Jamie Dimon: Becoming Too Big To Save – Creating Fiscal Disaster

By Simon Johnson

In Sunday’s New York Times magazine, Roger Lowenstein profiles Jamie Dimon, head of JP Morgan Chase.  The piece, titled “Jamie Dimon: America’s Least-Hated Banker,” is generally sympathetic, but in every significant detail it confirms that Mr. Dimon is now – without question – our most dangerous banker.

Mr. Dimon is not dangerous because he is in any narrow sense incompetent.  On the contrary, Mr. Dimon is very good at getting what he wants.  And now he wants to run a bigger, more interconnected, and more global bank that – if it were to fail – would cause great chaos around the world.  Lowenstein writes,

“Dimon has always been unusually blunt, and he told me that not only are big banks like JP Morgan (it has $2 trillion in assets) not too big, but that they should be allowed to grow bigger.”

The problem with very big banks is not that they are “too big to fail,” in the sense that it is physically impossible for them to fail.  It is that they are so large and therefore so connected with each other — and with all aspects of how the modern economy operates — that the failure of even one such bank would cause great damage throughout the world.

Lehman Brothers had a balance sheet of around $600 billion when it failed.  Its collapse helped trigger the worst financial crisis and deepest recession since the 1930s.  Imagine what would happen if JP Morgan Chase – even at today’s scale – were allowed to go bankrupt.

Dimon is brilliantly disingenuous on this key point. 

“No one should be too big to fail,” he tells me.  And J. P. Morgan?  “Right,” he says.  “Morgan should have to file for bankruptcy.”

But Dimon himself argued, in a November 2009 op ed in the Washington Post, that regular bankruptcy is not a feasible option for megabanks.  Instead he eloquently advocated the creation of a special resolution mechanism for big banks – an update and expansion of the powers that the FDIC has long used to handle the orderly failure of small and medium-sized banks with insured retail deposits.

“Creating the structures to allow for the orderly failure of a large financial institution starts with giving regulators the authority to facilitate failures when they occur. Under such a system, a failed bank’s shareholders should lose their value; unsecured creditors should be at risk and, if necessary, wiped out. A regulator should be able to terminate management and boards and liquidate assets. Those who benefited from mismanaging risks or taking on inappropriate risk should feel the pain. We can learn here from how the Federal Deposit Insurance Corp. closes banks. As with the FDIC process, as long as shareholders and creditors are losing their value, the industry should pay its fair share.”

Unfortunately, the resolution authority that ended up being created by the 2010 Dodd-Frank financial reform legislation does not cover JP Morgan Chase because Dimon’s bank operates so extensively outside the US (30% non-US in its current business, on its way to 50%, according to Lowenstein).  There is nothing in the current resolution mechanism or the broader powers of the Financial Stability Oversight Council that enables the relevant authorities to implement the orderly winding down of a cross-border bank, like JP Morgan is today or Lehman was in 2008. 

And there is no prospect of any kind of inter-governmental agreement to put in place a process for imposing orderly and foreseeable losses on the creditors to cross-border bank.  In fact, the Basel Committee of bank regulators, which has jurisdiction in this matter – and which Dimon praises in the NYT interview –has definitely decided not to take up the issue.

JP Morgan Chase is already Too Big To Fail.  If it were to threaten failure, the government would face a terrible choice: provide some form of unsavory bailout, i.e., fully protecting creditors; or risk the outbreak of a Second Great Depression.  While the executive branch pondered these alternatives, there would be global financial panic.

But that is not the worst of our worries.  Jamie Dimon is apparently dead set on ensuring JP Morgan Chase becomes even larger, in part by expanding its operations in emerging markets in India, China, and elsewhere.

As Ireland and other European countries have recently discovered to their horror, Too Big To Fail banks that want to expand globally can grow so large that they become Too Big To Save.  “Too Big To Save” means that the government wants to save the bank – e.g., by providing a blanket guarantee, as the Irish did in October 2008 – but that creates such a large liability for the state that it pushes the entire country into insolvency.

JP Morgan Chase is well on its way to becoming Too Big To Save.  Through expanding overseas, it effectively bypasses the weak controls we still have in place on bank size (no bank is supposed to have more than 10 percent of total retail deposits).  Experience in Europe is that this strategy can enable individual banks to build balance sheets that are larger than the GDP of the country in which they are based – in the UK, for example, the Royal Bank of Scotland had a balance approaching 1.5 times the size of the British economy.  And then it failed.

If JP Morgan Chase were to reach the equivalent size in the US, it would be a $20 trillion bank.  Perhaps that would take a while, but JP Morgan Chase soon at $4 trillion or $8 trillion is easy to imagine. 

Dimon argues that banks becoming bigger is the natural outcome of market processes.  He is completely wrong – as Thomas Hoenig, president of the Kansas City Fed explained in a NYT op ed this week:

“These firms [big banks] reached their present size through the subsidies they received because they were too big to fail. Therefore, diminishing their size and scope, thereby reducing or removing this subsidy and the competitive advantage it provides, would restore competitive balance to our economic system.” (See also this news coverage on Hoenig’s views.)

Or listen to Gene Fama – the father of the modern “efficient markets” view of finance.  He told CNBC that Too Big To Fail banks are “perverting activities and incentives”, giving big financial firms,

“a license to increase risk; where the taxpayers will  bear the downside and firms will bear the upside.”

Or read the recent letter to the Financial Times by Anat Admati and other top names in academic finance (here’s the version of their text on the Stanford website).  They could be speaking directly of Dimon and his views in the NYT piece when they say:

“Many bankers oppose increased equity requirements, possibly because of a vested interest in the current systems of subsidies and compensation. But the policy goal must be a healthier banking system, rather than high returns for banks’ shareholders and managers, with taxpayers picking up losses and economies suffering the fall-out.” (See also Professor Admati’s follow up letter to the FT this week, further blasting the views of top bankers and their acolytes; see this link for a version not behind the FT wall: latest letter.)

Jamie Dimon’s job is to make money for his shareholders and even he has struggled – the bank’s stock price is only roughly where it was when Dimon took control in 2004.  He really believes that the answer to his stock price doldrums is to make JP Morgan Chase bigger and more complex.  In effect, he wants to load up on risk – hoping that this will pay off for him, his employees, and (presumably) his shareholders, and really not caring much about who bears the downside risk.

Lowenstein mentions at various points that Dimon was a protégé of Sandy Weill, but he neglects to remind us that Weill in his heyday espoused many of the same ideas that Dimon stresses in the interview.  Weill believed there were great synergies between commercial and investment banking (and insurance).  Weill was convinced that bigger was undoubtedly better both for shareholders and for society.  He was wrong on all counts, as explained by Katrina Brooker in the NYT earlier this year,

“The dream, the mirage has always been the global supermarket, but the reality is that it was a shopping mall,” says Chris Whalen, editor of The Institutional Risk Analyst, of Citi’s evolution over the last decade. “You can talk about synergies all day long. It never happened.”

Sandy Weill, of course, built the modern Citigroup, which effectively collapsed – in spectacular fashion – in 2008-09, and which had to be rescued by the government at least twice.  What was Citigroup’s balance sheet at the time?  It was just over $2 trillion, roughly the size of JP Morgan Chase today.  And Citigroup was (and is) extremely global – doing business in more than 100 countries.

Jamie Dimon is intent on building a bank that will surpass all the size and complexity records set by Sandy Weill’s Citigroup.

Whether or not JP Morgan Chase will fail on Jamie Dimon’s watch remains to be seen.  He is, without doubt, a relatively careful risk manager in an industry where hubris tends to run amok.

But sooner or later Jamie Dimon will hand over the reins to someone who is decidedly less careful, someone who goes with the groupthink, and perhaps even someone like Chuck Prince, head of Citigroup, who inherited Sandy Weill’s mantle and said – in July 2007,

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

The music had already stopped when he said that.

If the Dimon’s bigger, more global, and greatly interconnected JP Morgan Chase is still dancing next time the music stops, the choice will not be bailout vs. great recession.  The real choice will be no choice at all: fiscal disaster through attempted bailout (Ireland), or fiscal disaster through economic collapse (Iceland).

64 thoughts on “Jamie Dimon: Becoming Too Big To Save – Creating Fiscal Disaster

  1. Yesterday I got the Chase letter I knew would be coming. No more free checking unless you carry a $1500 daily balance or have direct deposit. They must need to count our money as leverage. Working class folks need not apply. I was getting out anyway but now I have a date. Feb. 1st.

  2. Mr. Dimon’s science of banking is best explained by the astrophysical principle of the schmeichel as it applies – not to his shareholders – but to him. A little bit is all you take as the plate goes by. If one wants more, one has to increase the volume of the food on the plate or one can increase the speed of the plate circulating. Mr. Dimon wants to do both and that will be excellent for him and still just a schmeichel.

  3. This is exactly why we should not extend the Bush tax cuts for the rich. We’re going to need that $700 billion to bail out the banks again in a few years!

  4. Bruce –

    Congrats on your upcoming firing of Chase. Check out a local credit union. They’re user friendly, offer as sophisticated a set of services as anyone is likely to need and, being non-profit, nearly always offer much better terms and rates than any mega-bank.

  5. I understand why banks that are too large are a threat. What I don’t understand is why 100 smaller banks that are all following the same “optimum” strategy are not just as much of a threat. Don’t we need to focus just as much on preventing financial disaster caused by large numbers of small banks with highly correlated strategies as we do on preventing disaster caused by a few very large banks?

    Have I missed something here?

  6. Thanks Dr Johnson, for returning to the Us, though only halfway. Of course JP Morgan (or should we say Chemical bank) should not be allowed to get bigger, unless, unless, it would be reconfigured into smaller, individually regulated pieces not allowed to trade with one another. For instance, the US commercial bank and the US investment bank, should be completely separate (only the shares might be held by the same holding company) and the bank should not be allowed to to business with the investment bank.

    Likewise, international operations should be incorporated locally and have no recourse (and be very public about it) to the US parent’s (or its regulators/involuntary guarantors) estate.

    I guiess that a large bank thus ill equipped to operate cross border would present little risk to the international financial system. However, if some of the good habits/values of the real JPM are stll alive, maybe such a bank should be the exception allowed to operate cross border UNDER a BANKING CHARTER. Entities like Goldman should of course never have been given such a charter, but that is for the next crisis.

  7. More rage against the machine; Wall St borrows fromthe Fed Reserv at .0078 percent, several banks including Chase going to the Fed like your local ATM.

    http://www.huffingtonpost.com/2010/12/01/wall-street-borrowed-from_n_790709.html?view=print “The European firms — Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), and BNP Paribas (France) — borrowed $5.2-6.2 billion in Treasuries 20 different times. The one-time fees they paid on each transaction ranged from $403,277.78 to $481,110. Deutsche led the way with seven such deals”

  8. Two answers:

    First, if you took JP Morgan and broke it into 100 banks it’s much less likely that all 100 would follow the same policies and thus implode at the same time. Smaller banks are also easier to unwind and probably less likely to spawn a “panic”.

    Second and probably more importantly, smaller banks don’t have the political clout that larger banks do. Thus they would be less likely to use regulatory capture to increase their their ability to take on, and share, risk.

  9. I’m sure someone can give good reason – but one has to also take some alarm that most of these were in fact foreign firms. One would have thought it would be for American firms only.

    I assume that we (the people) lost money on these deals – that while they borrowed at .0078% it cost us more than that.

    Perhaps not though – with the usual detractor for printing money being inflation and we having at best deflation, then as long as they paid back, we might have still effectively made money.

    Someone who knows a lot more how the Fed finances such lending could probably answer that though.

  10. Too Big To Fail, Too Big To Save…

    “History doesn’t repeat itself, but it does rhyme.” – Mark Twain

    $4 trillion or $8 trillion, a $20 trillion bank…

    “The greed of gain has no time or limit to its capaciousness. Its one object is to produce and consume. It has pity neither for beautiful nature nor for living human beings. It is ruthlessly ready without a moment’s hesitation to crush beauty and life out of them, molding them into money.” – Rabindranath Tagore

    When the music stops…there will be no choice but fiscal disaster.

    “I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands, and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war.” –
    Abraham Lincoln

  11. At the heart of the matter is the fact that bankers like Mr. dimon know fully well that if they have the requisite size both in terms of AUM and global reach they can, in effect, get anything they want from any government by simply stating “if I fail, then we all fail”. Now, think of youself as a majot shareholder of this entity, what better position could you possibly ask to be in? We spend a lot of time ridiculing people like Dimon and Blankfein but we tend to forget that they have shareholders and boeards without who’s support they cannot do what they do. Even more disturbing, is the fact that when you scroll through the shareholder rolls you are likey to find your pension fund, your mutual fund company and even your local government. My point is that WE ALL are a part of the problem. We need to turn the spotlights inward and push for the changes to be made by the people who are most able to make them.

  12. The government will not take any action against the big banks until they are not dependent on them for sustaining the money supply in a credit driven economy, buying government debt, and maintaining liquidity in the stock market.

  13. It’s crucial that economics inform itself through the mirror of ecology. Networks of organisms, organizations, industries and, yes banks, are vulnerable to the very structures that evolve to host them. This is not a matter of opinion, it’s a function of the network itself:


    This is where the danger lies. If Mr. Dimon and his counterparts use political muscle to force their will on the financial world, becoming even larger than they already are, there’s no question that they can take down the global economy.

  14. The reason is the same one that lets you and everyone else (anywhere) post to this blog, the Internet. It’s in the process of breaking down every artificial boundary you might care to name.

    The financial world is no different. German banks will get hung out to dry to the tune of 110 billion Euros if Ireland goes belly up. That’s why the country has chipped in 18 billion in an attempt to re-float Irish banks. Barriers to global investment long ago fell to the global network (see my post below for a link to what this means for global financial stability).

  15. We seem, increasingly, to be moving to the point where the only outlet for people is disruptive social unrest. I suppose Ireland will be the test of that. I fully expect that their next government will either fully repudiate the current ‘agreement’ or will, itself, be very short-lived in power.
    The unbridled abuse of power by the major banks is becoming too obvious for people to continue to deny… but any relief through normal political process also seems to be denied.

  16. I’d like to comment on the following statement: “JP Morgan Chase is already Too Big To Fail. If it were to threaten failure, the government would face a terrible choice: provide some form of unsavory bailout, i.e., fully protecting creditors; or risk the outbreak of a Second Great Depression.”

    Those aren’t the only two choices. Why couldn’t the government just act as a business lender until the financial sector rebuilt itself? The Fed actually did this to some extent during the crisis and it seems to have worked. It’s the same strategy the government applies to all other national emergencies: step in to provide essential services until private businesses get back on their feet.

  17. Call me old school, but this reminded me of an old quote:

    There can be no effective control of corporations while their political activity remains. To put an end to it will be neither a short nor an easy task, but it can be done … Corporate expenditures for political purposes, and especially such expenditures by public-service corporations, have supplied one of the principal sources of corruption in our political affairs.

    – Teddy Roosevelt

    When you consider just how corrupt the system was prior to the Great Depression and how corrupt it is now, the two are eerily similar.

    Moreover, it’s not that surprising that banks like JP Morgan (Chase) are still in business.

  18. Most ecellent post.

    Aggravating to me is the failure to charge the TBTF’s for implicit insurance, as well as the failure to set up a resolution process that would handle all.

  19. …a business lender of multi-trillions of dollars at… .078% interest! Why couldn’t they have asked for more? Why weren’t the bankers and financial houses asked to eat their own dog food? The Fed board ended up looking like fools, or worse yet tools.

  20. Borrowing money should not be so cheap. Setting interest rates at absurdly low values distorts the market by essentially subsidizing borrowing (it gets cheaper, demand for borrowing goes up). We should not be surprised that every bank that qualifies will grab a bunch of cheap cash to invest in just about anything that stands to generate even a very modest yield. While cheap borrowing might help those borrowing to improve manufacturing infrastructure, etc., it also makes speculation more easy and profitable. We should not be surprised that all these easy dollars are finding their way into speculative markets.

    The heartless nature of a corporation shows that there is no morality at work here: it is, instead, just greed. Without regulation, we should also not be surprised to find extensive gaming of the system in every conceivable way.

  21. Why is it we all know the answers, but for the very fact our elected officials fail to act upon them? Professor Johnson has spoken numerous times about the “Financial Modernizaton Act” {(7/30/99)(Gramm-Leach-Biley Act)} that has literally flushed down the toilet with any iota of the “Glass-Steagall Act” remants left intact. Ironically this was perpetrated by yours truly Mr. Sandy Weill’s who bought the government? The “Federal Reserve Banking System” is our biggest problem along with having to repeal the “Financial Modernizatin Act”! Is that to much too ask for…or should we demand it? Ref:
    “The Creature from Jekyll Island, The Federal Reserve” – “Timelines of the Great Depression” respectively, and tell me you don’t see deja`vu (yogi-ism) all over again? Thankyou Simon, and James
    PS. You’ve been hitting the ball out of the park lately, Bravo :-)

  22. From the book “AN AUTISTIC WORLD (1)

    In September of 1999, a lawsuit was filed by the Utility Consumer’s Action Network, against Bank of America, acting on behalf of the Privacy Rights Clearinghouse, both in San Diego, U.S. The lawsuit alleged that Bank of America engaged in unlawful, unfair, and fraudulent business practices by disclosing consumer’s personal, private, and confidential information to third parties without consumer’s consent or without making proper disclosure. Particularly, it charged that the Bank disclosed the Social Security numbers, account numbers, and other sensitive data from about thirty five million current and former Bank of America customers, to telemarketers, direct-mail marketers, and other vendors in return for millions of dollars in fees and commissions. The information was released despite assurances in the Bank privacy policy that it will keep the information provided secure and confidential, only sharing customers data for legitimate business purposes.
    A settlement was proposed between both sides, for those individuals that were affected between September 9, 1995 and May 31, 2007, based on saving costs of uncertain trials and appeals, after nearly eight years of litigation. In that settlement, Bank of America would provide $10.75 million to be spent on waiving fees for certain products and services, agreeing to contribute an extra $3.25 million to privacy related programs, including $1.5 million for nonprofit groups that seek to protect consumer’s privacy. The lawyers in this case would get millions.
    I believe that in July 2007, Bank of America sent a form with an insert to every customer. When I received mine in the mail, I was surprised because I didn’t know anything about the lawsuit. This legal notice, by order of the court, was directed to inform past and present customers about the settlement and its causes, leaving an option for the people that didn’t agree with the settlement. I read the notice, and I was perplexed, not only due to the information that it was revealing, since I was completely unaware, but because of the confusing way in which the notice was written.
    It gave me this impression:
    -First: This is a paper that you should toss in the garbage as soon as possible, disregarding its content.
    -Second: If you decide to read this piece of crap, you will loose valuable time because you are so stupid that you won’t understand a single thing.
    -Third: If you decide to spend some time reading what it says and you do not agree with the settlement, it would be a waste of your energy, because everything is under our lawyer’s control and whatever you say or do, will be irrelevant.
    -Fourth: If you do something about it, you may get in trouble. It would be a lot better if you take your kids to the park, so they won’t have to visit you in jail.
    -Fifth: If you think that this notice is unjust, and unfair, and you decide to claim benefits in a class action settlement, you are an idiot.

    From about thirty five million current and former Bank of America customers, only about fifty objected to the settlement. I was one of them.
    A few months later, the judge declared in court that the grounds for the actual settlement were valid, since the possibility of being right from the point of view of the objectors, was so infinitesimally small, compared with the overwhelming abstention produced by the rest of the customers.
    In my modest opinion the most surprising aspect of this lawsuit, wasn’t that Bank of America disclosed the Social Security numbers, account numbers, and other sensitive data from about thirty five million of its customers, which it denied, but what amazed me was the ambiguous answer from those customers to the settlement. If we could tell the founding fathers that many of their descendants wouldn’t object to the possibility of some bankers sitting in a room in some building, trading the most valuable information that a bank could have, which is the information related to its clients, who after a hard day of work deposit their trust and their money into the bank’s hands, without the chance of severe punishment after exposing the facts in court, they wouldn’t had believed us.
    Times have changed and the sacred relation between most banks and its customers has been reduced to mere data. As this example shows, with the help of that notice in the mail, the immense majority of individuals didn’t think that confronting the settlement was a good idea, they probably assumed that their role was an unimportant, insignificant part of a big puzzle. The fact is that it’s not good business for the bank or for the customers to have a meaningless relationship. Somehow, that connection must be improved in the future, and technology could help to close the gap if we find the will to do it. Otherwise, we better change the US Constitution and start thinking about a more realistic approach, adjusting the words “We The People,” for more adequate ones like “We the Numbers.”

  23. I’m not talking about the government lending money to the banks. I’m talking about the government lending money to all the other businesses that would otherwise run out of cash when all the banks fail. The point is to save the economy while allowing the banks to fail.

  24. Wrong, wrong and more wrong. Rates are NOT low. They have not be negative since mid-2000’s. You obviously don’t understand how nominal and real interest rates work.

    Even when you artifically raise the nominal rate, that doesn’t mean you stop real low rates, matter of fact, you can make it worse by creating credit bubbles. Which is what happened to Volcker in early 80’s when he reacted to inflation expectations due to Reagan. It took a nascent credit bubble that began in 1973 and blew it up to big size by the end of the decade.

  25. I guess our definitions of low vary. I was talking the window at the Fed, not what ma and pa borrow at.

  26. Ah, the globalists!! Dimon is no different than the CEO’s of hundreds of large companies. Once they effectively globalize, they can become global oligarchs. The global oligarchy is as effective as national ones in creating a situation on a global basis that insures their perpetuity, and continued growth. With banks, there’s a much more substantial problem. They tie up huge amounts of financial assets in essentially “non-productive” ways. They are in the business to make money, not things beneficial to society as a whole, and, in doing so cause a massive imbalance in the usage of cash or cash like assets. It’s like they control rain and grow crops while other farmers don’t and can’t.

    You article just points out the fact the JPMC is in a position, as are about 25 banks nationally and internationally, to control the world of money, literally. These banks are so large that they can call all the shots and essentially do whatever they want. They buy all the politicians necessary, and the regulators are all captured. The next catastrophe, which will happen to be sure, will probably mark a quantum change in our human occupation of planet Earth. But, then, what do I know?

  27. Dimon, WaPo op-ed:
    “[U]nsecured creditors should be at risk and, if necessary, wiped out.”

    Depositors are, with respect to the bank itself, unsecured creditors.

  28. Constant, lone voice within the Federal Reserve:

    http://www.nytimes.com/2010/12/02/opinion/02hoenig.html?pagewanted=print : “….History suggests that financial strength follows economic strength. A competitive, accountable and successful domestic economic system, supported by many innovative financial firms, would restore the United States’ economic strength. More financial firms — with none too big to fail — would mean less concentrated financial power, less concentrated risk and better access and service for American businesses and the public. Even if they were substantially smaller, the largest firms could continue to meet any global financial demand either directly or through syndication. Crises will always be a part of our capitalist system. But an absence of accountability and blatant inequities in treatment are why Americans remain angry. Without accountability, we cannot hope to build a national consensus around the sacrifices needed to eliminate our fiscal deficits and rebuild our economy.”

  29. Dimon…what a disgusting, pathological a**hole. Every dollar he and his ilk fabricate is a dollar stolen.

  30. Pulling/pushing our/small-people’s money out is the most these banks can do. I got a letter with even worse conditions from Citi, then in short sequence, a no payment/no interest until 2012 offer on a Citi credit card.

    So, I agree, they need all the cash for leverage, lower management costs, yet they still seek out to make a bundle on credit delinquency. Elizabeth Warner has work cut out for her.

    To shift gears a bit, are these signs that Wall Street still runs our economy? If so, the neo-Marxists are right, and US capitalism will fester until, say, the Chinese pick it up. In other words, the US capital doesn’t know anymore how to seek out productive opportunities for growth. Two years ago, I wondered how good of an approximation Wall Street was for market capitalism (http://imotion.blogspot.com/2008/09/wall-street-how-good-of-approximation.html ). Now we know that Wall Street hates a lot of the things we hold dear, including free markets.

    The question becomes: Can we take our lives back from the handlers on Wall Street? Moving our transactions/cash to community banks is not going to do it. It’s our pension and insurance money they are gambling with…

  31. “078% interest! Why couldn’t they have asked for more?” Perhaps because there are no readily available prospects to invest in where the return would justify a higher rate.

    Some mention unrest, and I agree, but from the government perspective, we are taking the longer route. NOBODY sees any solution, they are hoping it pops afater they leave office, or some miracle happens and American production is reinvented.

  32. More eye-popping, jaw dropping:


    “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations including two European megabanks — Deutsche Bank and Credit Suisse — which were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities.”
    Sen Bernie Saunders (VT) continues by saying “I intend to investigate whether these secret Fed loans, in some cases, turned out to be direct corporate welfare to big banks that used these loans not to reinvest in the economy but rather to lend back to the federal government at a higher rate of interest by purchasing Treasury Securities…”

    “…Instead of using this money to reinvest in the productive economy, I suspect a large portion of these near-zero interest loans were used to buy Treasury Securities at a higher interest rate providing free money to some of the largest financial institutions in this country. That is something that we have got to closely examine.” Senator Dick Durbin proposed and pushed for some form of cram-down mortgage legislation but the Obama Administration oppose it by staying on the sidelines and letting the banking lobby have their way with other the Senators. Like other cave-ins by the Administration, the U.S. is now the world’s policeman, banker and ruler.

  33. While the American has been snoozing for the last 40 years, American-style capitalism and the oligarchs owns everything from the president to Pentagon to Congress, to the upper courts and to conglomerate media. There is no film out of Hollywood to challenge the reality of your lives but when it does come to your television watch it.

  34. Finally!!! A voice that hits the proverbial nail on the head! The issue with with national or global scale megalopoly banks is 3-fold:

    1. They have an unfair advantage in the form of cheap capital from the central banks (US Fed, etc);

    2. They are allowed to take that cheap capital and use it for higher risk purposes (eg, market trading) than the intended purpose (lending into constituent markets); and

    3. They are allowed to cross collateralize their assets subjecting all assets of the firm to all aspects of the risk they are taking on a global scale.

    And why? Because bank management are incentivized to maximize SIZE in order to be compensated more highly (not profitablility, not risk adjusted profitability, not even return to shareholders).

    I became a shareholder of Chase Manhattan Bank in 2000 (by virtue of becoming an employee). At the time, the stock was priced at about $60 per share. Since then, it has only touched the $50 level a couple of times and has spent the rest of its life in the $40’s or below. And yet, it is 8 times the size it was in 2000.

    You tell me…

  35. David – your suggestion is an excellent one. Unfortunately, the Fed doesn’t have the infrastructure in place to do the underwriting, process the paperwork, etc. Talk about bureaucracy – imagine what a federal government commercial lending operation would look like!

    But this highlights a very important part of the problem. Our government has ceded the control and responsibility of market lending to the commercial banks. But then, somewhere along the way, the “responsibility” became “right”. For example, the Fed has been flooding the market for over 2 years with cheap money lent to the banks. But how much commercial lending have the banks done? Next to zero. Where is the money? Answer: Either on the banks balance sheets or in the various securities markets around the world. Certainly not in the hands of companies looking to grow their businesses and payrolls.

  36. http://graysinfo.blogspot.com/2009/11/too-big-to-fail-too-powerful-to-go-to.html

    Too Big to Fail: Too Powerful to go to Jail?
    By Stephen J. Gray

    Based on the evidence available regarding the financial mess created by those who were literally selling junk packaged as assets, one has to ask the question: should some jail time be in order? Or are some of those who run the “financial order” too powerful to go to jail? Do they in fact run and control the system? There were those in this system who were giving triple A ratings to this junk. They were also getting paid big fees for giving it an excellent rating. Which begs the question: How could “respected” rating agencies do such a thing? After all, these people are the so-called experts in the ratings field.

    Meanwhile out in the muddied financial field, the brilliant financial minds were selling this manure as safe and solid investments. These “investments” were sold to pension funds, mutual funds, numerous investors and anybody and everybody who would buy this financial dung. Some of the dung-sellers were paid millions in bonuses, proving that old saying rings true: “where there is muck, there is money.” Unfortunately, the people getting the muck were those who bought the useless waste from the money changers and the money changers got their money.

    Big profits were made by some of these financial sharks who were touting this financial toilet paper as a good investment, and some of them were selling themselves out of this “good investment” and passing it on to others. One wonders, does this constitute a fraud? Or was this an “honest fraud,” whatever that means, in today’s society of mangled language? Still, one banker did say they did “wrong.” He also said they were doing the work of God. Which makes one wonder, how can one do wrong and be doing God’s work?

    Meanwhile, the “working” political elites are travelling around the world at taxpayers’ expense, holding talks on fixing the monetary system. The solution is staring them in the face. They could start by jailing these paper-passing fraud artists and try finding out just how much money is stashed away in their offshore banking and tax-free havens and confiscate it all. But, that will not be done; the powerful are too powerful and the politicians are their dumb lackeys who have provided taxpayers’ dollars to the exploiters of the system. Bailouts of billions of taxpayer dollars, called stimulus packages, were handed over to these manipulators of money. Now, the taxpayers everywhere will be paying and suffering for years and years while those who benefited from their tax dollars are allowed to walk away free.

    These financial con artists are responsible for people losing their jobs, their homes, their savings, their investments and their peace of mind. In my mind, I believe, a fraud of massive proportions has been perpetrated. The fraud artists have been compensated with taxpayers’ dollars and the losers are the decent people everywhere who believed in the honesty of the financial system.

    Stephen. J. Gray
    November 19, 2009.

  37. Dimon’s piggy bank is large enough to hold the US government hostage. It’s up to the government to push back.

    There is nothing to Dimon or JP Morgan- Chase that an ambitious prosecutor couldn’t unravel like a cheap sweater.

  38. JP Morgan Chase is a wholly owned subsidiary of the Rockefeller Families, and Goldman Sachs a tiny subsidiary of the Rothschild Families, period! These families have relations through marriage…a berthing legacy that could make the “Principality of Liechtenstein’s” population look as if birth control was still a thing of the past? Now, where was I? Oh yes…my point is they control the media and have declared “Julian Assange” a terroist to the World (I’m not going to get into it but it certainly could clear up some?), and ironically our fabulously free-spirited 4th Estate agrees? That said…I’d like to know why our “Corporate Tax” is so high compared to the rest of the (G20) world? This has undoubtably been facilitating the offshoring of our manufacturing/industrial base for decades? The revenue imbalances just don’t add up – very strange indeed. Now I realize I’ve gone off-topic, but perhaps Simon, or James could address this issue down the road? Ref: “Taxes, Income Tax Rates, Tax updates Business News, Economy”
    Ref: “Corporate Tax Rates Around The World”
    Ref: “The Tax Foundation – Comparing International Corporate Tax Rates: U.S. Corporate Tax”

    Please relize that by keeping our “Tax Structure Inflated” we are subverting the landmark principles of “FreeTrade”, and our very own lifeblood…exporting is what’s being held hostage. Thus the Dimon’s of the world can use their free money (handouts) from the “Fed” to shore up their offshore nefarious accounts to God I don’t know where?

  39. These financial con artists are responsible for people losing their jobs, their homes, their savings, their investments and their peace of mind. In my mind, I believe, a fraud of massive proportions has been perpetrated. The fraud artists have been compensated with taxpayers’ dollars and the losers are the decent people everywhere who believed in the honesty of the financial system.

    Stephen. J. Gray
    November 19, 2009.

    People did not “lose” it – it was STOLEN. And even the JUDGES are helping people “lose” it – that’s definitely the final straw.

  40. A. this guy (dimon) is such an arrogant a**hole. He knows his buddy Obama (“a savvy businessman”) will bail him out no matter what.

    B. in regards to the new resolution authority, didn’t we have such a thing in glass-steagall and the fdic? I know it didn’t cover such “interconnected firms”. But in the last 15-20 years where they were doing away with all the regulations for banks, why didn’t we have some new regulation to deal with the creation of these new ‘mega-financial institutions’? Why is it they get to run totally free, like some Ted Bundy of finance, and when they finally cause so much damage and wreck our world, only then do we get control of them and pass laws to regulate them? Yet for us poor persons, they write laws and make restrictions on my actions before I even come out of the womb.

    C. As for Ireland, maybe Dimon & his cohorts, maybe their plan is to blow things up so bad that they bankrupt the U.S. and instead of Social Security paying to keep old people off the streets and not eating catfood, maybe it will be used to pay to bail out our big banks.

    F*** You Jamie Dimon.

  41. @steve from virginia: you’ve heard of regulatory capture? We have a government that’s captured, an economics profession that at the academic and many other levels is captured, a legal profession that’s captured, and a popular imagination that’s captured (see the “Tea Party”). It seems there is nobody to push back.

  42. Thank you so much for this proof that it was PREDATORY.

    Pick a handful of the most successful and sane archtypes to circle and devour with the wild dogs of “war”, individually, and you bring down that whole “class”, their whole culture and infrastructure, with the schtick that began with the PSYCHObabble – “….not everyone DESERVES to own a home…”

    All is FAIR in love and war – look up how OLD that culture IS that noted the “game” in a theatrical play…

    I culled data from the girls – everyone has some kind of FOREIGN man calling as the “bank” person still trying to steal WHAT DOESN’T EVEN EXIST – the 9 TRILLION lottery went directly to the banksters you stupid “abdullah”….

    PC is OFF the table – FOREVER.

    yes, in the background is eugenics, Part Deux – and EVERYTHING has been done to protect the PSYCHO gene pool.

    USA worked exceedingly well as a meritocracy – as a kleptocracy – all hell is gonna break loose.

    Looks like there will have to be nasty cruel heartless and INSANE wars until the majority of HUMANITY gets it – SLAVERY will not be TOLERATED.

    The REAL reason for foreclosuregate? The new architecture/homes continued to be more and more energy efficient and environmentally friendly

    oil and coal had a FIT – hence all the “abdullahs” in charge of SWAT teams…

    If Homeland Security was REAL, the five of us who lost 2.5 million in SAVINGS would have been drafted to work for the department. What turned out was we were TARGETED for destruction by them instead.

    War profiteers and drug lords….

    We have NO MORAL OBLIGATION to bend our knee to such filth.

  43. I’m sure some treason trials for all the money laundering the banks do for the cartels and terrorists should take care of the main offenders at the top of EVERY traitorous bank.

    I’m sure the rest of the parasites would soon shape up. If not… no problem… rope is cheap.

  44. Jamie the Demon will get a personal lesson in the sharper edges of French history if he doesn’t start using that single brain cell he might posses.

  45. The parasites will be given a lesson in the sharper edges of French history if they don’t turn loose of the jugular vein of the middle class.

    Time to shine a light on the sub human parasites called bankers.

  46. Here’s a wee bit of satire.

    A Bankster’s Wisdom
    Satire By Stephen J. Gray

    As an honorable member of the financial profession I am fed up hearing snide remarks about financial fraud. Sure, we sold what some are calling “toxic assets” to pension plans, state governments, mutual finds, and everybody and anybody who would buy them. And certainly we were selling ourselves out of these investments while promoting them as a good buy. Some are even calling this misrepresentation, or fraud! Still, some people are hard to please. But, this is how the system works: this was free enterprise at its finest. Instead of criticism we should be getting plaudits for creating and inventing a market for the buying and selling of debt-ridden financial paper.

    There are reportedly trillions of this financial paper out there waiting to be snapped up. Who will take it is the problem, but a solution will be found. We are very creative in this business of finance, and that old saying holds true: “there are suckers born every minute.” And we await the suckers, oops, I mean the investors.

    Meanwhile, governments invested in our financial problems, and they came through with flying colors, bailing us out with trillions of tax-payers’ cash when we were financially strapped. Some cynics were even calling it corporate socialism. Envy is a terrible thing and all because we were bailed out. The wording is more appropriate now; they don’t call it bailouts anymore. It’s called stimulus funds and I must admit stimulus does have a more respectable ring to it. Some people are calling it rewarding fraudsters, and you know hearing that kind of defamatory comment makes my blood boil. We tried to help people in their investment portfolios and this is the thanks we get.

    Okay, the financial system is now in the dumpster and millions have lost their jobs. There are a reportedly 40 million plus on food-stamps in the greatest country on earth, and that is surely good that the system helps the less fortunate. We have a recession right now and everybody needs to practice austerity, except us of course. Money is our messiah, and one of our own did say we were doing, “God’s work.” One does not get higher praise than that. Oh, I know there are those who will say, “tax-payers bailed out you fraudsters with trillions,” and some of these same taxpayers are now unemployed and getting food stamps, but hey we can’t all be winners. There have to be some losers otherwise how would the market survive?

    Surviving in the market will be the topic of my next investment seminar and hopefully many people will attend and hear about the buying opportunities now available. But, I digress. Now back to my take on the financial system (It’s offshore).

    The system right now is broke, except of course for those who use offshore tax havens. There has to be safe havens somewhere from governments. Government printing presses are running hot trying to keep up with demand for more financial paper, also known as money. I say money is not a problem when there are tax-payers’ monies available to keep the financial system stable. A stable financial system can become unstable if it is used and abused by financial charlatans. Therefore it is people like us that are needed to run the system? After all, who would advise governments on monetary policy? Who would loan people their own money?

    I believe we are indispensable to the common good. Still, it hurts immensely when I hear some people calling for jail time and saying we committed financial fraud. But, we will not stoop to the level of our accusers. We are pillars of society who keep the free market functioning and just went through a rough time. Tax-payers’ dollars pulled us through and now we are back to business as usual. In closing, I say thank you to all the taxpayers out there. If you need a loan, please come and see us; after all, it is your money that kept us in business.

    Stephen J. Gray
    August 23, 2010.

  47. I really doubt that “Royal Bank of Scotland had a balance approaching 1.5 times the size of the British economy”

  48. Bravo! But you glossed over all the mechanisms that allow this metastable condition persist (or slowly escalate, take your pick). The losses socialized, profits privatized cliche is at the core of this problem, and I’m not sure I see the Tea Party doing anything except maybe repealing The New Deal before much attention is paid to make the system less ‘game-able.’

  49. If the financial system is in the dumpster and the safe havens are offshore, where are the customers going to come from if they have no stimulus money. China and India?

  50. What about the derivative portfolios of the banks and this bank. The $2 trill assets pales into insignificane compared with derivative exposure and the global interlinking through these instruments.

  51. look at it this way: the devil worshiper going gods work doesn’t think their doing wrong.

    There is a perspective problem. What might be wrong to you might not be wrong to someone else.

  52. all the way down here to see this first post!

    I’m not sure if it will actually crash the bank, but it sure beats sitting around waiting for the problem to solve itself. I’m in, and hoping it works…

  53. I was only referring to the chosen wording. It might give an impression of ‘X times the country’s overall wealth’.
    I reckon proper way to express what was meant should be ‘X times the yearly GDP’.

Comments are closed.