Posts Tagged ‘JPMorgan Chase’

BankingThis is just a little something for all of you who persist in believing, hoping against hope, that there is something called “a free market”.

There isn’t. It’s all a con.

The banks and their allies WANT you to think all this stuff is too hard to get your head around, so they can continue ripping us all off without any real danger to them as institutions or individuals.

Well, it isn’t. This excellent article lays it all out in a manner even the somewhat financially-challenged Wellthisiswhatithink crew can understand.

This is a very long article, but if you are even tangentially involved in politics, finance, banking, or policy development – hey, if you ever made an investment, borrowed money or exchanged money – even if you simply want to know what’s going on in the ivory towers around you – you really need to read it.

http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425

What’s at stake? I’ll give you just a taste:gandhi

After scandals involving Libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation?

The answer to that question is far from reassuring, because the potential is almost everywhere.

From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we’re forced to trust.

“In all the over-the-counter markets, you don’t really have pricing except by a bunch of guys getting together,” Masters notes glumly.

That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it.

The problem in each of these markets is the same: we all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of thingslike interest rates, swaps, currencies and commodities.

Yup. Coming soon to a newsstand near you. Your favourite banker, on the cover of the Rolling Stone.

How lo9ng till the mob starts burning down the offices of those that rob them? It might be nearer than you think ... especially when they work out what's going on.

How long till the mob starts burning down the offices of those that rob them? It might be nearer than you think … especially when they work out what’s been going on.

The fascinating piece of reportage that follows from Bloomberg deserves to be re-blogged on every damn blog in the world. And if you’re a blogger reading this, I mean you. And if you’re not a blogger, then just repeat it on every FB page and email list in sight.

Let me first say this: I am not against banks per se – they’re a necessary evil in a modern mixed economy.

Am I against banks where the executives vote themselves massive salaries, yet where they fail to create any real shareholder value, and where without a subsidy from the poor bloody customers that every day they f*** over with unreasonable fees, charges and restrictive practices they would go broke? Yes I f****** am against them. I am customer, hear me roar.

Am I against them when they rort and skew the banking system to allow themselves to behave with utter irresponsibility lending money to people who will never be able to repay it, and then sloughing off that debt onto people they should deal fairly with but in fact they dupe, and doing so knowingly and ruthlessly? You damn rootin’ tootin’ I’m against them.

Am I against their executives not being prosecuted for their idiocy, but just shuffled around the boardroom tables of Wall Street, London, Paris, Athens, Rome, Madrid etc etc until the paper trail becomes so convoluted that no-one’s sure who is really guilty? Yes. I am against that. And if they all end up in jail together because no one can be sure who started the mess, then frankly serve them all damn well right.

In short: stop working class welfare for bankers before it wrecks our society!

The Bloomberg article follows, referring the the USA, but essentially the story is repeated in every advanced country in the world. Bankers have got used to hanging off the teat of Government by crying poor. Enough is enough. Oh, and just a side note? The entire foodstamp programme for the USA cost $78 billion last year …

Why Should Taxpayers Give Big Banks $83 Billion a Year?

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks – notably JPMorgan Chase & Co. Chief Executive Jamie Dimon – make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

It's your money. Just keep saying that to yourself as you consider how you feel about this story. It's YOUR money.

It’s your money. Just keep saying that to yourself as you consider how you feel about this story. It’s YOUR money.

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.

Lately, economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, two researchers — Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz — put the number at about 0.8 percentage point. The discount applies to all their liabilities, including bonds and customer deposits.

Big Difference

Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.

The top five banks – JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. – account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry – with almost $9 trillion in assets, more than half the size of the U.S. economy – would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

Neither bank executives nor shareholders have much incentive to change the situation. On the contrary, the financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy.

Monopoly. It's meant to be a game, not a blueprint for the world banking system.

Monopoly. It’s meant to be a game, not a blueprint for the world banking system.

The result is a bloated financial sector and recurring credit gluts. Left unchecked, the superbanks could ultimately require bailouts that exceed the government’s resources. Picture a meltdown in which the Treasury is helpless to step in as it did in 2008 and 2009.

(And picture what it would mean to the very people who are propping the banks up then and now. That’s you and me. Ed.)

Regulators can change the game by paring down the subsidy. One option is to make banks fund their activities with more equity from shareholders, a measure that would make them less likely to need bailouts (we recommend $1 of equity for each $5 of assets, far more than the 1-to-33 ratio that new global rules require).

Another idea is to shock creditors out of complacency by making some of them take losses when banks run into trouble. A third is to prevent banks from using the subsidy to finance speculative trading, the aim of the Volcker rule in the U.S. and financial ring-fencing in the U.K.

Once shareholders fully recognized how poorly the biggest banks perform without government support, they would be motivated to demand better.

This could entail anything from cutting pay packages to breaking down financial juggernauts into more manageable units.

The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.

"Hello fellas, need a hand keeping the pitchforks at bay?"

“Hello fellas, need a hand keeping the pitchforks at bay?”

Read more : How Obama squibbed his chance to rein in Wall Street.