Tick Tick Tick
Posted on May 17, 2012
Filed Under The Economic Scene
JPMorgan Chase lost $3 billion (up from the initial $2 billion, and that amount may grow significantly bigger). That’s the headline. It’s all over the news, but many Americans will wonder, “Why should I care?”
You should care because it was just three years ago when the U.S. financial system was teetering on the verge of collapse, and to avoid total disaster the taxpayers stepped up and bailed out the “too-big-to-fail” banks. And then those banks told us they had made changes to the way they invested their own capital and a similar problem would not happen again.
But it did.
These are the same banks that have been ardently blocking all attempts by government regulators to make the system safer for taxpayers.
It is quite a ridiculous situation. They want to be allowed to make mountains of profits for themselves while putting the rest of us at risk. Ina Drew, the now-departed JPMorgan veteran who headed the office that was supposed to manage risk, made $14 million last year. To earn that kind of money, you need to be a risk taker much more than a risk manager.
No matter what the bank CEOs say, no matter what their high-paid lobbyists say, the fact is that unless solid safeguards become law, we will always be a day away from another “unexpected” financial bomb.
How can I say that with certainty? Because bankers are human. Greed, incompetence and poor judgment will always make their way into the banking system.
Don’t forget that Jamie Dimon, head honcho at JPMorgan Chase, was considered the white knight of the industry. He had a team of the best and the brightest. Yet even for them some combination of greed, incompetence and poor judgment caused their “hedge against risk” to blow up.
The big banks are still too big to fail. Unless we have strong regulations in place, it is and will remain an “I always win” situation for the bankers, and the opposite for us taxpayers.