The Gold Report: We’re hearing many people these days warning that it’s not a good time for investing in junior mining stocks. The TSX Venture Exchange has been experiencing some of its lowest volumes in six to nine months. What do you believe investors should do this summer?
Bob Moriarty: Anybody following my website for years will be familiar with me saying this: You can ignore technical analysis. You can ignore seasonality. You can ignore fundamentals. The only thing you can ever absolutely make money in is being a contrarian. Some very big names in the mining industry, including Rick Rule and … [visit site to read . . . → Read More: Bob Moriarty: A Contrarian’s Guide to Volatile Markets
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The Obama and Romney campaigns have released competing ads, both concerning Mitt Romney's time at Bain Capital. The Obama ad, which Jamelle posted here, attacks Bain Capital for buying, eviscerating, and then selling off a company called GST Steel in Kansas City, leaving the good hard-working people there jobless and desperate. The Romney ad, on the other hand, tells an entirely different story, that of Steel Dynamics, a company that employs thousands of good hard-working people, thanks to Mitt Romney. So which story should we believe? I'll give you the answer in a moment, but first, let's look at the Romney ad:
So who's right? Is Mitt Romney a job-creator, or a job-destroyer? The answer is ... yes!
Obama would like people to believe that Romney's work in private equity consisted of buying companies, tearing them to pieces, and selling off bits of the carcass, perhaps running over a child's toe with his limousine as he drove away from the shuttered plant. Romney would like people to believe that the start of every day at Bain, he said, "All right, team?how can we create jobs for Americans today?" The truth is that both the creation of jobs and the destruction of jobs happened at various times. That's because Romney and Bain were in business for one purpose: making money. Sometimes they did so in ways that destroyed jobs, and sometimes they did so in ways that created jobs. We may never figure out whether the total jobs ledger was positive or negative, since you can always argue that particular losses would have happened anyway without Bain, or that particular gains would also have happened anyway. So we should embrace a little nuance here. Romney's Bain career was neither completely evil completely saintly.
One interesting note: At the end of the Romney ad, one of the workers says, "One of the hardest things to do is move up a socio-economic status in a generation. Because of this company, I'm able to do that with my family." But according to conservative dogma, moving up the socioeconomic ladder isn't supposed to be hard. It's supposed to be easy. Anyone can do it. All it takes is hard work. You'll find it nearly impossible to get a Republican to admit that in America, you can work hard and still wind up behind. All market outcomes are supposed to be just. People only get what they deserve. If someone is rich it's because he worked hard, and if someone is poor it's because he's lazy. How did that bit of socialist propaganda find its way into Mitt Romney's ad?
Our regular featured content-On This Day In History May 14 by TheMomCatPunting the Pundits by TheMomCatThese featured articles-Pique the Geek 20120513: Melatonin, not just a Sleep Aid by Translator1% Want To Steal Your Social Security, Pres. Obama Is[...]
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Elizabeth Warren (Kevin Lamarque/Reuters)Elizabeth Warren, candidate for Massachusetts Senate, is the hot ticket for financial reporters today, by virtue of the fact that she's just about the smartest person on financial reform out there since she chaired the congressional oversight panel on TARP from 2008 to 2010, and led the Consumer Financial Protection Bureau from 2010 to 2011, after having fought successfully for the agency to be part of the Dodd-Frank financial reform bill. Beyond that, she can talk about financial reform both with authority and in a way that makes it completely understandable.
She made news first by calling for Jamie Dimon, chief executive of JPMorgan Chase, to resign his position on the board of the New York Federal Reserve in response to the news that his bank lost more than $2 billion in one set of trades.
That's not all she's talking about today, though. In an email to supporters, she makes the case for Congress to implement a modern Glass-Steagall law, to keep banks from being able to speculate with depositors' money.
A new Glass-Steagall would separate high-risk investment banks from more traditional banking. It would allow Wall Street to take risks, but not by dipping into the life savings and retirement accounts of regular people.She follows up that thought in an interview with Ezra Klein.
And by making banks smaller, a new Glass-Steagall could also help put an end to banks that are "too big to fail"?further avoiding costly taxpayer bailouts.
Klein: [W]hen I talk to people in the industry about this, they say that simple rules sound great, but they?re not really possible. It?s hard to distinguish a hedge from a bet, or a speculative trade from a legitimate one. The world is complex, and that?s why regulators and politicians who don?t like Wall Street and don?t like being browbeaten by lobbyists end up allowing complex rules, too.This is precisely why defeating Elizabeth Warren is the number two priority for Wall Street (after defeating President Obama)?because she's fiercely committed to simply evening the playing field for American consumers, and because she's proven how capable she is at getting results. She wants to make sure that we're not losing all our savings when the banks go crazy, and that we're not paying for it a second time in taxpayer-funded bailouts. That's completely unacceptable to Wall Street.
Warren: Here?s another way to look at what you just described: That?s the strongest argument for a modern Glass-Steagall. Glass-Steagall said in effect that hedge funds should be separated from commercial banking. If a big institution wants to go out and play in the market, that?s fine. But it doesn?t get the backup of the federal government. If it?s too complicated to implement the Volcker rule, do you say we give up and let the largest financial institutions do what they want? Or do you say maybe that?s the reason we need a modern Glass-Steagall?
Join with Warren in calling for Dimon's resignation from the New York Fed, and help her beat Wall Street by helping her get elected. Please contribute $3 to Elizabeth Warren on Orange to Blue.
In the wake of a $2 billion trading loss sustained by the bank JPMorgan Chase, many economists have advocated for the strengthening of financial reform to prevent against reckless behavior. Not Fox, however, which has argued that the problem is too much regulation of Wall Street banks.
NY Times: "JPMorgan Discloses $2 Billion In Trading Losses." From a May 10 New York Times article:
JPMorgan Chase, which emerged from the financial crisis as the nation's biggest bank, disclosed on Thursday that it had lost more than $2 billion in trading, a surprising stumble that promises to escalate the debate over whether regulations need to rein in trading by banks.
Jamie Dimon, the chief executive of JPMorgan, blamed "errors, sloppiness and bad judgment" for the loss, which stemmed from a hedging strategy that backfired.
The setback for JPMorgan may strengthen the hand of regulators in Washington who are now writing the rules for Dodd-Frank -- in particular the Volcker Rule, which restricts banks from trading with their own money.
JPMorgan's setback "casts doubt on Jamie's opposition and adds fuel to anyone who has been pushing for greater regulation," said Mike Mayo, an analyst with Credit Agricole Securities. "Oh, how the mighty have fallen." [The New York Times, 5/10/12]
Fox's Cavuto Calls The Dodd-Frank Act A "Swamp" And A "Very, Very Expensive And Regulatory-Laden Law That Didn't Work." On the May 11 edition of Fox News' Your World, host Neil Cavuto interviewed Jim LaCamp of Macro Portfolio Advisors to discuss the JPMorgan Chase loss:
CAVUTO: It is weird if you think about it. I'm not condoning or forgiving -- getting a handle on what happened at this firm. But I guess I'm worried about the wrong people policing it.
LaCAMP: Yeah. I mean the last thing we need is another big bill, another new piece of regulation. They need to fix the one they have. They don't even understand the one they have. This administration has a history of putting together big bills with lots of news clips that put vague powers in the hands of unnamed regulators. They still don't even know what the Volcker Rule is. So rather than get all up in arms about this loss that isn't really going to hurt anybody but JPMorgan, how about clarifying the laws that we have? All it's done is make the big banks bigger, which is they were trying to prevent, and it's also driven up credit card fees for consumers, and driven up debit card fees for consumers. So they need to fix what they have first, and then worry about any new legislation.
CAVUTO: Alright. We have plenty of legislation and new rules that kicked in with Dodd-Frank, the new financial law that was supposed to, among other things, address errant or wild trading as it's known, one of the features that led to this JPMorgan fiasco. It gets kind of in the weeds, and I want to step out of that and just look at the swamp here. And the swamp is a very, very expensive and regulatory-laden law that didn't work.
LaCAMP: It didn't work at all, and they really just didn't define anything very clearly at all. Again, a lot of the rules that are in play -- put in place by Dodd-Frank put really vague powers in the hands of unnamed regulators. Nobody knows what's going on. The foxes are still running around the henhouses, but they are a lot smarter than those that build the henhouses. [Fox News, Your World with Neil Cavuto, 5/11/12, via Media Matters]
Fox's Gasparino On JPMorgan Loss: "Regulators Never Catch This Stuff. Regulators Are Bad At Regulation." On the May 14 edition of Fox News' Happening Now, co-host Jenna Lee interviewed Fox Business correspondent Charles Gasparino on the JPMorgan loss:
LEE: A quick final question though Charlie since you know Jamie Dimon. He has repeatedly said this was a stupid mistake.
LEE: A really stupid mistake. So how do you regulate stupid, even if it's in a smaller bank?
GASPARINO: My point is this: You're never going to regulate stupidity, right? It's always going to happen. Banks will take losses. By the way they lose a lot more money on other things they do that -- has nothing to do with Dodd-Frank, including lending to people. Here's why -- here's what you -- and by the way regulators never catch this stuff. Regulators are bad at regulation. Here's what the taxpayer should be worried about: How do we make these mistakes smaller? You make them smaller by not having such tremendous financial institutions.
These things are bigger than countries. I mean, Jamie Dimon controls a balance sheet probably as big as France. I mean this is -- we're at a point now where it's kind of absurd that we have banks this big, this powerful, this systemic to the global economy and ours.
And the only way to deal with this, it may not be easy, it may be messy, but you got to protect the American taxpayers. You're not going to protect them through regulation. We should point out, Dodd-Frank has been in effect. Jamie Dimon has Fed officials, the Fed is their chief regulator, camped out in their offices every day. And they missed this. You want to trust them on something else? [Fox News, Happening Now, 5/14/12, via Media Matters]
Fox's Morris: "Is The Regulation Now Hindering Wall Street's Ability To Make America Stronger?" On the May 12 edition of Fox News' Fox & Friends Saturday, co-host Clayton Morris interviewed former Lehman Brothers trader Larry McDonald, and asked whether too much regulation of Wall Street had played a role in the JP Morgan Chase loss of $2 billion:
MORRIS Alright, welcome back. Well JPMorgan Chase under intense scrutiny this week after losing $2 billion in what's being called a bad bet -- have you ever made a bet like that? Now lawmakers on Capitol Hill are calling for more regulation on the big banks, but is that what we need, more regulation? Larry McDonald is a former trader at Lehman Brothers who left just before it failed, you got out at the good time. He's also the author of the book "A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers." Larry, nice to see you this morning.
McDONALD: Great to be here.
MORRIS: So the question, you know some are now calling as a result of this JPMorgan Chase $2 billion bet gone bad. We need more regulation, we need more regulation so something like this doesn't happen again. What do you say?
McDONALD: Well, you know, the bankruptcy at Lehman Brothers was very devastating to the global economy. But you have to remember, Jamie Dimon in the last 60 years is the best risk manager as a CEO. He's entitled to a bad quarter. The banks are even more regulated today than they were back in 2007. So I think that's the ultimate take-away from me right now.
MORRIS: Is regulation the answer, or is something else needed to be done?
McDONALD: Right now, I mean, I was in Wall Street 2004 to 2008, right here in New York, and I'm -- went on the lecture tour, I'm back on Wall Street now. It's like night and day. The regulations are at least double, triple what they were. So we have more regulation today. I think that there's a lot of pain, and I just don't want to see an overreaction at this time.
MORRIS: Is the regulation now hindering Wall Street's ability to make America stronger?
McDONALD: In some respects, the one thing I really talk about is mortgages. In 2005, 6, and 7, there was massive amounts of liquidity and mortgage availability.
MCDONALD: Today, because of regulation there really isn't that same infrastructure that we had back then, and that's hurting lending.
MORRIS: We've been hearing that it's simply the banks that aren't lending to individuals. You want to go out and buy a home right now, interest rates are the lowest they've ever been, but the banks won't loan to you. But it's really not the banks you're saying, it's more the regulation surrounding the banks and mortgages?
MCDONALD: Yes, it's a very long story but the whole CDO thing -- right now investors in that type of mortgage product won't buy them because they are looking at the robo-signing scandals. Investors don't trust the infrastructure, so they won't buy big piles of mortgages, which means that mortgage brokers around the country and banks can't sell them as easily as they could. [Fox News, Fox & Friends Saturday, 5/12/12, via Media Matters]
Former Director Of CFTC's Trading Division: If Dodd-Frank Is Fully Implemented, It Would Protect Taxpayers, The World Economy, And The Banks Themselves. From a May 11 CNBC guest blog by Michael Greenberger, a former director of the Commodity Futures Trading Commission's Division of Trading and Markets:
If Dodd-Frank had been in effect, these trades would almost certainly have been required to be cleared and transparently executed. They would have been priced by objective clearing operations on at least a weekly basis for purposes of collecting margin against the losing nature of the trades. As the trades lost value, margin would have been called for on a regular and systematic basis. (The losses would never have reached $2 billion without much earlier and corresponding regular calls for margin.) The losing nature of the trades would have been transparent to market observers and regulators for quite some time and the losses would not have piled up opaquely. It is almost certain that, at the very least, the Fed (not wanting to exacerbate its reputation for throwing taxpayer money at "Too Big To Fail" (TBTF) problems), would have backed JP Morgan off these trades long ago.
If even the trades were not required to be cleared, they still would have had to be reported to the public and to the regulators.
Now, if and when Dodd-Frank goes into effect (and if it does, it will be over the likes of JP Morgan's huge and expensive lobbying efforts against implementation), not only will the American taxpayer and the world economy be protected, but these TBTF banks would be protected against their own concededly reckless and highly risky actions. [CNBC, 5/11/12]
Former IMF Chief Economist: "Continued Opposition To [Dodd-Frank's] Volcker Rule Invites Ridicule." Among the reforms instituted by the Dodd-Frank financial reform legislation was the enactment of the Volcker Rule, which restricts banks from engaging in proprietary trading that is not at the behest of their clients. In a May 11 blog post, Simon Johnson, a former chief economist at the International Monetary Fund, called for robust implementation of Dodd-Frank, and said that based on the JPMorgan experience, "[c]ontinued opposition to the Volcker Rule invites ridicule":
The lessons from JP Morgan's losses are simple. Such banks have become too large and complex for management to control what is going on. The breakdown in internal governance is profound. The breakdown in external corporate governance is also complete -- in any other industry, when faced with large losses incurred in such a haphazard way and under his direct personal supervision, the CEO would resign. No doubt Jamie Dimon will remain in place.
The SAFE Banking Act, re-introduced by Senator Sherrod Brown on Wednesday, exactly hits the nail on the head. The discussion he instigated at the Senate Banking Committee hearing on Wednesday can only be described as prescient. Thought leaders such as Sheila Bair, Richard Fisher, and Tom Hoenig have been right all along about "too big to fail" banks (see my piece from the NYT.com on Thursday on SAFE and the growing consensus behind it).
The Financial Services Roundtable, in contrast, is spouting nonsense -- they can only feel deeply embarrassed today. Continued opposition to the Volcker Rule invites ridicule. It is immaterial whether or not this particular set of trades by JP Morgan is classified as "proprietary"; all megabanks should be presumed incapable of managing their risks appropriately.
Dennis Kelleher and Better Markets are right about the broad need for implementing Dodd-Frank and they are particularly right about the problems that surround non-transparent derivatives. [The Baseline Scenario, 5/11/12]
Economist Jared Bernstein: Financial Markets "Will Neither Self-Correct Nor Self-Regulate. ... Therefore, They Need To Be Regulated." In a May 12 blog post, economist Jared Bernsteinsaid that although not entirely clear, "if the rules were properly implemented and enforced, Dodd-Frank would have prevented" JPMorgan's loss. Bernstein also pointed out that JPMorgan's loss constituted further evidence that the financial sector can't be trusted to self-regulate:
That's the most interesting part of this. The answer to the second question is not entirely clear, though I think if the rules were properly implemented and enforced, Dodd-Frank would have prevented this outcome. Hedge #1 would probably be legit but hedge #2 -- the one that blew up -- looks more like the type of proprietary trading the Volcker rule is intended to block. (The usually careful and reliable Allen Sloan gets this wrong today -- the facts of the case and the magnitude of the losses aren't even known yet and he's somehow determined that the case proves we don't need the protection of a Volcker rule.)
It's also possible that under Dodd-Frank transparency rules regarding derivative positions, market participants and more importantly, regulators at the Federal Reserve, would have seen that one bank -- actually one trader at one bank -- was getting cornered such that a reversal in the index had the potential to cause sudden and systemically dangerous losses.
But the fundamental truth here is the one known since Adam (Smith, that is) and amplified by the great financial economist Hy Minsky: humans underprice risk. Their proclivity to do so increases as the business cycle progresses and confidence takes over (remember, JP's bet was unwound by the fact that the economy wasn't as strong as they thought). The advent of a global derivatives market with notional trades in the trillions greatly amplifies the risks.
And that is this: financial markets are inherently unstable. They will neither self-correct nor self-regulate. Their instability poses a threat to markets and economies and people across the globe. Therefore, they need to be regulated. [JaredBernstein.com, 5/12/12]
Reuters Financial Journalist Felix Salmon: "No Sensible Regulator Can Ever Trust The Banks To Self-Regulate." From a May 10 piece by Reuters financial journalist Felix Salmon, titled "JP Morgan: When basis trades blow up":
This time around, the basis-trade disaster has happened at JP Morgan, where the famous London Whale seems to have contrived to lose $2 billion on what was meant to be a hedging operation. And once again, although the details are still very murky, the culprit seems to be the CDS-cash basis.
Of course, this loss only goes to show how weak the Volcker Rule is: Dimon is adamant, and probably correct, in saying that Iksil's bets were Volcker-compliant, despite the fact that they clearly violate the spirit of the rule. Now that we've entered election season, Congress isn't going to step in to tighten things up -- but maybe the SEC will pay more attention to Occupy's letter, now. JP Morgan more or less invented risk management. If they can't do it, no bank can. And no sensible regulator can ever trust the banks to self-regulate. [Reuters, 5/10/12]
Economist Paul Krugman: "We Need To Restore The Sorts Of Safeguards That Gave Us A Couple Of Generations Without Major Banking Panics." From a New York Times column by Nobel-Prize winning economist Paul Krugman, titled "Why We Regulate":
Just to be clear, businessmen are human -- although the lords of finance have a tendency to forget that -- and they make money-losing mistakes all the time. That in itself is no reason for the government to get involved. But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. And what JPMorgan has just demonstrated is that even supposedly smart bankers must be sharply limited in the kinds of risk they're allowed to take on.
It's clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It's clear, that is, to everyone except bankers and the politicians they bankroll -- for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?
What did JPMorgan actually do? As far as we can tell, it used the market for derivatives -- complex financial instruments -- to make a huge bet on the safety of corporate debt, something like the bets that the insurer A.I.G. made on housing debt a few years ago. The key point is not that the bet went bad; it is that institutions playing a key role in the financial system have no business making such bets, least of all when those institutions are backed by taxpayer guarantees.
But the truth is that we've just seen an object demonstration of why Wall Street does, in fact, need to be regulated. Thank you, Mr. Dimon. [The New York Times, 5/13/12]
Former Labor Secretary Robert Reich: JPMorgan Loss "Reveals How Fragile And Opaque The Banking System Continues To Be, Why Glass-Steagall Must Be Resurrected." From a May 10 blog post by former Secretary of Labor Robert Reich:
J.P. Morgan's lobbyists and lawyers have done everything in their power to eviscerate the Volcker rule -- creating exceptions, exemptions, and loopholes that effectively allow any big bank to go on doing most of the derivative trading it was doing before the near-meltdown.
And now -- only a few years after the banking crisis that forced American taxpayers to bail out the Street, caused home values to plunge by more than 30 percent, pushed millions of homeowners underwater, threatened or diminished the savings of millions more, and sent the entire American economy hurtling into the worst downturn since the Great Depression -- J.P. Morgan Chase recapitulates the whole debacle with the same kind of errors, sloppiness, bad judgment, and poorly-executed and excessively risky trades that caused the crisis in the first place.
But let's also stop hoping Wall Street will mend itself. What just happened at J.P. Morgan - along with its leader's cavalier dismissal followed by lame reassurance - reveals how fragile and opaque the banking system continues to be, why Glass-Steagall must be resurrected, and why the Dallas Fed's recent recommendation that Wall Street's giant banks be broken up should be heeded. [RobertReich.org, 5/10/12]
Professor Of Corporate And Securities Law: "This Latest Debacle At JPMorgan Demonstrates That The Banks Cannot Police Themselves." From a May 11 Huffington Post article titled "JPMorgan Trading Loss Suggests Little Has Changed Since The Financial Crisis":
"This latest debacle at JPMorgan demonstrates that the banks cannot police themselves, and should not be trusted to do so," said law professor Frank Partnoy, director of the Center on Corporate and Securities Law at the University of San Diego. "At minimum, they should be required to disclose details about their derivatives, so their shareholders can understand what risks they are taking." [The Huffington Post, 5/11/12]
Fox Business Host Gerri Willis: "I Think Dodd-Frank Is More Trouble Than It's Worth." [Fox Business, Cavuto, 8/17/11, via Media Matters]
Special Report: Businesses Won't Invest Because Of "Uncertainty" Caused By Health Care Reform And Financial Regulation. [Fox News, Special Report with Bret Baier, 6/30/11, via Media Matters]
Fox's Asman: Health Care Reform, Financial Regulation Are "Holding The Economy Back." [Fox News, Happening Now, 6/2/11, via Media Matters]
Dobbs, Hannity Rehash Falsehood That Financial Regulation Law "Will Guarantee Bailouts In Perpetuity." [Fox News, Hannity, 7/15/10, via Media Matters]
On Hannity, Malkin Claims Financial Regulation Bill Will "Institutionalize And Make Permanent Financial Bailouts." [Fox News, Hannity, 4/21/10, via Media Matters]
Fox Falsely Suggests Financial Reform To Blame For Market Drops. [Media Matters, 5/21/10]
Fox's Carlson: Financial Regulation Reform "Was All Timed To The President's Benefit." [Fox News, Fox & Friends, 4/28/10, via Media Matters]
Right-Wing Conspiracy Theory: Obama Administration Colluded With Security And Exchange Commission On Goldman Charges To Gain Support For Financial Reform. [Media Matters, 4/19/10]
Fox Contributor Dick Morris On Financial Regulation: "Castro Doesn't Have Those Powers." [Fox News, Hannity, 3/29/10, via Media Matters]
Romney's new adMitt Romney's campaign is responding to the Obama campaign's criticism of Romney's Bain record with a 60-second web ad talking about a Bain deal that went well and created jobs: their investment in Steel Dynamics, which is now worth more than $6 billion and employes over six thousand workers.
The ad does a good job of selling Steel Dynamics as a success story, but it glosses over at least three important points:
The bottom-line is that Bain made more than $80 million on the Steel Dynamics deal more than a decade ago. Yes, it got $37 million in public subsidies, but there are still people on the job. That's a good thing, but it has nothing to do with the central question raised by the Obama campaign's ad, which is this: Why did Mitt Romney make millions even when his investments failed?
GST Steel, the company at the center of the first Obama campaign ad on Romney's Bain record, is just one example of such an investment, but it goes straight to the heart of the Bain criticism?criticism that Romney has not addressed, and probably will not address.
The issue isn't that GST collapsed or that its workers lost their jobs. It's that Romney and Bain Capital made enormous profits on the deal despite the failure of the company. They loaded it up with debt, bankrupting the company and destroying its pension fund, walking away with millions?leaving employees out of work and taxpayers on the hook for the pension fund guarantees.
Nobody expects every single business to be a success, but how is Mitt Romney's business motto?tails I win, heads you lose?compatible with free enterprise? If a company he invests in fails, shouldn't he share in that failure? Isn't that one of the most basic rules of our economic system? Yet with Mitt Romney's business model, that rule did not apply to him, and he's never explained why. And changing the topic by talking about Steel Dynamics doesn't put the question to rest.
Ally Bank, formerly known as GMAC Mortgage, the nation's fifth-largest mortgage servicer, put its mortgage subsidiary Residential Capital into bankruptcy. This is part of a continuing effort on the part of Ally, which is still majority-owned by the US[...]
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(SodaHead)Anyone looking for silver linings in last week's announcement from JPMorgan that it had lost $2 billion with synthetic credit default swaps this quarter could be excused for thinking that now, finally, maybe there will be a real push to get banks regulated beyond a milquetoast way. Hope springs eternal. With the news from JPMorgan's supremely confident, profoundly anti-regulatory CEO Jamie Dimon that the bank could perhaps lose another $1 billion, some people might be tempted to imagine that maybe even the diehards would now move away from Dimon's history of attacking bank regulation as "infantile" and "non-factual":
While JPMorgan has long been regarded as one of the nation?s strongest banks, the circumstances surrounding its $2 billion trading loss look depressingly familiar. Once again, a bank with large trading operations allowed a mixture of incompetence, risk-taking, hubris and complexity lead to an embarrassing and costly blowup.Even Dimon himself said Sunday that JPMorgan's losses would provide ammunition to those who want more regulations. But that hardly means he now believes there actually should be more regulations.
?This underscores the fallacy of thinking the best-managed banks are somehow infallible,? said Sheila C. Bair, the former chairwoman of the Federal Deposit Insurance Corporation, a bank regulator.
You see, the buck doesn't stop with some underlings in the JPMorgan second tier, one of whom has already lost her post, nor with Dimon himself, who is still running the $2.3 trillion bank as of today. From the mind-set of right-wing politicians, this mess is all the government's fault. On Meet the Press Sunday, David Gregory asked Republican National Committee chief Reince Preibus, "In light of the losses on Wall Street this week, you think we need less financial regulation rather than more?" Preibus didn't skip a beat: "I think we need less." New rules added by Democrats in the wake of the financial crisis that took down several big banks and brought about a gigantic taxpayer bailout of other banks have "made things worse," he said.
A stunning assessment considering just how gutted the implementation of the law imposing new regulations actually is. Matt Taibbi at Rolling Stone provided a 7000-word look at that just a day before JPMorgan announced its giant losses:
Two years later, Dodd-Frank is groaning on its deathbed. The giant reform bill turned out to be like the fish reeled in by Hemingway's Old Man?no sooner caught than set upon by sharks that strip it to nothing long before it ever reaches the shore. [...]As usual Taibbi does not let Democrats off the hook in the matter. The White House and powerful Democrats in Congress helped make Dodd-Frank what it isn't, he writes.
The fate of Dodd-Frank over the past two years is an object lesson in the government's inability to institute even the simplest and most obvious reforms, especially if those reforms happen to clash with powerful financial interests. From the moment it was signed into law, lobbyists and lawyers have fought regulators over every line in the rule-making process. Congressmen and presidents may be able to get a law passed once in a while?but they can no longer make sure it stays passed. You win the modern financial-regulation game by filing the most motions, attending the most hearings, giving the most money to the most politicians and, above all, by keeping at it, day after day, year after fiscal year, until stealing is legal again. "It's like a scorched-earth policy," says Michael Greenberger, a former regulator who was heavily involved with the drafting of Dodd-Frank. "It requires constant combat. And it never, ever ends."
But there would have been no Dodd-Frank at all had Republicans been in control. And certainly no Consumer Financial Protection Bureau, the best thing to come out of the financial crisis. Elizabeth Warren, the person whose idea that was, and who guided it through its crucial first months, and is now a Democratic candidate for Senate in Massachusetts, called Sunday for Dimon to step down from his position on the New York Federal Reserve. As part of its oversight role, the Fed is right now making decisions, among other things, about how exactly the new financial regulations will be implemented. It will advise who will get rescued
if when there is another meltdown. No way should Dimon?who opposes regulations and is in charge of a too-big-to-fail bank still obviously engaging in risky behavior?be on the board.
However, this isn't about just one person or a handful of them. It's a system. To add just a smidgen of sanity into that system, just sensible not even slightly radical, Sen. Sherrod Brown (D-OH) and Reps. Brad Miller (D-NC) and Keith Ellison (D-MN) have introduced the The Safe, Accountable, Fair & Efficient (SAFE) Banking Act of 2012. The bill was first introduced by Brown and Miller in 2010. It would impose limits on the size of bank deposits so that none could hold more than 10 percent of the total deposits of all insured banks in the United States. It would also impose an absolute size for a bank holding company of no more than $1.3 trillion. No non-bank financial company could exceed $436 billion.
Getting Dimon off the Fed and imposing size limits on financial institutions aren't all that needs to be done by a long shot. But they are moves in the right direction.
There's more discussion in bobswern's diary.
The Republican National Committee mocked guidelines issued by the Obama administration on Friday that will make agencies seek special permission to spend over $500,000 on a conference, calling the policy "wasteful." What the RNC might not have realized is that members of their own party proposed a cap in the exact same amount.
The RNC quickly criticized the guidelines, writing that "such a strict spending limit" would force the GSA to choose between either a mindreader or magician.
"With wasteful policies like this it's not hard to figure out why Obama has run the three largest deficits in history," RNC spokeswoman Kirsten Kukowski said in a statement, mocking the guidelines as "capping all conferences at the low, low price of $500,000 (unless they are granted 'special permission')."
Ironically, $500,000 is the exact same cap contained in an amendment proposed by Sen. Tom Coburn (R-OK), who is known as one of the biggest spending hawks in D.C. The House unanimously passed a bill which contained the same $500,000 cap that was proposed by Rep. Darrell Issa (R-CA).
Kukowski said in an email to TPM that the language in the House bill and a Senate bill "has more teeth" than the Office of Management and Budget memo.
"A bill has the force of law and can establish a hard cap," Kukowski wrote. "An OMB memo is guidance issued to agencies and should set better targets that what they are doing. This is the same song and dance from an administration that likes to pride itself on being transparent and tough on spending when the opposite is true."