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July 30, 2013


I awakened this warm and sunny morning determined to clean out my Chevrolet, which badly needs hygiene. I then made the mistake of watching Good Morning, America! while having breakfast, and on the news ribbon at the bottom of the screen I read something that I knew would delay my good intentions to shine up the Malibu’s dashboard. JP Morgan Chase was back in the news (again).

My followers will recall the saga of Enron, those numero uno supporters of George Bush. They will also recall that Enron shut down the State of California with its phony electrical shortages designed to raise rates, kept hundreds of “partnerships” in offshore venues to soak up their losses while (as a publicly traded corporation) only showing profits here (resulting in enormous increases in stock values), saw their national accounting firm go out of business as a result, had their CEO indicted and convicted (but he committed suicide before justice could be served) etc. My followers will also recall that the Houston major league baseball team gave Enron naming rights and played at “Enron Field” until Enron’s criminal activities were known and its executives indicted, upon which the baseball field was renamed. George Bush threw out the first ball when the field was named “Enron Field” and was shown hugging the now-deceased CEO afterwards, which was the least he could do for his number one contributor, who supplanted Amway as his biggest campaign contributor. (Amway, however, remained the #1 contributor to GoPac, a Newt Gingrich endeavor dedicated to the virtues of deregulation and reduced taxes.)

Flash forward to JP Morgan Chase’s record over the past few years – JP Morgan is one of the big Wall Street “too big to fail” banks. These are the people who spend billions in PR and lobbying fees to tell us that they are overregulated by these “socialists in government,” that we should let “the market” sort out these private enterprise matters (though they are publicly traded corporations with shareholders at risk) etc. (It is noteworthy that it was O.K. for those “socialists in government” to provide bailouts and buy their subpar paper at par prices during and after the 2008 near depression THEY CAUSED. Apparently we are to define socialism as good or bad depending upon whose ox is being gored. I here observe the reality of the bailout and other such measures which allowed the big banks to survive, i.e., that such measures that were undertaken by those “socialists in government” were for the benefit and even survival of the capitalist system, one on the verge of evaporation by reason of capitalist excesses. Some socialism that is!

Today’s news ribbon line on TV said that regulators have accused JP Morgan Chase of manipulation of electricity prices in California, and my first reaction was: SHADES OF ENRON! Of course, an accusation is not an indictment, but if such a matter has now become public, it is a good bet that criminal and/ or at least heavy civil fines are in the offing. Will these banks, energy companies and others who pay big money to propagandize the rest of us ever understand that you cannot engage in such conduct on the one hand and expect less regulation on the other? JP Morgan Chase is becoming the poster boy for such in-your-face dichotomies.

It seems clear to me that when a gun toting and shooting cowboy comes to town that you need to have the sheriff pay attention. Clearly that maverick needs regulation – a surrender of his six-guns at the least – and when the big banks come into town to take over and do as they please (though their stock is publicly traded), they have BY THEIR OWN CONDUCT proven that they need regulation for the protection of the other folks in town (the rest of us), and I take a different view than the one promoted on propaganda sites and in print venues by these desperados – I think the sheriff is derelict in his duties IF HE DOES NOT rein in such conduct by these people. Free market? Private enterprise? Let the market decide? We tried those and were treated to a Great Depression and Great Recession, crapshoots, bailouts, recession, unemployment and impoverishment. Let’s try heightened regulation.

Plainly more rather than less regulation is called for unless we want to grubstake these people in their next crapshoot in the international casino. We have financed credit derivatives at the last crapshoot; what new and even more exotic paper will Wall Street big banks have us finance next time – and bail out if their (not our) plans to profit hit a snag? It is not all the fault of Wall Street banks if what happened in 2008 happens again; it will also be our fault for letting it happen again. We need to lose our timidity and directly confront the money and power of Wall Street’s big banks with regulations that debit their reserves and shareholder value for their losses, not our bailout resources.

Finally, a reference must be made to JP Morgan Chase’s recent loss of $6 billion via a trader on their London desk known as the “whale.” His transactions were approved by the bank’s CEO, and guess what they involved? Credit derivatives! Shades of 2008! While the bank had sufficient reserves and surplus shareholder value to take the hit, it nonetheless tells those of us who are awake something. It tells us that the big banks have learned no lessons and are still engaging in crapshoots.

It also tells us that we must have reinstatement of Glass-Steagall (there is a bipartisan bill now up before the Senate to do just that) to protect us from liability for such crapshoots. One could argue that if we the people as investors are liable for losses then we should share in the profits as well. Let’s see how that idea resonates on Wall Street. It will fail. We are in an era of socialized losses but privatized profits, an irrational arrangement. Reinstatement of Glass-Steagall will remedy that lopsided version of equity.

So did the board fire the CEO of the bank for a $6 billion dollar loss he approved? No, but they really roughed him up – they reduced his bonus. That’ll show that cowboy, by crackey! Maybe next time they will make him go to his room. Who says private enterprise cannot correct itself? Outside regulation? Never! It’s free market forever (unless we need a bailout)!

On that hopeful note of how well the bank’s board protected the bank’s shareholders (and our bailout potential) from further abuse by the bank’s CEO, I will now attend my Chevrolet, secure in the knowledge that electrical and credit derivative bandits need no regulation, just like it says on the TV business channels and the Wall Street Journal. GERALD  E

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