"Rich Cordray was still serving as director of the consumer agency under a recess appointment; he hadn’t yet been confirmed by the Senate, which meant that the agency was vulnerable to legal challenges over its work. Dimon told me what he thought it would take to get Congress to confirm a director, terms that included gutting the agency’s power to regulate banks like his.
By this point I was furious. Dodd-Frank had created default provisions that would automatically go into effect if there was no confirmed director, and his bank was almost certainly not in compliance with the those rules. I told him that if that happened, 'I think you guys are breaking the law.'
Suddenly Dimon got quiet. He leaned back and slowly smiled. 'So hit me with a fine. We can afford it.'"
Elizabeth Warren, A Fighting Chance
Moral hazard arises when a contract or financial arrangement creates incentives for at least one of the parties involved to behave against the interest of others, while engaging in unethical and possibly criminal behaviour.
If you ever had any doubts about what is at the heart of the economic problems facing our society the above quote should dispel any confusion. It is the very definition of moral hazard, of fraud and privilege that operate with impunity, above any fear of the law and consequences.
And it is enabled by the credibility trap of the intellectual and leadership class, and the corrupting power of big money. Jamie Dimon certainly seems confident in his ability to get what he wants from the Senate. And if not, in the ability to obtain a wristslap fine from the regulators as the cost of doing business.
"...they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."
Charles Ferguson, Predator Nation
This is your country, and the legacy of moral hazard and corruption you are leaving for your children and grandchildren.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.
Have a pleasant evening.
