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The GOP Assault on Our Economy Continues-Why The GOP Hates Regulations

The GOP Assault on Our Economy Continues-Why The GOP Hates Regulations

The GOP hates regulations (laws). They call them all sorts of names like “Job-Killers” or “Business-Busters” to serve as dog whistles to

JPMorgan Chase Tower (Photo credit: Wikipedia)
get their packs howling. What they really hate about regulations is the fact that they are designed to keep people honest; to keep transactions transparent so that all facts are disclosed to BOTH parties in a financial transaction. Americans want everyone to be treated fairly don’t they? We don’t want to give banks incentives for cheating or dishonesty in our voter laws any more than we want incentives for cheating or dishonesty for voter registration do we?

Then, given the above, why does the GOP actually hate regulations? Surely they want truth, honesty and the American way.

Well, maybe they don’t?

That Pesky Government Intervention

Yes, people make errors every day. A lot of them. That in itself is no reason for the government to get involved in financial affairs. But banks are unique. The risks they bear are backed by taxpayers. Moreover, the economy depends on these banks. Now More than ever.

That’s the reason post Great Depression lawmakers separated banking entities into two groups.

Commercial Banks, whose purpose was to keep ready liquidity available for businesses with low-risk, low-reward financial instruments like certificates of deposit. Businesses need that liquidity in order to make payroll, order inventory and pay bills.
Investment Banks, whose purpose was to offer financial gamblers in the crazy, chaotic world of commodities and stocks/bonds a haven in which they could keep their high-risk high-reward liquidity.
For fifty years that separation kept business and financial risk-takers separate with protections applicable to each sub-group.

JPMorgan Chase-A Learning Moment Among Many Recent Similar Moments

What JPMorgan has just demonstrated is that even Harvard-smart bankers must be sharply limited in the kinds of risk they’re allowed to take with businesses and taxpayers’ money.

History is replete with evidence that banking is and always has been subject to occasional destructive “panics”. These fits of panic usually inflict havoc with the economy in general. Current GOP folklore has it that bad banking is always the result of government intervention, either from the Federal Reserve, or from meddling members (liberals) in Congress.

However, as the Great Depression and the last twenty years of GOP insistence on eliminating all manner of transparencies in financial transactions have proven, these protections are greatly needed. Needed despite the specter with which they paint regulations of Job-Killing and Business-Busting as cover for their huge contributors on Wall Street.

Seriously. What does it take for the average American to realize that the GOP is filling them full of deceptions?

After the mother of all banking panics, the Great Depression, we arrived at a workable solution, involving both guarantees and oversight.

  • On one side , the scope for panic was limited via government-backed deposit insurance
  • On the other, banks were subject to regulations intended to keep them from abusing the privileged status they derived from deposit insurance-which is a government guarantee of their debts.
  • That’s why government-guaranteed deposits (heretofore in Commercial Banks) weren’t allowed to engage in the often risky speculation characteristic of investment banks like Lehman Brothers.
  • This is the balance that worked very successfully for half a century of financial stability.

    Enter Phil Gramm, Ronald Reagan and the GOP

    Unfortunately, with the stability afforded by the above, lessons of history were forgotten. New forms of banking without government guarantees multiplied, while both commercial and investment banks were allowed to take on ever-greater risks by the GOP rolling back the protections afforded by law, one-by-one. Predictably, we eventually suffered the 21st-century version of the 1930s Bank Panic.

    So, we should clearly, “hold THESE truths to be self-evident”right?

    Congress needs to restore the balance and protections that the wise lawmakers post-Great Depression enacted
    We need to restore the sorts of safeguards that gave us a couple of generations without major banking panics
    It is clear, right?

    Well, apparently it’s clear to some, but others not so much.

    Banksters ( bankers+gangsters=Banksters ) and the politicians they bankroll seem to think otherwise. Naturally the bankers would like to go back to business as usual since the taxpayers (at the behest of George W. and Hank Paulson) were so generous in bailing them out. And I guess it’s coincidence that Wall Street is giving vast sums to Mitt Romney. Romney, who has promised to repeal recent financial reforms like Dodd-Franck.

    JPMorgan Chase Tries Hard to Remind Us-Yet Again

    JPMorgan, ironically, managed to avoid most of the bad investments that brought other banks to the taxpayer troughs in 2008. This display of cautiousness has made JPMorgan’s Jamie Dimon the focal point in Wall Street’s fight to postpone and dilute further financial reform in the hopes that President Obama will be replaced with the more Wall St. friendly Willard Mitt Romney.

    Mr. Dimon was particularly vocal in his opposition to the Volcker Rule, which would prevent banks with government-guaranteed deposits from engaging in “proprietary trading,” (speculating with depositors’ money). As JPMorgan CEO, Mr. Dimon has been saying that “everything’s under control at JPMorgan. We’re bankers-we KNOW what we’re doing for gosh sakes!”

    Hmmmm. Maybe not.

    What Exactly Did JPMorgan Do?

    So far all we really know is that JPMorgan used the market for derivatives, (complex financial instruments) to make a huge bet on the safety of corporate debt. Oddly enough, these are the same type bets that the insurer A.I.G. and investment Bank Lehman Brothers made on housing debt a few years ago. We all know how well that went.

    The real shake-your-head-in-disbelief moment is not that the bet went bad. The most outrageous aspect to this affair is that JPMorgan Chase, knowing how wrong 2008 went, and knowing that they now play a major role in the financial system, have no business making such bets. And to again use money backed by taxpayer guarantees is particularly egregious.

    As of today, May 15, 2012, the JPMorgan shareholders have remained confident that Mr. Dimon is still the person to lead their endeavors. Mr. Dimon even admitted that maybe the stronger regulations really are needed.

    But it won’t last. It never does. Wall Street will be back to its usual overconfidence within weeks and using taxpayer-guaranteed funds to make speculative bets with our money.

    But can’t the even the normally obtuse American public finally come to the realization that the truth is that we’ve just seen another demonstration of why Wall Street does need to be regulated?

    Please?

    Source: hg.scimth.net

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