Dimons and Diamonds
As we celebrate Independence Day, let’s remember the freedom of the big banks from accountability and consequence for the havoc they continue to wreak. We’ll skip that celebration, thank you. Their impunity from civil and criminal liability, and the lack of effective action to help the rest of us move past the fallout of their reckless conduct, has become farcical and tragic.
Jamie Dimon, who wowed ‘em on Capitol Hill recently with his quick wit and easy charm while maintaining his crusade against sensible and necessary Dodd-Frank regulations, and any regulation of the dangerous derivatives markets, is now having to acknowledge that the derivatives bets made by JP Morgan-Chase with FDIC-guaranteed dollars, bets that he himself has characterized as “stupid,” may well result in losses of $9 billion rather than the initially-reported $2 billion. Folks, these are bets in an unregulated market devoid of transparency with money insured by our tax dollars. But don’t ask for any of the profits if they win—the risk is public, the reward is private. Anyone genuinely concerned with creeping socialism should start right here.
Today we read that Robert Diamond of Barclays Bank has resigned amidst a scandal involving that banks’ manipulation of global interest rates. The bank’s defense appears to be that regulators implicitly approved these manipulations. Regulators are pushing back, as reported here in the New York Times today:
The Barclays case is the first blow in a series of potential actions against the banks that help set the London interbank offered rate, which is used to determine the borrowing costs for numerous financial products, including student loans, mortgages and credit cards. … After the Barclays settlement, American and British authorities are now shifting their focus to a pattern of wrongdoing on Wall Street, pursuing action against more than 10 big banks scattered across the globe, including UBS, JPMorgan and Citigroup. Authorities suspect that big banks reported false rates throughout the crisis to squeeze out extra trading profits and mask their true financial health.
For those of us who don’t pretend to understand much about Libor rates or this level of sophisticated deceit, it’s easy to skip over to the sports page or wherever. But one need not be a financial analyst to get the drift—more evidence, on top of a mountain already amassed, of big banks gaming the world financial markets, and crashing them at a cost in our country alone of tens of millions of jobs, nearly a trillion dollars of lost home values, millions of foreclosures—with millions more looming for the estimated 16 million now underwater—and a 30% loss of average family wealth since 2007, with those losses most heavily concentrated in working and middle-class households.
Still no bankers in jail. Still only one relatively modest settlement against them, on the massive robo-signing scandal that only returns a fraction to homeowners in principal write-down of the equity they have lost. And as the Times said recently about the mortgage fraud investigative task force announced by President Obama during the State of the Union address:
In January, Mr. Obama vowed to begin an expanded inquiry, but there are scant signs of progress. The Justice Department has confirmed that 100 lawyers and staff members from various state and federal agencies are working on the investigation, a skeleton crew compared with the banks’ armies of lawyers. Only recently did the department convene a two-day meeting for lawyers, regulators and other experts involved in the inquiry to discuss cases, legal theories and strategies. Coordination is important, but it seems a far cry from a hard-charging prosecution, especially as potential violations draw closer to expiration under statutes of limitation for financial crimes.
Mr. Obama has promised an investigation with real accountability. There is still time, but he has not yet delivered. Meanwhile, with the possible exception of a euro zone meltdown, the housing market remains the largest threat to economic recovery.
The patriotic thing to do is to call and write the White House and DOJ and demand more civil and criminal actions, call and write Congress to demand passage of pending bills that will let many underwater homeowners finally refinance, and call and write Fannie and Freddie to reduce the principal balances on the mortgage loans they hold. Injustice doesn’t take holidays. Happy Independence Day, everyone.