The Obama government’s attack on JP Morgan and banks is something we should find very worrisome

I’ve been suffering from an ear worm for the past few days.  Every time I read the headlines, I hear President Gerald Ford’s voice in my head.  He’s always saying the same thing, too:

A government big enough to give you everything you want is a government big enough to take from you everything you have.

Pithy, isn’t it?  Sometimes a pithy saying obscures the truth or means nothing at all.  But there are some pithy sayings that go to the heart of the issue — and with this one, Gerald Ford nailed it.

Right now, the government wants to take away private control over money.  Barack Obama phrased it as “reform,” with the government over seeing even those banks he concedes are “best-managed”:

“JPMorgan is one of the best-managed banks there is,” Obama said during an interview on ABC’s “The View”, which will air on Tuesday. “Jamie Dimon, the head of it, is one of the smartest bankers we got, and they still lost $2 billion and counting.”

[snip]

According to the president, if even a bank as well-managed as JPMorgan could make an error this glaring, other banks are susceptible to similar blunders.

“You could have a bank that isn’t as strong, isn’t as profitable, managing those same bets and we might have had to step in,” Obama said. “That’s why Wall Street reform is so important.”

Elizabeth Warren was more direct:

The era of self-regulation on Wall Street needs to end now, Elizabeth Warren says.

The Democratic candidate for Massachusetts Senate told CBS News Monday that America has to say “no, the banks cannot regulate themselves.” The comments were made in reference to JPMorgan Chase’s $2 billion trading loss on Thursday.

“Regulation” is not the same as the system we have now, which is a series of rules governing banks (and more on those rules later).  The regulation the Obam-ites envision really means central control of America’s financial systems, with the government calling the shots.  If they didn’t envision more government control, we’d be right back at our rules-based system.

As for the rules-based system (I promised I’d get back to it), that in itself is a laughable disaster.  There are too many rules, and they are too poorly written.  I’ve worked on banking related litigation and can tell you that, between the Code of Federal Regulations and the various state rules (a) nobody can get it right and (b) there is room for enough loopholes to make all the rules mere tools for those bent on nefarious behavior.

The government is promising order yet once it takes control over the banks, what’s to stop it from simply nationalizing the system?  Once the banks become indistinguishable from the government, we won’t have stability.  Instead, we’ll have reprise of what happened with social security.  Aside from being poorly managed, the government simply raided the “lock box.”

Yes, banks make errors.  Yes, big banks make big errors.  The smart solution is to have a few rules that are unbreakable — easy to follow; easy to police — rather than to trust a government that says, “We’re just here to help.”

 

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  • jj

    Yes, Morgan lost $2 billion – which means they’ll only make $4 billion this quarter instead of $6 billion.  They didn’t crash and burn the whole damn economy, or even their own operations.  So where’s the problem?

    • http://bookwormroom.com Bookworm

      Since I was more interested in the big principles than in the details (read: I was too lazy to read the small print), I didn’t realize that the JP Morgan “loss” was a tempest in a teapot. Of course, having the facts actually makes my point even stronger, so thanks to all of you for filling in those blanks.

  • Ron19

    Since they only lost $2B, can we put them in charge of the US treasury?

  • Danny Lemieux

    I don’t see what the big deal is – like any business, banks win some and lose some. The core question is whether JP Morgan’s losses are to be carried by the taxpayer.

    If that is the case, then JP Morgan deserves to be nailed. However, if the taxpayer is NOT on the hook for this, then this issue is purely between JP Morgan and its shareholders.

    Incidentally, just to show how completely off-balance the MSM media is…did any of these gasp-shock-horror stories of the MSM happen to mention that JP Morgan’s total asset value is in excess of $2.3-trillion?

    To put this in perspective, if your net worth was $230,000…could you afford to lose $2-3,000 in a bad equity trade in one day, knowing that you could very well make it up and double your return the next week? Heck, my own retirement savings account exhibits more volatility than that on a weekly basis. This kind of news is hardly enough to send me scampering to my hidey hole in the hills.

    Or, am I missing something here? 

  • Mike Devx

    No, Danny, you’re not missing ANYTHING.

    They’re evil if they make money.  They’re evil if they lose money.

    My current impression is that, for the left, this is another case of “Something unusual and kind of bad happened… THERE OUGHT TO BE A LAW!”   They’ll pass new regulations exercising even more government control.  The answer is always, always, always, more government control.

    As you pointed out, Danny, with supreme excellence, there was a level of risk present, but when you step back and look at the larger picture, not all that much.  These people aren’t crazy loons – unlike those who would risk so much more wealth on ObamaCare.  They let this wunderkind run, and he stumbled and fell flat on his face.  But really, they only let him run with some company risk, not a whole lot.

    Leftists are incapable, it seems, of judging proportionality.  They really can’t get their heads around numbers, they can’t evaluate them.  ObamaCare costs run in the trillions and will be a massive bankrupty machine… but oh so what, it FEELS good, so it’s ok.  This fellow takes risks and fails, with what is porportionally for the company not that great a risk, but it FEELS bad, so it must be bad.

    I’m still trying to get my head around the whole gestalt reaction, but that’s what I’m seeing so far.

     

  • http://OgBlog.net Earl

     
    Thanks, Ron19…..my thoughts exactly. 
     
    Leftists want to “regulate” JPM,  because…..why?  Because they’ve done such a great job on the Federal budget and are looking for new tasks to give us an example of excellence?
     
    My brother sent me this very helpful link to add a bit to my understanding of what JP Morgan Chase was about:
    http://brucekrasting.blogspot.com/2012/05/defense-of-morg.html
     

  • lee

    Radio Free NJ had something interesting to say about it. He is a conservative blogger who apparently works in finance and knows whereof he speaks: http://freenj.blogspot.com/2012/05/heaven-help-banking-industry.html
     
     (Hope I got that right–I can’t paste into the comment sections here.) 
     
     The upshot of Radio’s entry is that it is really a non-event.

  • http://ymarsakar.wordpress.com Ymarsakar

    The good bankers vs the evil bankers. Guess which side Obama is on.