"Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of plutocracy."
John Pierpont Morgan
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| Oh you must mean the vaporized money... |
The reactions of the CNBC spokesmodels and Andrew Ross Sorkin are worth watching.
Still I give them credit for having these sorts of discussions at CNBC, as compared to Bloomberg TV which has become an extended, often arrogantly frivolous, infomercial bordering on propaganda for the one percent. At least the print version of Bloomberg maintains solid journalistic standards.
It is interesting that the argument keeps coming back to the defense that Wall Street firms 'write off big losses all the time.'
It is not so much the size of the balance sheet, but rather the leverage and risks that are stacked against those assets, and the likely outcomes of cascading losses in a deeply intertwined financial system.
The bank has come far from when its founder, J. P. Morgan, did business with a person based on their integrity and character, and not on the size of their balance sheet or cleverness of their accountants, lawyers, and attorneys.
Asked: "Is not commercial credit based primarily upon money or property?"We do not know if Jamie Dimon will tell the whole truth his testimony, but there is little doubt in my mind that he will at least partially hide behind the CEO defense, claiming ignorance of the situation which he helped to create and from which he profited enormously. He may apologize for it, but he will not own it. And it was his doing in order to circumvent the impending Volcker Rule, of this I have barely a doubt.
"No sir," replied Morgan. "The first thing is character."
"Before money or property?"
"Before money or anything else. Money cannot buy it...Because a man I do not trust could not get money from me on all the bonds in Christendom."
John Pierpont Morgan
It seems that JPM was mispresenting and mispricing their risks, egregiously to the point of making false statements to the press, the public, and probably the regulators, and they were doing so with public funds and government guaranteed deposits in the pursuit of outsized income for their traders and management. And it may involve regulatory capture and accounting misrepresentations executed by offshoring portions of their trade book, and perhaps fraud.
There seems to be a pattern of behaviour here, of a firm taking very large positions in the markets and rationalizing them as 'hedges' in order to take undisclosed risks for short term profits and thereby presenting systemic risk.
This is precisely the genre of problems that led to the collapse of Lehman Brothers.
We ought not to forget that JPM was also sitting on over $600 million in stolen MF Global customer money for many months, and quietly returned it over a weekend not so long ago.
And that they have claimed that 'hedging' is the rationale for their enormously large and leveraged short positions in the silver market, although I doubt that the truth of that will ever be allowed to come to light with any consequence.
Have we learned nothing?
When a people declare that 'greed is good' is their overweening motto and principle of action, then they have already forsaken their liberty, and ensured themselves and their children nothing more than a miserable and despicable decline.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery.
