Over the weekend JPMorgan Chase, the world’s largest bank, reportedly agreed to fork over $13 billion in what will be the world’s largest corporate settlement. Although the penalty, in proportion to JPMorgan’s multi-trillion-dollar balance sheet, will merely dampen its annual earnings, some commentators said they felt bad for CEO Jamie Dimon. Calling the not-yet-announced agreement a “shakedown,” the Wall Street Journal opined: “Federal law enforcers are confiscating roughly half of a company’s annual earnings for no other reason than because they can and because they want to appease their left-wing populist allies.” The Washington Post, lamenting the “persecution” of Morgan, quibbled that the Justice Department should not be so “backward-looking” as to slap the bank “for allegedly misleading investors about the quality of [subprime] securities it marketed before the crash.” After all, the editors said, “roughly 70”‰percent of the securities at issue were concocted not by JPMorgan but by two institutions, Bear Stearns and Washington Mutual, that it acquired in 2008” under government pressure.
Poor Jamie. We do feel his pain. But all this empathy misses the point. What the historic deal demonstrates, beyond any reasonable doubt, is that the biggest banks are so big today that almost no wrongdoing can threaten their existence. They have become, in effect, something close to sovereign powers. Yes, if you’re a bigger power, like the United States, you can extract “tribute” from them occasionally, as the Romans used to do to vassal states. But you don’t liquidate sovereign powers or put their officials in jail.
Consider the odd spectacle of Dimon reaching out like a potentate to Eric Holder, asking for a personal meeting in which the two of them could hash out the penalty in private. The head of a bank and the attorney general of the United States held, in other words, a kind of personal “summit” meeting. Such a pact would only have been possible if the government of the United States is itself afraid of disturbing the operations of the bank — and in fact Holder admitted just that back in March when he warned that the biggest banks have grown not only too big to fail, but too big to prosecute. (In testimony before the Senate Judiciary Committee, Holder delivered an implicit rebuke to his former Cabinet colleague, Treasury Secretary Timothy Geithner, who permitted Wall Street to resurrect itself in what is largely its former image.)
As MIT financial expert Simon Johnson, the former chief economist of the International Monetary Fund, observed, “If Dimon’s bank didn’t have $4 trillion in assets (measured using international accounting standards), but rather a much more moderate $250 billion or $500 billion, do you think he would have the same access?”
Dimon is apparently taking this deal as a large-scale cost of doing business, and he’s still fighting Justice’s demand that his bank admit some culpability or wrongdoing. Which is the same pattern we saw in previous cases with Goldman Sachs and others: in one case, against Citigroup in 2011, U.S. District Judge Jed Rakoff rebuked the Securities and Exchange Commission and refused to approve a $285 million settlement with the bank because the SEC failed to gain any admission of wrongdoing or liability. To his credit, Holder is reportedly still pursuing a criminal case against JPMorgan involving allegedly fraudulent mortgages in California; in previous instances, banks have successfully bargained for the dropping of criminal charges in exchange for substantial settlements.
But for those who are tut-tutting that poor JPMorgan is giving up some half its profits, consider these figures from Andrew Haldane, head of the Bank of England’s financial-stability department. He wrote that the financial crisis of 2008-09 produced an output loss equivalent to between $60 trillion and $200 trillion for the world economy. Assuming that a financial crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5 trillion per year, Haldane says. What that means is that overall, our unrestrained financial sector does not add any net benefit to the economy — its repeated crises cost us far more than Wall Street brings to overall economic growth.
JPMorgan, in effect, is giving up what amounts to a medium-sized penalty fee so that it can perpetrate Wall Street’s pattern of occasionally blowing up and costing the rest of society its pursuit of happiness. And despite crying now that 70 percent of the bad mortgages were accumulated by Bear Stearns and Washington Mutual — which the government pressed on Dimon in the heat of the crisis — in fact he made out very well. “He got a ‘Jamie-deal’ on both Bear (the U.S. government guaranteed $30 billion of mortgage assets) and WAMU (the FDIC put WAMU in bankruptcy and let JPMorgan buy it for peanuts),” says Jeff Connaughton, author of the book “The Payoff: Why Wall Street Always Wins.” “So in some ways the fine is a belated increase in fair purchase price.”
Dimon has often behaved like the latter-day potentate he is. In the years since the crash, no one has worked harder than Dimon to resurrect the debunked idea that Wall Street can regulate itself. He has publicly disparaged Paul Volcker, the legendary inflation-fighting Fed chief and namesake of President Obama’s still-unimplemented “Volcker Rule,” which prevents federally insured banks from acting like risky hedge funds. Volcker has taken to telling audiences in recent years that the big, complex trades earning billions for firms like JPMorgan Chase add little growth to the real economy, just as Haldane’s paper concludes. And despite the evidence that not a single Wall Street CEO really understood the trades that would doom his firm in the months leading up to September 2008, JPMorgan and the other global banks have still sought to keep derivatives and swaps trading in the dark and out of regulatory control as much as possible, so as to keep their vast profit machine (which relied on a lack of transparency) going.
The latest deal? Just the cost of doing business.
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Before we get to the specifics of this exposé about escorts working the Iowa and New Hampshire primary crowds, let’s get three things out of the way: 1.) It’s from Cosmopolitan; 2.) most of the women quoted use fake (if colorful) names; and 3.) again, it’s from Cosmopolitan. That said, here’s what we learned:
- Business was booming: one escort who says she typically gets two inquiries a weekend got 15 requests in the pre-primary weekend.
- Their primary season clientele is a bit older than normal—”40s through mid-60s, compared with mostly twentysomething regulars” and “they’ve clearly done this before.”
- They seemed more nervous than other clients, because “the stakes are higher when you’re working for a possible future president” but “all practiced impeccable manners.”
- One escort “typically enjoy[s] the company of Democrats more, just because I feel like our views line up a lot more.”
No matter where you stand on mandating companies to include a backdoor in encryption technologies, it doesn’t make sense to allow that decision to be made on a state level. “The problem with state-level legislation of this nature is that it manages to be both wildly impractical and entirely unenforceable,” writes Brian Barrett at Wired. There is a solution to this problem. “California Congressman Ted Lieu has introduced the ‘Ensuring National Constitutional Rights for Your Private Telecommunications Act of 2016,’ which we’ll call ENCRYPT. It’s a short, straightforward bill with a simple aim: to preempt states from attempting to implement their own anti-encryption policies at a state level.”
Much has been made of David Brooks’s recent New York Times column, in which confesses to missing already the civility and humanity of Barack Obama, compared to who might take his place. In NewYorker.com, Jeffrey Frank reminds us how critical such attributes are to foreign policy. “It’s hard to imagine Kennedy so casually referring to the leader of Russia as a gangster or a thug. For that matter, it’s hard to imagine any president comparing the Russian leader to Hitler [as] Hillary Clinton did at a private fund-raiser. … Kennedy, who always worried that miscalculation could lead to war, paid close attention to the language of diplomacy.”
The New Covenant. The Third Way. The Democratic Leadership Council style. Call it what you will, but whatever centrist triangulation Bill Clinton embraced in 1992, Hillary Clinton wants no part of it in 2016. Writing for Bloomberg, Sasha Issenberg and Margaret Talev explore how Hillary’s campaign has “diverged pointedly” from what made Bill so successful: “For Hillary to survive, Clintonism had to die.” Bill’s positions in 1992—from capital punishment to free trade—“represented a carefully calibrated diversion from the liberal orthodoxy of the previous decade.” But in New Hampshire, Hillary “worked to juggle nostalgia for past Clinton primary campaigns in the state with the fact that the Bill of 1992 or the Hillary of 2008 would likely be a marginal figure within today’s Democratic politics.”
At first, “it was pleasant” to see Trevor Noah “smiling away and deeply dimpling in the Stewart seat, the seat that had lately grown gray hairs,” writes The Atlantic‘s James Parker in assessing the new host of the once-indispensable Daily Show. But where Jon Stewart was a heavyweight, Noah is “a very able lightweight, [who] needs time too. But he won’t get any. As a culture, we’re not about to nurture this talent, to give it room to grow. Our patience was exhausted long ago, by some other guy. We’re going to pass judgment and move on. There’s a reason Simon Cowell is so rich. Impress us today or get thee hence. So it comes to this: It’s now or never, Trevor.”