives (Senior Vice President and above) and any policies regarding such compensation, the budget and self-evaluation of the Bank’s performance prepared by Bank management, prior to submission to the Board of Governors of the Federal Reserve System for action.”

And either the Class C directors of the New York Fed oversee the “selection, appointment, or compensation of Reserve Bank officers whose primary duties involve supervisory matters” or they do not.  This is not a question to which a satisfactory answer can be, “only a little bit.”  The fact that the Board of Governors is also involved is somewhat reassuring but not decisive – how on the outside are we to know who makes which final decision and what basis?

The good news is that the sum of donations from Jamie Dimon’s firm is small relative to the total fund-raising of Columbia University. A representative emailed me that, “regarding JPMorgan Chase and Columbia, it might be helpful to know that placed in the context of the $4.9 billion raised by the University since 2004, JPMorgan Chase is not one of Columbia’s major donors.   Specifically, over the eight-year period, JPMorgan has given $845,000, as well as $989,000 from its corporate foundation and $121,000 from employee matching gifts to support the university’s mission of scholarship, teaching and research.  This total represents .04% of overall university fundraising during this period.”  That should make it easy for them to return the money to the JPMorgan Chase Foundation. In fact, I don’t think that should even be a long or difficult conversation for the trustees of Columbia, which includes Vikram Pandit, the chief executive of Citigroup.  Avoiding even the appearance of a conflict of interest is most important for all involved.

To be clear, I am not accusing Mr. Bollinger of any wrongdoing. Mr. Bollinger is a leading legal scholar and one of the top thinkers on and defenders of the First Amendment. (I particularly recommend his “Uninhibited, Robust and Wide Open: A Free Press for a New Century,” published in 2010.)  I also understand that Mr. Bollinger has not personally solicited any donations from Jamie Dimon or JP Morgan Chase.

Of course, the question of who donates how much to elected officials permeates all of lobbying and modern American election campaigns – and it is an important theme in the commentary on Mr. Dimon’s gentle treatment by the Senate Banking Committee on Wednesday.  But just because bankers are powerful in general does not excuse the specific governance weaknesses within the Federal Reserve System – unless we are resigning ourselves to no longer be a serious country.

The fault here lies with the rules and expectations set by the Board of Governors of the Federal Reserve System. (I have for several weeks been seeking a meeting with any governor of the Federal Reserve, to present a petition I organized seeking Mr. Dimon’s removal from the board of the New York Fed. I am currently confident that I will be offered the opportunity to meet soon with senior staff; I will report on that conversation in this space.)

More broadly and with regard to the substance of the matter, Mr. Bollinger’s choice of words was unfortunate. No one has a false understanding of the situation. He has his understanding of how the New York Fed works within the Federal Reserve System. The rest of us, looking in, have a different understanding of the role of the Fed in the boom-bust-bailout cycle that has dominated the last decade or so.

The prevailing view at the top of Federal Reserve remains indifferent to how the rest of us view their legitimacy; they live in a bubble – in the old, pre-Greenspan meaning of the expression. And the Board of Governors is making a serious mistake in perpetuating this indifference (and borderline arrogance, in my experience) – jeopardizing, through inaction, the political future of the institution.

For Ben Bernanke, the chairman of the Federal Reserve, to attempt to shift the blame entirely onto Congress last week is, at best, disingenuous. The Fed Board of Governors has plenty of power to tighten governance at regional Feds, even within the framework provided by existing legislation – a point made in an important Op-Ed by Jonathan Reiss, an experienced financial services industry executive, which appeared last night on Bloomberg View.

In addition, the Federal Reserve Act should be amended. The boards of regional federal reserves should become advisory groups. If local boards are retained in any fashion, they should be filled with distinguished experts toward the end of their careers – as is the case at the National Transportation Safety Board.   (Mr. Reiss also has some very constructive suggestions.)

Columbia University should return the donations it received from JP Morgan and the JPMorgan Chase Foundation while Mr. Bollinger was a Class C director. And Mr. Dimon should resign from the board of the New York Fed.

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

100 responses to “An Institutional Flaw At The Heart Of The Federal Reserve

  1. We need to seperate Bank from State.

  2. Just another example of the dumbing down of America, from the top down, as was seen by yesterdays hearings.

  3. About this: “The good news is that the sum of donations from Jamie Dimon’s firm is small relative to the total fund-raising of Columbia University.”

    What value does JP Morgan Chase derive from the student loan system? Can dollar value be estimated for the student loan burdens of Columbia graduates that generate profits specifically for JP Morgan Chase, but also to the banks in general?

    The reason I ask is because just recently I had a long conversation with a friend who went to graduate school at Columbia in a subject area that tends to be populated with students from affluent families who can support their young adults while pursuing expensive grad programs that are culturally and intellectually stimulating but for which they will likely never be well compensated in the workforce. So my friend financed his education, including living expenses in NYC, through student loans. We’ve been friends for 10 years and I’ve been hearing about this drama at different stages in his career. Now, at mid-life, he is accepting of the fact that he will NEVER pay off his student loans. He was told that there is, in fact (dubious to me but he claims it’s true), a provision in the tax code that allows excessive student debt to be discharged at Social Security’s age for normal retirement. So he’s paying the absolute minimum in order not go into default, while the debt expands with fees and interest because he pays below the assigned installment, but he’s at peace with this because he’s worked out a manageable payment and he’s given up the ghost on ever fully resolving his debt. So when reading this post describing a significant relationship between Columbia and the banking system, it made me wonder if there is a more full value to that relationship.

  4. ‘He used the diplomatic language favored by finance ministers, but the message was loud and clear: Mr. Dimon should resign from the board of the New York Fed.’

    Which is nothing other than a flat out lie. As I’ve pointed out here before, in the interview to which Simon Johnson links, Mr Geithner was specifically asked, three times, to call for Dimon to resign. Three times he declined to do so.

    Of course, I don’t own a secret finance minister decoder ring, but my native tongue is English. Aristotle warned us against planting false premises, and this is a good example of why. One such is needed to justify this;

    ‘ The Wall Street Journal reported Mr. Bollinger’s view: Mr. Dimon should stay on the New York Fed’s board, and critics attacking the Fed have a “false understanding” of how it works. (Please note the correction to the original Wall Street Journal story, with an important change to the reporting of what Mr. Bollinger said.) This is a remarkable statement in part because Mr. Geithner is himself a former president of the New York Fed, so it is hard to see how he would have a false understanding of how the Fed works.’

    1. Mr. Geithner didn’t make any criticism of Mr. Dimon’s sitting on the Board, and 2. Mr. Bollinger clearly wasn’t referring to Mr. Geithner as one of the ‘critics attacking the Fed’.

    Btw, as long we are casting unsupported assertions against our neighbors, isn’t MIT a competitor of Columbia for corporate largesse? And, isn’t this an obvious bit of cronyism on Johnson’s part;

    ‘An elegant solution to the current problem would be to replace Mr. Dimon with a distinguished former banker, for example John Reed – previously chief executive of Citigroup and more recently a critic of very large banks. (Mr. Reed and I are both on the new systemic risk council created by Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation. This general idea, but not Mr. Reed’s name, was suggested to me by a leading financial journalist.)’

  5. The Bond Man

    Mr. Dimon is held in idolatry by the Congress, by the lame stream “media”, by the punditocracy, and by a wide range of sycophantic bloggers, there is NO WAY to get Dimon off the FED, whether by pushing him over, or otherwise persuading Jaime to step down by his own volition.

    Dimon stated yesterday he believes JPM is capable of self-regulation, but the only self-regulation is hugely risky derivatives ($3.5 + billion loss with the London Whale episode), that no one can accurately quantify, and fewer who comprehends the myriad counter-party claims.

    The same people running Vegas could effectively operate the TBTF’s, and vice versa, and Dimon is no exception.

    People need to stop kissing his rear end, too.

  6. the author just indirectly said the founders of our United States are also misguided. remember, they too opposed the central bank. central banks were unconstittional originally. i think these elites writing these articles need to be put back in their place. it’s not that a central bank can’t do some things that are helpful. the problem is that they abuse their powers and make bigger problems over time. the savers in this country are robbbed everyday that the central banks work with the treasury to allow for the printing presses to work overtime. keep in mind, a 96% reduction in the value of the dollar since the creation of the fed in 1913. the dollar lost virtually no value from 1800-1899 before the fed, even after the civil war.

  7. George O'Har

    You have a much higher regard for that vapid twerp Bollinger than I do. Otherwise, spot on.

  8. The Bond Man

    A central banking system does serve a useful function, except when the central bank is a private banking cartel using fractional reserve bank loans, and where currency issues are a debt issues.

    Keep the central bank, but nationalize it, and issue GREENBACKS without the usurious interest attachments, which is what makes all of us poorer, including the government.

    Bankers control the planet, not governments, so, this outcome is likely, absent real revolution, but so many people in the USA are so ignorant, they don’t their arse from a hole in the ground.

    When Presidents broach this issue, they are gunned down in hidden conspiratorial murder plots.

  9. The Bond Man

    S/B UNLIKELY outcome….

  10. Indeed Columbia U. is small potatoes, but then the real juicy booty has already been captured:

    http://www.rt.com/news/tedeschi-vatican-vatileaks-banker-vatileaks-546/

  11. On the topic of central bankers and the need to maintain at least a semblance of integrity, Europe isn’t doing much better, apparently:

    http://www.zerohedge.com/news/just-what-mario-draghi-hiding-ecb-declines-respond-bloomberg-foia-request-greek-goldman-swaps

  12. This is all very deliberate an planned systematic transfer of global ownership through fiat printing of pretend money. With nothing behind the reserve notes, an infinite amount of reserves can be created at any time with inflation passing the cost to the population of the world other than the 7% that now owns more than 50% of the world and also excluding the 1% of USA population which now earns more than 50% of the nationial income. There is no intention to restore anything to anyone, just to keep people calm while the process of a global world order continues and the evolution to totalitarianism. Truth will always be defeated by tyranny, unless people are willing to step forward and put their lives into the battle. The future belongs not to ideas but to people who act on those ideas. By 2010 the federal debt had risen to$202 trillion when all liabilities are included. If you had a stack of $100 bills 40 inches high you would be a millionaire. $202 trillion would rise over 127,000 miles into space. By the time you read this, after the expenditures of subsequent Council on Foreign Relations administrations, It will touch the moon.

  13. This long ago became an ethical and moral issue, now we are entering the sphere of profound crisis between elites and the ethics of government. Obama can’t step back from this. He must now escalate this fight and make clear who regulates who. Even the Dallas Fed (the DALLAS FED!) has weighed in that TBTF is a disaster and has now so perverted the economy that the engine of free enterprise has blown from simple lack of trust. I respect your work and thank you for it. Sorry, but you must continue to make this clear. People (especially us privileged and still ethical ones) really need to spread the word and use all this to make Obama’s election about wresting control back to the people. This is obvious. Am I hopelessly naive? Perhaps Obama can be shamed into taking action.

  14. @Dr. Palms, “…Truth will always be defeated by tyranny, unless people are willing to step forward and put their lives into the battle….”

    A little science can go a long way in knowing how to evolve. Life reproduces itself. Which means it is dependent on sustainable systems. So the foundation of a *real* economy – life maintenance commerce – is the acceptance of there being a limit to profit since there is a time limit in the sustainable system – ie. it takes a set time to turn 2 cows into a herd of 10 cows and it takes a year from one harvest to the next. The other limit is a man to land ratio. Any society that stays within the man to land ratio views its citizens as assets, not debtors. No one is “born” poor.

    The ideas of what to do with a non-living, unclaimed, independent rock, for instance, need to be considered against what you do with the rock in contributing to life maintenance and sustainability – can you eat it, drink it, smoke it :-)) ? Nope, You can use it as a tool, though, to labor for you – makes a good weapon, works as a wheel, pile them up and you’ve got shelter, etc…

    Now enter in fiat money. It is independent of animal, mineral and vegetable. No theoretical limit to profit, time to acquire profit, or a known “ideas” about what magic powers can be assigned to it since, well, we made it up – it’s *fiat*. Talk about a *god* man invented! Seems there ain’t no god better suited to man’s delusions of being a god, himself, than the magic power of his FIAT money.

    I don’t think that anyone sane is still thinking about surviving using fiat money. The man to land ratio is too stressed because of how quickly extractions were made to pay off interest on fiat money to create this small band of untouchably rich fiat-ors. We all know that they have a STUPID plan for whittling down the population. It’s now a matter of using them as the pilot batch experiment for their own plan – ie, how quickly will THEY die in a city that is claiming better living through rocks, but drowning in trillions of fiat derivatives….? It’s not even *money* anymore, when you think about it. They’re now betting with their magic rocks on whether tyranny rules in this skirmish or that one, or whether truth pulls a check on the board king this one time…never forget it is just a GAME to them, nothing more or less.

    They’re psychos. A different species. Neither animal, mineral or vegetable :-) – they’re Fiators…

    bend your knee to the War Lords, Drug Lords and Slave Lords….

  15. To many have been allowed to shroud their ignorance in conspiracy. Conspiricies sell. Conspiracy theories are entertainment and entertainment is what we are told we want. Is it more likley that you can convince the deluded masses of a necesary tool that’s simply been reapproriated by those who would use it to bludgen them? Or contraraly is it more likely that fools whose entire belief system contributes to the rot and ruination of society are able to scapegoat institutions that could otherwise be used for the betterment of all if not ran by the failed ideas and demegogy of the very fools who scapegoat them. I believe you only need to look at recent history to discern this answer…

  16. I suggest asking someone who has worked in criminal law enforcement for three decades whether conspiracy theories are entertainment, or whether these schemes are the basis for many crimes, or otherwise nefarious activity?

  17. Mark McDonald

    One side sees this as a gentlemanly negotiation, the other is at war. The first side should see it for what it is and demand surrender, or take it into custody.

  18. I think there is a problem of legislating the investment process for derivatives because the process is so complex.

    I think it is more practical to break up the banks so they can indeed fail and take the normal consequences of the market place.

    The deposits should be insured say up to $50,000 and the bank should pay the premiums. That way the Bank could go to Chapter 11 but the depositors would still be protected.

  19. Great post Simon, thank you.

  20. I saw where one senator spent $63 million on a campaign. A .04% contribution to him would have been $25,200, far above what use to be the limit for an individual. Seems like Dimon’s donation could have gained him some influence.

  21. Simon,

    A wonderful, well reasoned post. I worry, however, that only those of us who are, essentially economists and those who are already convinced of your position will read such a long and erudite, article.

    The most disheartening thing about this turn of events is that the Democrats are supporting Mr. Dimon.

    How can we convince the hardworking poor and middle class that they have been sold out?

    Not, I fear, with arguments about how the Fed works.

    Cheers,

    tas

  22. markets.aurelius

    Another excellent post, Simon.

    The Fed and the banking systems of the developed economies have been, from their inceptions, designed by the bankers themselves to provide access to the treasuries of the respective states in which they are domiciled.

    The managers of these institutions set out to create a lender of last resort and to nominally control the money supplu, to correct the destructive excess of the 19th-century banking system and the carnage it wrought. They found, over time, this central bank could be transformed into the guarantor of their equity options in the banks they managed. So of course they levered up — this is the not-to-subtle way anyone with access to debt jacks their ROE. To get the convex payout of the call option they all crave, they needed to ensure the taxpayer — via the Treasury — was always there to bail them out in the event the leverage destroyed their institution.

    The major facilitating mechanism of this system and process were the elite universities, and the generations of economists trained at these institutions who became a priesthood studying and defending the money-creation process and the centrality of the banking system to the development of society. The universities and their faculty became emotionally invested in the elegance of their models and theory; the bank managers — intellectually less brilliant but quantum levels above the profs in terms of business savvy — saw they had an installed base of defenders of their role in society and the necessity of their continuance, despite the repeated recklessness demonstrated by these bank managers. The bankers can further the continuance of these universities by endowing them — not unlike the emperors and kings of old — with chump change. (Of course, the deans and department heads are nothing more than fund raisers. This is their role, and it is the basis of their compensation.)

    At the end of the day, the bank managers only concern is amassing and protecting their wealth. Regardless of the cost to society. And, as we can see, they do amass considerable wealth with the Treasury guaranteeing the convexity of their cost-free call options in the institutions they manage.

    The recklessness and unbridled defense — a defense that does not count the cost — of these institutions is truly stunning. Dimon’s testimony this week was a case in point. The senators were nothing if not the eunuch courtiers to the emperor. This is how history plays out. Time and again. It may not repeat. But it can.

  23. Don’t worry, be happy, underdog is here to save the day!

  24. ‘Obama can’t step back from this.’

    He already has. Btw, Jamie Dimon voted for Obama, and made financial contributions to his campaign.

    ‘ He must now escalate this fight and make clear who regulates who. Even the Dallas Fed (the DALLAS FED!) has weighed in that TBTF is a disaster….’

    Didn’t bother to actually watch Dimon’s testimony? He called for an end to TBTF.

  25. ‘The universities and their faculty became emotionally invested in the elegance of their models and theory; the bank managers — intellectually less brilliant but quantum levels above the profs in terms of business savvy — saw they had an installed base of defenders of their role in society and the necessity of their continuance, despite the repeated recklessness demonstrated by these bank managers. The bankers can further the continuance of these universities by endowing them — not unlike the emperors and kings of old — with chump change. (Of course, the deans and department heads are nothing more than fund raisers. This is their role, and it is the basis of their compensation.)’

    Simon Johnson, you reap what you sow!

  26. Geittner having the credibility to suggest that anyone else should retire is a joke of epic proportions.

  27. @markets.aurelius – nice post.

    “This is how history plays out. Time and again. It may not repeat. But it can.”

    Good case for all students defaulting on their loans :-)) They taught us how it does NOT work – time and again.

  28. Simon, as you have at least hinted, if not outright stated, in the not too distant past, America is a plutocracy, a land where oligarchs own government. Sadly, in the case of your article’s thrust, what this means is that the FED has become simply a plutocratic instrument run to assure the health of our banking oligarchy. It does a spectacular job, within that context, however, when viewed as a facility for the economic benefit of the country generally, it is nothing less and an outright failure. We can so clearly see the situation, if we only look to the nexus between the NY FED, Mr. Dimon, Mr. Obama (and his love for Jamie, nearly shameful, if not entirely so), and Mr. Bernanke, who loves to pontificate on the FEDS helming of our economic ship. Power is a beautiful thing. Conceptually, the FED, as you have said, is really a sort of necessary or even important organization, but it has weaknesses in both operation and formation, which dictate a higher than acceptable level of corruptibility. Your article is spot on. But, where will we find enough reform minded voices to counter its oh-so-effect power core. I just don’t see it happening soon, if ever.

  29. Desi Girl - Doing God's Work

    Why is simon boy still on the payroll at MIT? All he does is drum up a variety of conspiracy theories, write books and columnns that pay him enormous sums of money. Why is he still a professor at MIT?

    All this is a bunch of theatrics to support Elizabeth Warren’s election campaign. Politics under the guise of morality is how third world countries operate. Why is such behavior tolerated in the United States.

    Simon Johnson should resign his post at MIT so that student tuition is utilized for teaching and serious research. MIT shoudl claw back all the sompensation paid to simon biy when he was writing books and news columbs for personal profit.

  30. markets.aurelius

    Your writing is as slurred as your thinking.

  31. markets.aurelius

    That was directed to desi whatever.

  32. LOL @ MARKETS!!

  33. Anonyomousy

    What comes around, goes around!!!

  34. @Bayard – granted with enough duress and drugs, the EXPERIENTIAL MEMORY of how life-maintenance commerce did work well for the Middle Class could be erased, but I think that the speed with which those psychobabble tactics and poisonings are being applied has triggered a countervailing FORCE against the Fiators from the “animal, mineral, vegetable” groupings on the planet. Raw brute force is met with same. Wasn’t the argument for polluting the waters made that eventually *nature* will heal itself….?

  35. “Charting the Cozy Connections Between JPMorgan and the Senate Banking Committee: A rundown of the long list of connections between JPMorgan Chase and the Senate Banking Committee leading the financial firm’s hearing.”

    http://www.motherjones.com/politics/2012/06/connections-jp-morgan-jamie-dimon-senate-banking-committee

    “If you want to trade securities at any brokerage firm in the U.S., you’ll need to study intensively for about three months, memorize dizzying rules and regulations, then take a six hour licensing exam. (The exam is so rigorous that it’s compared to the CPA exam. I don’t know if it’s fact or lore, but I was told exam rooms in past decades had puke buckets in the corners. My room didn’t in 1986.) Then, you’ll need to get fingerprinted, pass a background check, register with a host of stock exchanges, make sure you have a supervisor who holds a principal’s license, get approved in each state in which you plan to conduct business, and take ongoing continuing education classes to keep your licenses. Or, you could skip all of that and earn $14 million a year trading – without a license – stocks, bonds, swaps, options, futures with $374 billion of bank depositors’ money at JP Morgan Chase’s Chief Investment Office – a unit few on Wall Street had ever heard of until it reported losing billions of dollars in May in the same derivative transaction that made AIG a ward of the taxpayer in 2008. An “Investment” office sans licensed investment brokers is the latest deregulatory mutation on Wall Street. The other mutation is the JPMorgan model to create an art form out of depicting itself as a “fortress balance sheet” while holding $156 billion of capital and $66 trillion (with a “t”) in derivatives according to financial filings for March 31, 2012 with the Comptroller of the Currency.”

    http://www.alternet.org/story/155862/how_jamie_dimon%27s_new_business_model_from_hell_could_take_down_wall_street_%E2%80%93_again/

    “JPMorgan Chase CEO Jamie Dimon testified before Congress today about his bank’s gigantic trading losses a few weeks ago, and the gist of his testimony was — well, something or other. Basically, nobody laid a glove on him, and Republican senators in particular practically genuflected in his presence. No sir, nobody’s thinking about regulating you any more than you already are! Wouldn’t dream of it!”

    http://www.motherjones.com/kevin-drum/2012/06/what-do-jamie-dimons-cufflinks-tell-us-about-financial-industrial-complex

  36. @Bayard – about 8 minutes in – “…I don’t need to fight to prove I’m right, I don’t need to be forgiven…it’s only TEENAGE WASTELAND…”

    They were ALL yanked off the 24/7 shifts on the pile because they were killing themselves with *hope* – they were not digging out Jamie, Victor or Blankfein – they were hoping to find friends, family, and even UNKNOWN survivors.

    Treat people with DIGNITY. Especially when hosting the Olympics on the heels of this mess…..for YOUR improvement in perspective:

  37. Get your senators to co-sponsor Sen Sanders’ Federal Reserve Independence Act. The banking committee is filled with sycophants except for Merkley, and one other democrat, no one challenged Dimon. He owns them. An act is needed to keep congress people from taking/accepting campaign contributions from the industries they oversee.

    http://www.sanders.senate.gov/newsroom/news/?id=3CBB0CA8-B025-406A-A669-AA89BEC0B4E4

    http://WWW.OURFUTURE.ORG/BLOG-ENTRY/2012062415/DIMON-SIMPSON-GEITHNER-WEEK-CORPORATE-POLITICS

  38. You guys got the crime right, but you got the criminal wrong. It is Goldman Sachs that is screwing everybody. In fact, Goldman Sachs has taken over the U.S. Treasury Department, lock stock and barrel. You can find a detailed description in The Great Recession Conspiracy (KIndle, scribd.com or anywhere ebooks are sold) to read about it for yourself. Section Two details exactly how Goldman Sachs has taken over the Treasury and names the people and their positions. The whole thing is so odious that I called the book “Conspiracy”. If you think TARP was ever supposed to do anything other than bail out Goldman Sachs, you really need to read the book.

    And if you don’t believe what I have said, check out Matt Taibbi at Rolling Stone for another take on the same ground. Same conclusion with more colorful language.

  39. JUDY WOODRUFF: Thirty-two billionaires. . .

    MARK SHIELDS: Thirty-two billionaires have already contributed, starting with Mr. Adelson, who did impact. . .

    JUDY WOODRUFF: You said to the president.

    MARK SHIELDS: I’m sorry, to Mr. Romney’s campaign.

    JUDY WOODRUFF: Romney, Okay.

    MARK SHIELDS: The president has had 164 fund-raisers.

    JUDY WOODRUFF: Right.

    MARK SHIELDS: This is not the way that campaigns should be run.

  40. Blistering post Mr Johnson. As one of the lesser 99%, I appreciate your incisive investigation and articulate explanation of this glaring flaw in the socalled Fed’s practices, and wait with baited breath for your meeting with a Fed governor, and the deliverance of the petition for Dimon to step down.

    Please recognize this question. Legally, who does the socalled Fed represent and whose best interests do the socalled Fed advance. From my pedestrian perspective , general monetary policy aside – it seems the socalled Fed is purely a creature invented to protect, advance, and shield the financial oligarchs exclusively, and despite the pretty talk – the socalled Fed has NO direct mandate or obligation to protect, advance, or shield the best interests of the American people.

    I pray this belief is mistaken, and acknowledge that I look to wiser more knowledgeable minds for the answer.

    But I do know this, – if the socalled Fed is mandated to work in the peoples best interest – it is a catastrophic FAILURE, and MUST be structurally reformed!

    If it is not – if it is a creature invented and mandated to work in the predatorclass financial oligarchs best interests – then it is an evil fascist entity that MUST be dismantled and destroyed – and replaced with something more just and structured in equanimity.

    Either the socalled Fed is a castrostrophic FAILURE, or a rank criminal cartel!

    Real change is necessary.

    A thousand thanks

    Tony

  41. Tony actually the latter is correct. Which is why we currently have negative actual real interest rates, on the street they 0-0.25. Those like minded Fed heads also infiltrate the congress to a large degree, with the full belief and arrogance that cash money is their god, and nothing can or should prevent them from their pursuit of happiness, and their fountain of youth. They believe this because, well, no one has to this point, and they have not even been so much as threatened. it’s a disease of the mind, and it is also contageous.

  42. The Federal Reserve Board acting like they have nothing to do with the monstrosity that is the tax code as it exists today is ridiculous. They print their fiat $$$ and set up fractional reserve banking based on how much was available to the banks for a _bail out_ .

    Every single time the extraction algorithm gets turned on, the same ethnic groups find themselves “unemployed”. It’s sick. And the more you look into how the the 400 billionaires got on the Forbes list, the sicker it becomes. Follow just one of them like Carl Icahn who has earned infamy through the machinations of his spider web that caught up Martha Stewart….

    The FED is nothing more at this point in time than a criminal syndicate outside of the rule of law that everyone civilized has EARNED as a right through experiential trial and error, imho.

    The fact that all this went on in NYC in the decade following 911 is yet more proof of the complete depravity of the players and their opportunistic New World Order of the global economy…savage from their craven avarice and greed, every single one of them. They NEED to be stopped.

  43. TonyForesta

    Word Annie! Somehow Amerika devolved into a fascist state wherein the predatorclass and a few predatorclass oligarchs rob and pillage the citizenry for otherworldly profit and the traumatized, fearfully, and dim citizenry are silent and submissive to the wanton crimes of the predatorclass and predatorclass oligarchs. Rest assured though that some of us will NOT go sheepishly to the slaughter, or servitude, or the homeland security detention centers, or the prison industrial complex. We may be doomed, but not without a fight and predatorclass blood.

    In a world where there are no laws, there are no laws for anyone predatorclass biiiiiiaaatches!

  44. It’s often the case that institutions become isolated and, in that isolation, quite willing to believe that they are the keepers of the one true flame. History has shown such self-satisfaction to be the very reason they eventually get taken down. No one outside the secret circle can tell them anything they don’t believe they already know. That makes it impossible for them to change course if they’ve got their bearings wrong.

    That’s where we are at this point. The threat posed by bank leverage and risk taking has the potential to catastrophically destabilize the global economy, that much is clear. It’s crucial that dissenting voices outside the small circle of Fed board membership be accepted as legitimate by that board as well as the staff. I don’t know how that can be done, but it has to. The threat is that great.

  45. You rock, Norm Cimon.

  46. @Tony – People are NOT that f’n stupid – it was the SPEED of this heist but as everyone goes back to their paperwork, the SAME STORY bubbles up – you know how the saying goes, “….a lie makes it around the world 10 times while the truth is still strapping on their boots…” – and that saying came along WAY before nanosecond heists. The boots are ON.

    It is never a futile gesture to give it all you got,
    Whatever it takes, all options on the table
    To stand with DIGNITY, not bent knee
    When the face to face day comes
    And you stare into the abyss that is the EYE of the global War Lords, Drug Lords and Slave Lords.

    Heck, they do whatever the hell they want, so can we.

    You don’t need to apply for a permit to pollute if what you are doing does not create pollution :-)) Somehow, I don’t think that is why Rethugs want “no regulation”…

  47. Okay, here’s a perfect example of craven avarice – subjecting Greece to austerity measures and sacrifice, then telling them they need to sell their state property (how much for Mount Olympus?) and land to be privatized so that fines/taxes/rent/fees can be collected…

    Meanwhile, not a whiff of austerity measures in Syria. If people there want to fight each other until no one is left standing, then make them do it with stones and sticks, not trillion dollar war “stuff”!

    Austerity and sacrifice for all, no?

  48. The Bond Man

    Hi Annie: austerity is akin to being kicked in the teeth; all the ensuing suffering by the people, with none of the benefits inuring to the people, are a direct linear function of bailing out ZOMBIE banks, from the mess Zombie banks caused of their own making.

    This is outrageous, particularly, since this was the objective of the rentier class from the outset.

    The bailouts don’t help the macro-economies in any way, other than preserving the corrupt, immoral, bankrupt, cynical, greedy banksters.

    With help like that, I’ll take my chances telling the banks to eat it.

    Alex Tsiripas and Syriza came close in Greece, but those voting for the NEW DEMOCRATS favoring austerity, were sold a false bill of goods, imo.

  49. @Bond Man – “…This is outrageous, particularly, since this was the objective of the rentier class from the outset….”

    And WHY was it their objective? Perpetual war in the Middle East…talk about your Welfare Queen….

    Seriously, the ONE place on earth where there is no risk that peace will break out is NOT subjected to the austerity of killing each other with rocks and sticks. Complete utter insanity…

    No election on the planet is going to be anything other than an algorithm launch – there is no audit trail for electronic voting! You walk out of there without any proof that the computer registered your vote the way you voted.

  50. One more stat out today on the internets – 4.5 million people out of 6.67 billion all around the planet were displaced from their homes and that is considered a global crisis.

    Shoot, good thing we’re still number one in USA in something – we got the same number out of 330 million displaced due to FRAUDclosure Gate!

    They NEED to be stopped and all f’n options NEED to be on the table.

    Fiat $$$$ is supernatural since it’s not animal, mineral or vegetable, so to speak….meet Caligastia and Daligastia….

  51. there is so much to complain about here i don’t know where to begin. do we really want to change the Fed at all right now? is my first thought. is gold a more honest arbiter of exchange than the high priests of finance? is the Fed really as powerful as is made out here? are the Banks who’s equity prices have been clobbered in spite of the bailouts? The most glaring factual error of course concerns WHO is providing the bailout in the first place. That would be CONGRESS Simon…who had to appropriate a “bazooka” in order to contain the crisis resulting from the collapse of Lehman Brothers. I’m sorry? Is someone arguing the failure of Lehman wasn’t the free market system working? I didn’t think so. The lack of “objective” critical thinking these days is truly staggering…and when we lack such thinking we often end up creating more problems when we try and “fix” things. This crisis is far from over…although the US has come a long way from the collapse of 2008. Europe has not. Perhaps if we started comparatively then and proceeded from there then? Unless of course you all are arguing Europe doesn’t have a Central Bank right now.

  52. I think the perception is the US has come a long way since 08, in reality, we the country is in deeper dog doo than it was in 2008. So I think we should watch Europe, and see if the truth eventually does affect us here at home too, which in fact it should, once the accounting dept stops cooking the unfunded liabilities books.

  53. “As if last week’s bought and paid for by JPMorgan media circus in the Senate was not enough, in which Jamie Dimon played several bribed muppets like a fiddle, today we get part two. Momentarily, the Committee on Financial Services will pick up the baton where the Senate left off, and confirm to everyone that the people who lead this country, at least on paper, are some of the most incompetent, and outright clueless when it comes to financial matters. The same matters that have led America to the Second great depression, which has so far been prevented from wiping out 20% of the economy only courtesy of Bernanke’s relentless money printing. Dimon’s testimony, which is a replica of last week’s, can be found here. In other news, Jamie Dimon is furious he never bribed Maxine Waters before. Now he will have to explain introductory math for absolute idiots. Karma is a bitch.”

    http://www.zerohedge.com/news/formerly-brilliant-dimon-and-maxine-waters-debate-delta-hedging-and-negative-convexity-live

  54. markets.aurelius

    @ Anonymous

    Spot on. This is how Europe devolved over the past 142 years — the elites repeatedly sold out their societies. They now have no currency (pun intended). No one trusts the elites or the “pillar” institutions of those societies. No one will fight their wars, or pay their taxes. The humblest member of those societies seeks only to acquire something — money, a paying job, food, shelter, etc. — and avoid the tax collector. This is atomization of the worst sort. Either revolution or war follows. Stand by.

  55. http://www.thedailybeast.com/articles/2012/06/19/u-k-blocks-russian-cargo-shipment-to-syria.html

    Part of that conversation had to sound like a Monty Python skit. LMAO.

    “Yes, your insurance is being revoked.”

    What did they insure in the first place? Confidence in how much of a city, and everything in it, the weapon can blow up (working condition), or the risk of the weapon being blown up? Or both? Re-sale value? Etc Etc Etc.

    Now if only the same relentless logic of German austerity being shoved on the PEACEFUL nation of Greece is applied to the Welfare Queen (AKA Middle East), we’d be moving right along to making them all fight each other over religion with rocks and sticks for the next 1000 years…

    But the reality is, who is going to get the business that Russia isn’t allowed to do…? England? USA? China?

  56. Today Mr. Dimon basically buried simon’s monkey tricks in the house hearing: online petition? flawed federal reserve? Ha Ha. What a joker simon has made of himself.

    Simon should resign his post at MIT so that student tuition is utilized for teaching and serious research. MIT should claw back all the compensation paid to simon boy when he was writing books and news columns for personal profit, while drawing salary from MIT.

  57. The wives goin nuts off the throttle and on the phone.

  58. When will Desi sober up, that is the question…lol.

  59. @markets aurelius, “…No one trusts the elites or the “pillar” institutions of those societies. No one will fight their wars, or pay their taxes. The humblest member of those societies seeks only to acquire something — money, a paying job, food, shelter, etc. — and avoid the tax collector….”

    USA propaganda machine is _supernatural_. Once Europe starting governing itself based on monkey brain made-up “isms”, it lost its mind.

    The fact that people are getting grounded into the realities of life-maintenance – food, shelter, etc. – is a good thing. The results of getting grounded back into the SCIENCE of living is why they are not going to fight wars over some made-up delusional “ism”.

    They just rebuilt themselves after WWII! No psychobabble from the self-proclaimed intellectuals who IGNORE the trashing of the planet at the altar of their puerile technology – and with their horse chocking hypocrisy (religion? ha!) – will budge a people who get stubborn about their PROVEN TRADITIONS of living – familia and man to land ratio…

  60. @MB: “Now, at mid-life, he is accepting of the fact that he will NEVER pay off his student loans. He was told that there is, in fact (dubious to me but he claims it’s true), a provision in the tax code that allows excessive student debt to be discharged at Social Security’s age for normal retirement. … So when reading this post describing a significant relationship between Columbia and the banking system, it made me wonder if there is a more full value to that relationship.”

    Sadly, your friend is mis-informed. Social Security benefits are garnished to pay student loans. If your friend’s student debt is held by the federal government, it is dischargeable only at death. If his student debt is held by a private bank or banks, they will go after his parents, spouse or children for repayment of the principle plus decades of compounded interest.

    This situation is an OUTRAGE.

  61. As someone above noted, Jamie Dimon, yesterday, demolished Simon’s little crusade without breaking a sweat. His position on the Fed’s board is merely informational (he has now power to force any kind of action by the Fed) and congress set up the situation.

    Presumably it was thought a good idea, by congress, for someone who knew banking, to be available to provide feedback to the Fed. If not Dimon, then someone else.

    Anyone know of any comparable humiliation for a supposedly respected economist? Mountain…molehill.

  62. The Bond Man

    @ Carla, welcome return to baseline. We missed your wisdom, understanding, and knowledge. Don’t be a stranger to these pages!!

  63. The Bond Man

    Question: how do you know a CEO is lying?

    Answer: HER/HIS LIPS ARE MOVING! hehehehe!! : – ))

  64. “Anyone know of any comparable humiliation for a supposedly respected economist?”
    That’s exactly how Dimon and his henchmen in the government see it. The symbiotic relationship was on full display.

  65. @Carla – it is an outrage, and stupid.

    Not going to catch up, economically, to the billionaire 400 and the psychotic global war/drug/slave lords with a degree in Sycophant’s Statistics and Gaming Theory to Amuse the Elite and Fund their Mercenaries,

    or Nasty Gossip and Betting Against the House – How PsychoTowerofBabel Was Erected.

  66. What I find fascinating here is the enormous amount of passion and the utter lack of facts.

  67. @Bond Man: thanks for the kind words ;-).

    @Annie: Yes, actually it’s amazing how consistent the student loan rip-off is with the ethos of our “culture” and and our time: punish the weakest and most impoverished among us, and then punish them again.

  68. @Carla – I’m not sure what you mean by “weak”? If you have above average IQ and talent and good health (do we or do we not have an exceptional gene pool?), why go into debt to be “educated” to be a sycophant? If you can read, you can educate yourself if in that group!

    It’s that classic old world phenomena of power – gather the beauty and the best into your business and then amuse yourself with abusing them – pure sadism.

    Or are people “weak” because they are not ruthless vicious psychos?

  69. The Bond Man

    Chairman Ben held forth today in front of the MSM-financial reporters, who all basically seemed to be saying the FED is not being aggressive enough in its’ various programs designed to assist the unemployment crisis here. Anyone else catch this on TV, and what are your thoughts, incidentally?

  70. @Annie, I was referring to the elderly who will come of out this recession, without the jobs they went into debt to try to get, without pensions or 401K’s, dependent on Social Security and seeing that siphoned off to pay back student loans.

    I am fortunate and grateful to not be in that position myself, but feel compassion for those who are, and a great deal of anger at the people who decided that student loans would be dischargeable only at death, and in some cases, not even then. I believe Congress decided this in the mid-1990s.

  71. The Bond Man

    Chairman Ben can do a GREAT thing by getting the FeD by underwriting the entire student loan aimed at discharging said debt…certainly a more wise move than tossing unlimited TRILLIONS $USD into the derivatives gargantuan BLACK HOLE. Why not?

  72. “Chairman Ben can do a GREAT thing by getting the FeD by underwriting the entire student loan aimed at discharging said debt…certainly a more wise move than tossing unlimited TRILLIONS $USD into the derivatives gargantuan BLACK HOLE. Why not?”

    Don’t stop there, let them bailout the underwater mortgages too. We’ve reached the point of no return for fiat. Afterall, bailouts should not only be for the filthy rich who made bad choices. America’s future couldn’t possibly look any darker with QE to the moon virtually guaranteed.

  73. The Bond Man

    yeah……..that’s the ticket.

  74. “The private creation of money at interest is the granddaddy of all pyramid schemes; and like all such schemes, it must eventually collapse, despite a quadrillion dollar derivatives edifice propping it up. Willie and Kirby think that time is upon us. We need to have alternative, public and cooperative systems ready to replace the old system when it comes crashing down.”

    http://www.globalresearch.ca/index.php?context=va&aid=31505

    “If you doubt that the peoples of Western civilization live in an artificial reality created by propaganda, watch this documentary on psyops.”

    http://www.counterpunch.org/2012/06/20/silent-spring-for-us/

  75. “JPMorgan Chase Gets $14 Billion Per Year In Government Subsidy: Study”
    “At least some of the billions of dollars that JPMorgan Chase lost gambling on credit derivatives once belonged to you.

    Last week, Senator Jeff Merkley (D-Ore.) had the gall to spoil the Senate Banking Committee’s gentle grooming of JPMorgan CEO Jamie Dimon by pointing out that his bank would not still be in existence without taxpayer assistance.

    Outraged by Merkley’s impunity, Dimon roared that his bank only took the government’s lousy bailout money and only borrowed at rock-bottom interest rates from the Federal Reserve because the government insisted that it do so, for the sake of appearances and the good of the country. And JPMorgan is the country’s greatest hero, so it had no choice but to accept all of this free money the government was handing out. It certainly did not need it.

    What Dimon did not say, however, was that JPMorgan Chase continues to get loads of free government money — probably $14 billion per year, according to number-crunching by Bloomberg, based on an International Monetary Fund study. Bloomberg’s editors write:

    The money helps the bank pay big salaries and bonuses. More important, it distorts markets, fueling crises such as the recent subprime-lending disaster and the sovereign-debt debacle that is now threatening to destroy the euro and sink the global economy.

    Fourteen billion dollars? That’s a lot of cufflinks! The number is based on an IMF estimate of the benefit JPMorgan gets in the bond market from the assumption that the government will make JPMorgan’s creditors whole in the event of another financial catastrophe.

    The IMF figures that big banks pay about 0.8 percentage points less in interest to borrow, compared with ordinary mortal banks that have the misfortune of not being too big to fail. That lower interest rate translates into about $76 billion per year for the 18 biggest U.S. banks, Bloomberg writes, of which JPMorgan’s share is $14 billion. Fun fact: That $76 billion is more than enough to pay for the $30 billion in extended unemployment benefits that are set to expire at the end of the year. But who’s counting? Aside from the unemployed, I mean?”

    http://www.huffingtonpost.com/2012/06/19/jpmorgan-chase-government-subsidy_n_1608859.html

  76. “A report just released by the US Government Accountability Office explains how the Federal Reserve divvied up more than $4 trillion in low-interest loans after the fiscal crisis of 2008, and the news shouldn’t be all that surprising. When the Federal Reserve looked towards bailing out some of the biggest banks in the country, more than one dozen of the financial institutions that benefited from the Fed’s Hail Mary were members of the central bank’s own board, reports the GAO. At least 18 current and former directors of the Fed’s regional branches saw to it that their own banks were awarded loans with often next-to-no interest by the country’s central bank during the height of the financial crisis that crippled the American economy and spurred rampant unemployment and home foreclosures for those unable to receive assistance. – RT”

    http://www.alt-market.com/articles/854-fed-lies-unravel-gave-4-trillion-in-loans-to-own-institutions

  77. “And we often fall into this bias on the prompting of con men and sociopaths of the predator class who use it to justify their own criminal actions and personal injustice. They are not burdened with empathy for their victims, and even delight in their misfortune. But they must find ways to make their actions more acceptable to society as a whole that normally does have such concerns for equity and justice.” – Jesse

    http://www.theburningplatform.com/?p=36196

  78. Peter Principle

    “John Reed – previously chief executive of Citigroup and more recently a critic of very large banks”

    Irony is truly dead.

  79. My numbers are $17trillion (direct bailouts, subsidies, zero intererst loans at the Fed trough, et al.) and growing in total government largess funelled directly to the predatorclass den of vipers and thieves on Wall street, – a few thousand predatorclass vipers and thieves.
    But accepting you $4trillion number – imagine what a portion of that kind of government largess would done for education, infrastructure investment, aid programs for America’s children in the form of healthcare, after school and development program,, and general aid to un – under or dis employed poor and Middleclass workers, or our rapidly growing elderly population. By my math – we would be well onto the road of sustainable recovery.

    Sadly – everyone else including our children are reduced to digits, x’s and o’s – while the predatorclass den of vipers and thieves are given trillions of taxpayer dollars for wanton FAILURE and CRMINAL conduct,

    Way to go Amerika. God bless you!!!

    Shaitans!!!!

  80. TonyForesta

    A thousand thanks for the link Carla. Tragically it falls on deaf ears. No one cares, – or at least none of our socalled leaders care. The derivitives horrorshow approaches the .06 quadrillions – quadrillions. Who can even fathom these numbers???

    It’s insurmountable! There is no way to rectify these criminal numbers, there is no balm in Gilead!!! The entire criminal system is doomed to collapse. Central banks can kick the criminal Ponzi can down the road to their cold dark hearts content, heaping the burdens and hazards on this or that taxpayer, – but the game is up – there is no righting these horrific wrongs. The end is doom. Real horrorshow recognition of rampant criminality and systemic FAILURE!

    We all get what we deserve, and you day of reckoning is coming predatorclass biiiiaaaatches!!!

    The laws of karma are immutable and infinite. You will NOT escape your crimes and inhumanity.

    There will be a reckoning and a balancing, and there will be blood predatorclass biiiiiaaatches!!!

  81. TonyForesta

    Forgive the double post – but meant to say –

    We all get what we deserve, and ‘your’ of reckoning is coming predatorclass biiiiaaaatches!!!

  82. Tony, it’s been coming for quite a while, and still has a while to go. I think they can remain solvent longer than you can remain sane. Now if you personally can remove their dry powder from all sources, you might have a stronger case.

  83. George Washington certainly was not afforded the luxury of the British Army having no dry powder, and he still managed, with the Divine Intervention of Providence, to beat a superior force.

  84. ‘What I find fascinating here is the enormous amount of passion and the utter lack of facts.’

    And all in response to an MIT scholar. He should be so proud.

  85. http://www.huffingtonpost.com/2012/06/18/andy-chau-brooklyn-landlord-forbidden-ones-motorcycle-club-drive-out-tenants_n_1605871.html

    Well, Paddy, just pony up and get out the bats to clear the streets of passionate “scholars” ….

  86. What, between growingly increasing bouts of insobriety?

  87. Your divine intervention timer has passed my friend, long since passed, lets see now, that was 8/1994 by my calculation. Unless of course you are waiting for its return, even that might be awhile from now.

  88. I kept quiet about what I really felt was the true causes of the crash because I knew there was no way the major media outlets would interview me again if I stepped out of line and told the truth.

    What most people don’t realize is that when the mainstream media reports on the financial crisis or the foreclosure crisis, they have to be very careful what they say and how they present something and there is a reason for it. It’s not because they may say something that is libelous or malicious, but because it may be true. This is why why we have seen virtually no coverage on the foreclosure crisis on the mainstream media. On Saturday, Max Keiser gave an interesting commentary at the beginning of his show on RT and how the journalists at CNBC are “on the air to defend the actions of the banking industry.”

    The mainstream media in this country decides what stories will be published or aired based not on if a story is a legitimate news story but on the financial needs of that outlet’s parent company. The dystopian future of journalism controlled by corporate interests predicted in the 1976 movie, Network has become all too real.”

    http://www.mfi-miami.com/2012/06/whistles-were-the-only-thing-not-being-blown-by-wells-fargo-employees/

  89. @Anonymous #2, I think :-), from your Miami link, “…Sub-prime loans that were a lucrative business for Wells Fargo because they reaped huge profits with little fallout by dumping these loans on the secondary market to mortgage-backed securities Trusts controlled by Lehman Brothers, Goldman Sachs, Bear-Stearns and Deutsche Bank and as any in the business can tell you it comprised more like 40-50% of their business….”.

    You can’t stop there – the reason WHY this was done in the past decade with the speed it was done is OBVIOUS now, isn’t it? And the Welfare Queen is screaming it’s not enough, so UNEMPLOYMENT has to to maintained to break MORE backs and skinned alive – reaching into the pool of HONEST scientists, engineers, architects, etc etc etc. Start tracking the stuff that is showing up on “Shortages” list! No RATIONAL explanation!

    And it wasn’t just people of color, it was EVERY large grouping of people who were managing their finances in a certain way in the Middle Class. So, yes, it certainly does fit the MAIN qualification for being genocide.

    Wells Fargo remains the bank of choice for laundering the profits of the Mexican Drug Enterprise. Saw with my own eyes who supplied the security for the Arizona Senator when he visited the friendly towns who are part of the Wild West sadist machine – a Mexican Motorcycle Gang. Kid you not.

    The spin for getting BUSTED for privatizing the ATF in Phoenix for the gun manufacturing cabal to conduct “global” business is going like this today – the program was set up to fail because then the failure could be used as a reason to take away the second Amendment! And Holder needs to be impeached or censored or wha’ever. Not anyone actually INVOLVED in managing the operations of this physical reality enterprise, but someone in D.C. who got paperwork from Phoenix – as if THAT paperwork did anything but convolute what anyone could know about what was going on in Phoenix. If it wasn’t so serious, the whole “Fast and Furious” is a puerile practical JOKE.

    I’ll send YOU paperwork that obfuscates the privatization of ATF in Phoenix and then start digging into what you knew and when you knew it. Meanwhile the people actually doing the operations have already made their global business connections and cashed in on the profits. And are they negotiating who will replace Kyl in AZ.

  90. @ Annie. Here’s a chaser.

    “The Scam Wall Street Learned From the Mafia

    How America’s biggest banks took part in a nationwide bid-rigging conspiracy – until they were caught on tape”

    http://www.zerohedge.com/news/taibbi-back-scam-wall-street-learned-mafia

  91. @anonymous – IBM (Italian Business Men) went over to the dark side way back – 1960s. Track the numbers – they used to skim off 25 cents of every dollar, now it’s 75 cents (inflation?). And you’ve got 2 of them on the Supreme Court protecting their 75 cent loot. IRS works FOR THEM – embedded IRS agents have been supplying the numbers for the syndicate and how to steal from which group of savers for a LONG time.

    They have also completely taken over big pharma. Imagine embedding their Snookis as political plants – Mommy authorities – in the school systems to force a highly energetic and intelligent kid out of school unless they are medicated into a catatonic state! The “mother earths” and “feminists” of my day would have chased that witch out of the village with torches and pitchforks – go spread your legs at the 18th hole for the golfers…you POS.

    Resist and challenge every single step of the way – reduce them to the DOGS they are just barking “left” “liberal” progressive” “socialist” “communist” – meaningless NOISE because their teeth are bared and they want to EAT YOU.

    In my 15th summer I learned what has been proved to be true over and over again in every facet of life. No matter how low a woman can go, the man can go WAY lower. Without women having their RIGHT to say, you can’t go lower than this without being knocked down on your ass and jailed, then there is no where to go in the future that is CIVILIZED.

    Vote for Annie :-)

  92. woof woof…..kibbles and bits……..kibble and bits…..this doggie voted for ANNIE………..YEAH ANNIE!! : )

  93. Anonyomousy

    Obviously her brain still has yet to fully develop, 7 is the age of reasoning, but I think the new numbers are about 30 before you can feel right from wrong. No, he has so much control in the bathroom that every house in the great USA has a male urinal. Ha, Ha, Ha, oh yea, that’s really something, without women having a right to say, ho ho ho.

    And it’s a standard that American plumbers abide by and build for her, does anyone know of a women plumber? How could she insist on such a thing, and then make him build it for her, without his having a say in the matter?? No Annie, you just have a bad interpretation mechanism, there’s that nasty ism again settin you back, oh yea that was his fault. bow wow, woof woof.

  94. Thanks for proving the point about finding new MORAL and ETHICAL lows, Anonyomousy!

  95. Troll on, FILBT.

  96. p646:05 Hence materialism, atheism, is the maximation of ugliness, the climax of the finite antithesis of the beautiful.

    FIAT $$$$ = supernatural power = a godless god with the “theory of everything” figured out in a simple math formula:

    More misery for others = More $$$$ for ME ME ME

  97. Finally, justice.