Investment Contrarians

Jamie Dimon Believes in Corporatism, Not Capitalism

By for Investment Contrarians | Jun 28, 2012

















Not CapitalismCEO of JPMorgan Chase & Co. (NYSE/JPM) Jamie Dimon testified on Capitol Hill, exclaiming that regulation is unnecessary and that capitalism has proven to be the best system for a country’s citizens and economy.

What a joke.

First of all, when the financial crisis hit, if capitalism were allowed to prevail and if Dimon were such a champion of it, then the big banks, including his, should have been allowed to fail. Period.

Since the financial crisis, according to estimates from Bloomberg and the International Monetary Fund (IMF), JPMorgan has been receiving a government subsidy of $14.0 billion a year; the other big banks receive subsidies as well.

While the unemployment rate remains high and jobs are nowhere to be found since the financial crisis hit, Dimon and executives from the other big banks continue to receive their bonuses from taxpayers. This is not capitalism.

Since the government provides JPMorgan with money, it makes speculative trades on the markets that other people simply cannot. If the trades are profitable, the big banks keep the profits and pay themselves bonuses. If the trade works against them, taxpayers bail out the big banks. This is capitalism?

The Banking Act of 1933 (a.k.a. the Glass–Steagall Act) forced separation between banks, especially big banks, and those institutions that trade. President Bill Clinton repealed the Act in 1999. Should this Act have been in place, it would have gone a long way to preventing the financial crisis, and it should be reinstituted to prevent further financial crises, because it would change the structure of the big banks.

However, when asked whether Glass–Steagall should be reenacted to prevent another financial crisis, Dimon responded by saying that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Company (Freddie Mac) were never subject to the Glass–Steagall Act and they failed, implying that the Act is irrelevant.

No members of congress questioned Dimon on this. I don’t know if Dimon believes we’re idiots, but it was the repeal of the Glass–Steagall Act that allowed the big banks to create the derivates to speculate with depositor money.

The mortgage-backed securities that caused the financial crisis originated from the big banks. These exotic securities were what took down Fannie Mae and Freddie Mac.

There is no question that Fannie Mae and Freddie Mac were complicit in all this. That aside, these institutions were caught in the crossfire during the financial crisis from the problems that originated at the big banks.

Does Dimon think anyone will believe him? The continued government subsidy is appalling, especially while the suffering of the average American within the economy grows.

When Dimon testified on Capitol Hill, it was a very, very dark day for capitalism.

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  • gaitdoctor

    INTERESTING???? THEY WANT NO REGULATIONS, BUT GOVERNMENT BAILOUTS. AND NOW, EX-PRESIDENT CLINTON THINKS WE SHOULD KEEP THE TAX BREAKS FOR THE WEALTHY. SO BASICALLY, NO TAXES EITHER. WISH THE AVERAGE MIDDLE INCOME GUY COULD GET THIS DEAL. OF COURSE, SOMEONE HAS TO PAY THE TAXES, RIGHT

  • Auth

    Bank on itWith all the hullabaloo rlnectey with too big to fail and people occupying streets, many folks have started taking a look at who they let hang on to and invest their money. Traditionally, unless you are like my grandmother and hide money in various odd locations throughout your house, you probably keep your money in a bank. Recently, however, credit unions have been surging in popularity. So what exactly is the difference between a bank and a credit union? Well, both hold on to your money for you and offer you easy access to it, but they do differ in some key ways let's take a look.Credit where credit is dueI'm not going to argue one way or another for which is better, that's entirely up to you and your banking needs. What I will do is compare and contrast these two types of financial institution, so you can make your own decision. With that said, here we go.BanksCan be nationwide, even worldwideOperate on a for-profit business modelTypically owned by private investorsGoverned by a board of directors chosen by stockholdersOffer business as well as consumer accountsCredit unionsTend to be regionalOperate as a non-profit financial cooperativeOwned by their members, i.e. their account holdersGoverned by a board of directors chosen by the membersStrongly consumer orientedBecause credit unions don't need to turn a profit, any interest they earn by investing your deposits is returned to you in the form of a member dividend. They also tend to have lower fees and higher interest rates on savings and checking accounts.Banks have their advantages, too. If you frequently travel or work outside of your home region and require physical access to your financial institution, a nationwide bank might be a better option. Yes, you can withdraw money anywhere, from any ATM with a credit union, but if you need to make a deposit when the nearest one is 500 miles away, this may present a difficulty.The payoffObviously, your particular needs will determine which type of financial institution suits your needs the best. Don't just automatically assume that one is correct for you based on what I've written here go and do your research. Find out what banks and credit unions are popular in your area, and talk to people about what they like and don't like about them. When it comes to money, the best decision is an informed decision.