Chief Executive Jamie Dimon has survived a move to oust him as chairman of JP Morgan-Chase, even though the FBI’s financial crimes squad is investigating how his bank lost $2 billion or more from risky speculative trades.
Still, the likelihood of any charges being filed against Dimon or anyone else at his firm are slim to none, given that no one has ever been charged for the events leading up to the 2008 financial debacle that nearly brought down the US economy. Dimon admitted on Meet the Press last Sunday that it was “stupid.” Ya think? But what is even more stupid is that Congress hasn’t broken up the five largest banks and reinstituted Glass-Steagal and the Bank Holding Company Act.
In 1933, following the 1929 stock market crash and the nationwide failure of nearly 5,000 commercial banks, Congress passed the Glass-Steagall Act, which set up a regulatory firewall between commercial and investment bank activities. At the time, commercial banks were accused of being too speculative and taking on huge risks in the hope of even bigger rewards. Sound familiar?
Then in 1956 Congress passed the Bank Holding Company Act that created a wall between insurance and banking by prohibiting banks from underwriting insurance, though banks could sell insurance and insurance products.
Never comfortable with success, Congress passed the Gramm-Leach-Bilely Act in 1999, which repealed the Glass-Steagall Act’s restrictions on bank and securities-firm affiliations. It also amended the Bank Holding Company Act and allowed banking institutions to provide a broader range of services, including underwriting. In other words, the new law removed the very restrictions that Glass-Steagall had erected.
Free once again to speculate with taxpayer money, Wall Street gamblers crashed the US economy in 2008, all the while arguing against more government regulation by saying that bankers could manage their businesses without oversight.
Since the taxpayer bailout, the five largest banks are now 13% larger than they were before the financial collapse. The stock market has doubled. The Wall Street casino is still placing bets with taxpayer money. The largest financial institutions have spent billions lobbying Congress against any form of regulation. The banks are basically in charge of their own risk management. Most of the Dodd/Frank legislation designed to end the speculation hasn’t even been implemented yet.
The chances of another financial meltdown are rising with each passing day. While Congress fiddles, the country’s financial house continues to burn, driven by the winds of high-risk speculation with taxpayer money. Next time, there may be no way of putting out the inferno that could wipeout trillions in savings and pensions, and plunge the country into a deep and long-lasting depression.