A sampling of Chase activities:
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Recipient of $94.7B in taxpayer bailout money
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Spent $4.2M on lobbying within 9 months of the bailout
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Made $4.86B in profits during first half of 2009
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Bank account fees increased 249.5% from 2003 to 2008
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CEO Jamie Dimon’s 2008 pay was $19.7M, or 893X its average teller’s salary
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Intimately involved with subprime mortgage schemes, which were almost exclusively targeted to poor people of color
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Giving predatory loans to municipal and state governments, even after bailouts
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Laying off 14,000 employees after bailouts
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Reducing lending to American small businesses by $227M from 2008 to 2009, even with government bailouts and incentives
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Has admitted to violating the Servicemembers Civil Relief Act, illegally overcharging thousands of active duty military personnel and illegally foreclosing on over a dozen military family homes
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Received billions in interest on loans to General Motors, after GM went into bankruptcy and had their employee’s pensions taken away, a violation of the Employee Retirement Income Security Act
http://www.seiu.org/a/profilechase.php
http://www.military.com/news/article/bank-under-more-fire-over-troop-loans.html
http://www.gregpalast.com/grand-theft-auto-how-stevie-the-rat-bankrupted-gm/
These are the activities of the ‘job creators.’ It’s important to keep in mind that these are not evil people running this institution, it’s the institution that is evil. The institution of maximizing profits for shareholders with no meaningful regulation.
“I don’t say this lightly, but the consumer is simply an income stream and exploiting that is the purpose of the banking organization.” — former JP Morgan Chase employee
http://www.reuters.com/article/2011/11/18/us-wallst-disconnect-idUSTRE7AH0Z620111118
Regarding your mortgage comment, this article does a good job of explaining how the government forces the industry to make loans to the poor, how it helped contribute to the housing bust, and how the government hasn’t changed anything following the subprime mess:
http://online.wsj.com/article/SB10001424052970203633104576623083437396142.html
Whats up Rob.
I’m glad you brought this up for two reasons: 1. this is based on a faulty premise on the relationship between big business and government as well as their respective roles in society & 2. this is also historically inaccurate. The argument that protesters should be only directed at government is at best an honest concern with crappy legislation, and at worst, an intentional distortion and masking of true power. This is not an attempt to exculpate politicians and I would agree the Dodd-Frank act was pretty silly/hypocritical political theatre.
1. To blame government and not wall street execs assumes that there is a clear dividing line between the two. The Treasury Department, for example, is more or less a subsidiary of Goldman Sachs. It is also to argue that there is something inherently wrong with government and regulation, and that if only the ‘free market’ were unfettered, everything would be hunky-dory. This Ayn Rand philosophy has no historical merit, and also flies in the face of much better capitalists than I, like Keynes and Adam Smith himself. During the savings and loans crisis of the 80′s, it was the SEC regulators and FBI investigators that aggressively prevented a bigger crisis. Those functions have been eroded under the guise of free market ideology, and have led to all sorts of exotic/creative/secret mathematical financial cowboy practices. The impetus for deregulation and bailouts and bad legislation was not from a vacuum. Money has infected politics, and this money has largely come from wall street in recent years. Obama’s biggest fan in terms of money is Goldman Sachs, for example. The goal of these institutions is to make as much money as quickly as possible with no regard to society or even their own future economic outlook. This is a situation that needs heavy regulation, albeit with the backing of legislation written by independent representatives of ordinary citizens. This is why the occupy movement is targeting governments at all levels. But the symbolic capital of real power of America today is wall street.
2. First, I do not take anything the Wall Street Journal says seriously. Their editorial board includes people like Stephen Moore who has said “Capitalism is a lot more important than democracy.” They are a mouthpiece for plutocracy. The argument that everything wrong with the economy is only the government’s fault –and that wall street apparently has no influence there — is disingenuous. Peter Wallison, the author of this specific article, has a long history in republican politics and in urging deregulation, and was also a White House lawyer for the Iran Contra affair.
Also, the outrageous sub-prime mortgages peddled were not mandated by the Community Reinvestment Act. In fact:
“University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations.” http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
The specific charge about sub-prime mortgages being peddled to people of color:
“Now, what kind of American is ‘sub-prime.’ Guess. No peeking. Here’s a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of similar-income Whites. Dark-skinned borrowers aren’t stupid – they had no choice. They were ‘steered’ as it’s called in the mortgage sharking business.
‘Steering,’ sub-prime loans with usurious kickers, fake inducements to over-borrow, called ‘fraudulent conveyance’ or ‘predatory lending’ under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.” http://www.gregpalast.com/elliot-spitzer-gets-nailed/
The deregulation and bad legislation that have contributed to the economic melt down are results of less democratic influence in government, through money and secrecy. The more democracy we have, the better protected we are from the decisions made by oligarchs on wall street. But it is precisely those oligarchs who have corroded and continue to corrode our democracy. This is why it is not so simple to say, ‘blame the government.’
Looking forward to Christmas. Love, Jeff.
Jeff,
I just now noticed that my comment posted back in November (I thought it didn’t since I didn’t create a password) and that you replied.
I think there are two primary and overarching reasons for the housing bubble and ensuing recession:
1. The pervasive belief that existed throughout America that houses are investments rather than expenses.
Family members, friends, neighbors, co-workers, teachers, and real estate agents throughout the country repeated the refrain that rent is like throwing your money down the drain. The more housing prices went up while rent prices staid flat to down, the more the mantra was repeated rather than less. I think this is possibly the scariest example of nation-wide group think in our country in our lifetimes. Even after people convinced themselves that owning was financially better than renting, they would decide to, for example, buy a $175K home instead of a $125K home under the idea that the incremental $50K just increased their investment portfolio. In reality, the incremental $50K avoided no rent payments and was just a pure luxury expense (one that costs a lot more than just $50K because of the extra taxes, insurance, and interest).
2. Wide spread government incentives to prop up the housing market by encouraging people to borrow as much as they can and for financial institutions to lend to uncreditworthy individuals.
You mention Community Reinvestment Act, which is part of the story, but you also correctly point out that it is a very small part of the story. The government has primarily done this through Fannie/Freddie/FHA/VA. The government insures a large majority of the securitized mortgage obligations which makes interest rates dramatically lower than they normally would be and requires Fannie and Freddie to not require very much in down payments and to make certain portions of their insured mortgages in uncreditworthy individuals. Financial institutions were actively seeking out poor individuals to make loans in order to fulfill the demand from Fannie/Freddie that resulted from misguided government policies. The government set up, and still maintains, a system that requires lenders to make subprime loans. The secondary primary mechanism is through the mortgage interest tax deduction that most people understand better. The scary thing is that the government responded to the boom and bust by expanding subsidies rather than scaling them back, which is why the bottom of pricing has/is taken/taking so long. I was not happy the government so completely bailed out fannie/freddie, but it would have been a little hypocritical to require them to make such loans and then not provide some bailout.
There are certainly other contributing factors, but are relatively minor compared to the above two despite the press some get. The fed probably kept interest rates low for too long starting around 2003, but mortgage rates were/are low more because the government insures the loans than the fed’s policies (and businesses did not over invest because of the low rates in the mid-2000s). There were some mortgage agents who misled borrowers fraudulently, but most of the mortgage company wrong doings were dealing with loans after they already became delinquent rather than up front (such as robo-signing). There were some CDO salesmen who misrepresented the risk, but I doubt this was widespread in part because the individuals making the CDO purchasing decisions were almost all sophisticated professional portfolio managers. The small portion of Wall Street that made money betting against the CDOs were the exception; they also were helpful because they arguably helped end the bubble before it got any worse.
My point is that we can blame ourselves and group think first and the federal government and our lack of congressional leadership second. “Wall Street” is a very distant third.
Thanks for the response.
I think we agree on a lot of finer points above, except that often when you say ‘government’, I would say Alan Greenspan or the Federal Reserve more generally. I think it’s clear that at least since Reagan the Fed Reserve and Dept of Treasury have been dominated by ‘voodoo’ economists who come from places like Goldman Sachs, and subscribe to Chicago Business School insanity.
Additionally, Freddie and Fannie were privately run businesses during the run up to the crisis, and are still operated that way, even though the government sort of took them back over when the crisis hit.
Anyway, we could run around and around on this. But I don’t think there is a single bad decision made in Congress or the White House with respect to these issues that isn’t motivated by trying to help out ‘too big to fail’ institutions run wild. Even giving mortgages to people who can’t pay them.