When even Republicans start hating on the Big Banks, is it time to finally break them up?

In recent weeks, there have been a number of instances where the big Wall Street banks have been criticized as too-big-to-fail (TBTF), and even too-big-to-prosecute.

The list of critics has grown and now includes Senators Elizabeth Warren and Sherrod Brown, a number of Fed chairs, and even Attorney General Eric Holder.

Surprisingly, even some on the right are coming around, including George Will, Peggy Noonan and right-wing Federal Reserve board member from Dallas, Richard Fisher.

Eric Holder

US Attorney General Eric Holder says America’s big banks are too big to prosecute.

The Senate has been slow to move – there are plenty of campaign coffers stuffed full of Wall Street money – and progress there won’t be easy. It was just last month that the Senate approved Wall Street’s man Jack Lew to run the US Treasury. The White House has also been reluctant to side with Americans who have been left behind by Wall Street.

On the other side of the fight are Wall Street lobbyists, full of cash and still very much in control of Washington. Today’s Bloomberg editorial pushes back on the problem of the big banks relying too much on taxpayers. As Bloomberg reported recently the big banks receive$83 billion per year in federal handouts to Wall Street though according to another analysis, the amount is closer to $780 billion per year, equal to the entire stimulus bill every single year forever.

Despite the normal whining from Wall Street and its defenders, any business that takes billions of dollars from Uncle Sam should be subjected to more regulation and more inquiries about what they’re doing with that money. If they don’t want the questions, they shouldn’t take the money. But of course, their “profits” are dependent upon taxpayer money – the $780 billion annual subsidy is equal to ten times the banks’ annual profits – so they won’t be giving up the federal teat any time soon.

Bloomberg has also reported on the banks behavior related to the infamous “London whale” losses.

The largest U.S. bank “mischaracterized high-risk trading as hedging,” and withheld key information from its primary overseer, sometimes at Dimon’s behest, according to a report today by the Senate Permanent Subcommittee on Investigations. The 301-page document also shows how managers manipulated internal risk models and pressured traders to overvalue their positions in an effort to hide growing losses in a “monstrous” credit derivatives portfolio in London.

“We found a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public,” Chairman Carl Levin, a Michigan Democrat, told reporters today after his investigators spent nine months combing through 90,000 documents and interviewing current and former executives.

This hardly sounds like an organization that is even trying to cooperate with government officials. It also sounds like an organization that cares little for the financial obligations of taxpayers who have been there to back up the bank in the past. According to these reports, JP Morgan has problems in its management at the highest levels.

I once ran a bank that was THIS big. JP Morgan's Jamie Dimon (photo by Steve Jurvetson)

I once ran a bank that was THIS big.
JP Morgan’s Jamie Dimon (photo by Steve Jurvetson)

As the largest US bank, the risk to the country from JP Morgan is much too high. While Simon Johnson has a great read in the NY Times about how the banks’ special status may finally be in trouble because of pressure from so many critics, I’m inclined to be on the other side. Like they’re saying at Zero Hedge, JP Morgan CEO Jamie Dimon ought to be taken away in handcuffs, but sadly he won’t be going anywhere.

There will be plenty of big talk about banks being too-big-to-regulate, but in the end, nothing will change. The Senate may take down a sacrificial lamb or two, to prove they’re “tough on banks” (former JP Morgan risk director Ina Drew may be one of them).

If Drew is to take the fall, don’t forget that she already walked away with a fat retirement after being pushed out the door – so any “punishment” will be mitigated. Having said that, there are very few women on Wall Street at the higher levels – it might be nice to take down some of the old boys too.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

Share This Post

© 2018 AMERICAblog Media, LLC. All rights reserved. · Entries RSS