(By Mark Bridger, cross-posted at ThatMansScope)
J. P. Morgan Chase recently announced that its trading desk had lost at least $2 billion in market speculation; the SEC has opened an investigation of this debacle (see background article here). As the old-time senator Everett Dirksen of Illinois used to say (in another context): “A billion here, a billion there, pretty soon, you’re talking real money”.
This kind of risk-taking is one of the main reasons for the fiscal disaster and bailout of 2008, and might well have been prevented had the language of the Dodd-Frank bill contained the strong form of the so-called Volcker rule, which forbids banks from trading with their own assets. (Or, even better, had Republicans and Bill Clinton not trashed the Glass-Steagall Act in the 90s.) One of reasons that the Volcker rule was watered down in Dodd-Frank is that Senator Scott Brown (R. Mass.) made its removal part of the deal for his vote in favor of Dodd-Frank.
For more details on Scott Brown’s work on behalf of Wall Street and against the full Volcker rule, click here and here.
It isn’t that being in the pocket of Wall Street is unique to Republicans — many Democrats are unduly swayed by Wall Street campaign contributions and propaganda. For example, probably a majority of Senators and Representative believe the myth that the government is inefficient while entities in “the private sector” — especially large ones — are in trim, lean-and-mean fighting (and job-creating) shape due to the forces of competition. This has been proved false time and time again. For example, the Boston Globe has been running an illuminating series by reporter Brian McGrory on the excessive compensation of Liberty Mutual executives (click here for links to stories in the series). A good friend of mine used to be a V.P. at CitiBank and told me similar outrageous stories about waste at that bank (e.g. flying execs to Thailand for a “conference” that could have been held at a local hotel). Or, read some (better: all) of Michael Lewis’s The Big Short about the behavior of investment banks before and during the economic crises of 2008.
On the other hand, Medicare, while subject to some fraud and overpayment, is a far more efficient distributor of healthcare than any private company in the U.S.: Medicare expenses for the same outcomes are lower, and patient/government dollars buy more care through Medicare with less overhead than do dollars paid through private, for-profit plans.Also, Social Security is the best large-scale social program that any country has ever instituted. Not only that, but both of these federal programs, Medicare and S.S., treat the people they serve knowledgeably and respectfully (I am one of them, and so is my mother whose account I manage). Could you say that about your bank or insurance company … or dishwasher manufacturer?
One other thing about Scott Brown: Although he is not one of the total crazies, he is still a Republican. His presence in the Senate helps his party threaten filibusters, and he can dilute important regulatory legislation as he did with Dodd-Frank. Even though majority supposedly rules, the Republicans (and the Democrats in the past) have used the filibuster rule to ensure that many important pieces of legislation never come to a vote — which in many cases they would win — unless they command a 60% majority. This requirement not to be found in any part of our constitution. This lack of procedural democracy is further compounded by the fact that the votes in the Senate do not even come close to representing the population of this country. After all, in the Senate, Wyoming has as many votes as California or New York.