The Great Recession: Still More on "Too Big to Fail; Too Big to Exist"

[original posting on subject, "Too Big to Fail; Too Big to Exist Act of 2009"]
[also see: "More on Too Big To Fail; Too Big to Exist"]


Still don’t think Bernie Sanders’ (U.S. Senator, Vermont) proposed "Too Big to Fail; Too Big to Exist Act of 2009" has senior banking executives very, very worried?

Jamie Dimon (CEO and Chairman, JPMorgan Chase) certainly seems a bit worried. Shortly after the proposed bill was introduced, he had a commentary published in the Washington Post (November 13, 2009) where he offered his arguments for why there should not be legislation limiting the size or scope of financial-services companies.






Jamie Dimon, Chairman & CEO JPMorgan Chase
(don’t you just love his shit-eating, I got mine - screw the rest of you, banker smirk? )







Jamie’s self-serving diatribe confirms just how much the "Masters of the Universe" bankers really are divorced from the financial realities faced by most American consumers, and small and mid-sized American businesses.

In reality, the whole purpose for banks getting increasingly bigger is to support continuing growth of their profits. Any services that they happen to provide to consumers and business are merely coincidental to maintaining their growth. In fact, most of the "Masters of the Universe" would probably love to find a business model that would allow them to make oodles of money without having to deal with us pesky and costly customers.

Let’s take a closer look at Jamie’s propaganda:

• (2nd paragraph): "scale can create value for shareholders"
  
  Rebuttal: Scale doesn’t guarantee shareholder value, and in fact can destroy shareholder value, as has recently been demonstrated for companies such as Citigroup, Bank of America, and others.
  
  


• (2nd paragraph): "scale can create value for consumers, who are beneficiaries of better products, delivered more quickly and at less cost"
  
  Rebuttal:
  
  (a) Prior to the mid-1990s (when the "super-sizing" of banks began) fiscally- responsible people had no difficulty in obtaining the banking services and credit that they needed. Credit cards, automobile loans, unsecured personal loans, and home mortgages were all readily available to people who met common sense financial qualifications.
  
  (b) The result of the creation of super-banks over the past 15 years is the present economic chaos... hardly a benefit to consumers. Somewhere between 30 and 50 million American citizens have been significantly (and in many cases severely) impacted by the greed and recklessness of the super-banks. Probably about half that number got into trouble because the super-banks provided then with credit, or credit terms, which were not appropriate for their financial circumstances. But the other half, 15 - 25 million American consumers, did absolutely nothing wrong - they just ended up being collateral damage in the economic meltdown that the super banks caused. So, where the hell is this "value" to consumers that you’re prattling about Jamie?
  
  


• (2nd paragraph): "scale can create value for the businesses that are our customers"
  
  Rebuttal: So where’s the "value" in millions of small and mid-sized American businesses going under because the super-bank-caused recession has destroyed their revenue streams, and locked them out of the credit they need to cover ongoing operating costs? Come on Jamie, the greed and recklessness of the super-banks even brought some of the largest multinational corporations of this country (for example GM) to the brink of failure.
  
  


• (2nd paragraph): "scale can create value for the economy as a whole"
  
  Rebuttal: Yeah, right.... so how’s that working for you America? The negligent and reckless actions of the bloated super-banks set the American economy teetering on the brink of complete collapse, and you want to argue that that is "value" for the economy Jamie? Just what have you been smoking recently, eh?
  
  


• (7th paragraph): "... some of America's largest companies... operate around the world... need financial-services partners that can efficiently execute diverse and large-scale transactions; that offer the full range of products and services from loan underwriting and risk management to providing local lines of credit; that can process terabytes of financial data; that can provide financing in the billions"
  
  Rebuttal: So Jamie, you want to argue that multi-national corporations, and a global economy, have only existed since the mid- to late 1990s? Come on now... American companies have been doing business around the world, and we’ve had a "global economy", since at least the mid-1960s. The multi-national business world operated just fine, long before the creation of today’s super-banks.
  
  


• (5th paragraph): "financial institutions... can pose serious risks for our markets because of their interconnectivity. A cap on the size of an institution will not prevent that risk"
  
  Rebuttal: ????? Jamie, the interconnectivity is a direct result of size. The super-banks have their tentacles extended into every facet of the American financial system. They control the lion’s-share of capital in this country, shuttle it around between themselves, and then dole it out in small amounts to the rest of the system. The smaller community and regional banks are at the mercy of the super-banks for both capital, and for a variety of processing and other banking services. If we go back to a financial system based upon local and regional institutions, this problem of interconnectivity and dangerous banking monopolies will cease to exist.
  
  


• (2nd & 3rd paragraphs): "...ensuring that even the biggest bank can be allowed to fail in a way that does not put taxpayers or the broader economy at risk... creating the structures to allow for the orderly failure of a large financial institution... giving regulators the authority to facilitate failures when they occur"
  
  Rebuttal: Sounds good, but, would there really ever be such a thing as an "orderly failure" of a large financial institution? I mean, as soon as the first inkling of trouble got out, the financial world would react and the damage to the overall economy would be already done. In reality, the only way to keep the failure of a large financial institution from damaging the overall economy, is to prevent them from getting too big, and from acquiring too much economic power, in the first place.
  
  


• (1st paragraph): "...if some unforseen circumstance should put this firm [JPMorgan Chase] at risk of collapse.... we should be allowed to fail"
  
  Rebuttal: Again, sounds good. but what if it’s not an unforseen circumstance that’s involved? What if it’s the reckless, negligent actions of Jamie Dimon that put the company at risk? Should the company still be allowed to fail and shareholders and creditors punished? Shouldn’t, in such a case, Jamie Dimon be held responsible for the collapse, and personally liable for all the consequences and damages that result?
  
  We’d like to know Jamie, because in the current financial crisis, there were no unforseen circumstances involved. This economic meltdown was caused by a handful of financial-service company executives who negligently and recklessly:
  
  - engaged in, or facilitated, the origination of extremely poor quality and risky mortgages;
  
  - underwrote and distributed asset-backed securities from this pool of risky mortgages;
  
  - created, disseminated, and invested in outrageously risky derivative instruments (collateralized debt obligations) that had these near-worthless mortgages at their foundation;
  
  - participated in the misrepresentation of poor quality securities and CDOs as "investment-grade" instruments.
  
  Why should creditors and shareholders take the fall for the negligence (or even criminal fraud) of bank executives?
  
  Instead of being held personally liable for the damages they caused, many of the super-bank "Masters of the Universe" who created this current economic mess not only got to retain their jobs, they even got bonuses. Most of the rest were allowed to gracefully "retire" with generous buyouts and pensions, or were handsomely rewarded with a "golden parachute" when their contracts were terminated. So Jamie, do you see now why the American public is so pissed-off at you and your banking colleagues?

I’m sorry Jamie - I just can’t buy any of your arguments. Remember, you were a big part of the problem that created this "Great Recession" - you and your JPMorgan Chase were up to your eyeballs in the subprime and other high-risk mortgage bullshit that caused the economic meltdown.

The only reason JPMorgan Chase didn’t experience the same level of pain as some of its super-bank peers is that you got cold feet in late 2006, dumped $12 Billion of toxic mortgages that had been originated or acquired by your company (as in, you transferred the risk from your company to other people), and got out of the risky derivatives (collateralized debt obligations) game (more). Yes, that made you a hero with your shareholders, but you still have to claim responsibility for your contribution to the damages that have been inflicted upon the U.S. economy.

So it comes down to this Jamie: As far as I’m concerned, your arguments against regulating the size of financial companies are just the same tired propaganda we’ve come to expect from the banking industry. You worked most of your career to create the country’s largest financial-services company: Your own personal banking empire. You’ve played the "mine’s bigger than your’s" game very well for many years. And now it’s obvious that you’re very afraid that all that you’ve worked to create is going to be taken away and/or dismantled.

Too bad... but it’s no one’s fault but your own Jamie. Your undoing was the blatant greed, arrogance, and recklessness that you and your fellow super-bankers displayed over the course of the past 15 or so years. The citizens of this country have the right to insist that individuals like you never have the opportunity to inflict this kind of devastating economic damage on the American people again.

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