Our Problem with Financial Companies"Opinion"
The return to bank gambling using taxpayer money as a back-stop (hedge) has to end. This latest gambling spree by JPMorgan has to be bought under control. It’s another wake-up call to America.
Morgan will try to cover it up and move on. Congressional Republicans will cover for them and try to change the subject. We can see the cover-up playing out right now.
Bernanke should announce an audit of JPMorgan followed by a demand for restoration of Glass-Steagall and order a reorganization of JPMorgan and the other banks that are “too big to fail.” Breakup of these super sized banks is the answer.
As a confidence builder he should nationalize Morgan, appoint a bank management Board to dissolve the Corporate Board and use money from the sale of the Morgan spin-off units to pay off JPMorgan investors.
Morgan should be reorganized and the Fed should provide a template for the reorganization to the other finance houses to use. The other financial houses should be told to start reorganizing right away using Feds guidelines or else face the same fate as JPMorgan. The SEC should provide check and balances to the reorganization.
Congress will scream but few are listening to them as their 11% satisfaction rating with the public is working against them. The louder the screams the more that we will know who to vote out of office come November.
A Fed audit is bound to find tons more irregularities and maybe enough to jail some skunks.
Bernanke should position this as a break up of banking monopolies of which the others, such as Goldman-Sachs, BOA, Wells-Fargo, and Chase-Manhattan, can either break themselves up and sell off their units to buyers or else be nationalized as JPMorgan was, and then "be helped along" to streamline their banks by the Federal Reserve.
It isn't hard to figure out what to do to break up JPMorgan for they have units that themselves are huge businesses. These become the spin-off businesses that constitute the breakup and then they should be sold off at auction. Other behemoth banks should not be allowed to register for the auction. Derivative trading should be banned by the Fed unless they can be assured that it is regulated, supervised, and controlled. Derivatives should not be permitted to show as anything but liability on the corporate accounting statement.
Foreign banks should be required to conform to domestic guidelines.
This stuff has to end, taxpayers need assurance of stability, depositors need assurance of banking health, investors need transparency, and America need credibility. Congress is not going to solve the banking problems; they keep financial loopholes open as a routine matter with Lobby groups of which Banking is a powerful Lobby. Congress needs to be insulated from the money bag lobby groups so as not to lead them into temptation.
Obama has little power to act except that he can cheer on the Fed., support Bernanke, and jawbone Congress.
No matter what happens, we are going to take heat for this from Europe who will see it as an opportunity to divert investment money back into their banking system during this Euro Zone crisis and so we had better fix things so that the European heat produces a tasty stew and not burnt meat.
Monopoly is the enemy of Capitalism and it must be broken up. When a breakup of monopolies happens it is good for job creation, markets, and investors.