{"id":232013,"date":"2023-03-27T12:00:08","date_gmt":"2023-03-27T11:00:08","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=232013"},"modified":"2025-01-10T15:06:18","modified_gmt":"2025-01-10T15:06:18","slug":"us-banks-want-socialism-for-themselves-and-capitalism-for-everyone-else","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2023\/03\/us-banks-want-socialism-for-themselves-and-capitalism-for-everyone-else\/","title":{"rendered":"US Banks Want Socialism for Themselves–and Capitalism for Everyone Else"},"content":{"rendered":"
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\"\"<\/a>

\u2018After this week, the five largest banks will be even bigger.\u2019
Photograph: REX\/Shutterstock<\/p><\/div>\n

When banks like Silicon Valley Bank collapse, money floods to bigger ones like JPMorgan. Clients know they\u2019re \u2018too big to fail.\u2019<\/em><\/p><\/blockquote>\n

19 Mar 2023 – <\/em>G<\/span><\/span>reg Becker, the former CEO of Silicon Valley Bank, sold $3.6m of SBV shares on 27 February, just days before the bank disclosed a large loss that triggered its stock slide and collapse. Over the previous two years, Becker sold nearly $30m of stock.<\/span><\/p>\n

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But Becker won\u2019t rake in the most from this mess. Jamie Dimon, chair and CEO of JPMorgan Chase, the biggest Wall Street bank, will probably make much more.<\/p>\n

That\u2019s because depositors in small- and medium-sized banks are now fleeing to the safety of JPMorgan and other giant banks that have been deemed \u201ctoo big to fail\u201d because the government bailed them out in 2008.<\/p>\n

Last Friday afternoon, the deputy treasury secretary, Wally Adeyemo, met with Dimon in New York and asked whether the failure of Silicon Valley Bank could spread to other banks. \u201cThere\u2019s a potential,\u201d Dimon responded<\/a>.<\/p>\n

Presumably, Dimon knew such contagion would mean vastly more business for JPMorgan. In a note to clients on Monday, bank analyst Mike Mayo wrote<\/a> that JPMorgan is \u201cbattle-tested\u201d in volatile markets and \u201cepitomizes\u201d how the largest US banks have shed risk since the 2008 financial crisis.<\/p>\n

Recall that the 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. In the early 1990s, the five largest banks had accounted for only 12% of US bank deposits. After the crisis, they accounted for nearly half.<\/p>\n

After this week, they\u2019ll be even bigger.<\/em><\/p>\n

Their giant size has already given them a huge but hidden effective federal subsidy estimated to be $83bn annually<\/a> \u2013 a premium that investors and depositors willingly pay to these enormous banks, in the form of higher fees and lower returns, precisely because they\u2019re considered too big to fail.<\/p>\n

Some of this hidden federal subsidy goes into the pockets of bank executives. Last year alone, Dimon earned $34.5m.<\/p>\n

Dimon was at the helm in 2008 when JPMorgan received $25bn from the federal government to help stem the financial crisis which had been brought on largely by the careless and fraudulent lending practices of JPMorgan and other big banks. Dimon earned $20m that year.<\/p>\n

In March 2009 Barack Obama summoned Dimon and other top bank executives to the White House and warned them that \u201cmy administration is the only thing between you and the pitchforks\u201d.<\/p>\n

But the former president never publicly rebuked Dimon or the other big bankers. When asked about the generous pay Dimon and other Wall Street CEOs continued to rake in, Obama defended them as \u201cvery savvy businessmen\u201d and said he didn\u2019t \u201cbegrudge peoples\u2019 success or wealth. That\u2019s part of the free market system.\u201d<\/p>\n

What<\/em> free market system? Taxpayers had just bailed out the banks, and the bank CEOs were still raking in fat paychecks. Yet 8.7 million Americans lost their jobs, causing the unemployment rate to soar to 10%. Total US household net worth dropped by $11.1tn. Housing prices dropped by a third nationwide from their 2006 peak, causing some 10 million people to lose their homes.<\/p>\n

Rather than defend CEO paychecks, Obama might have demanded, as a condition of getting bailed out, that the banks help underwater homeowners on Main Street.<\/p>\n

Another sensible proposal would have been to let bankruptcy judges restructure shaky home mortgages so that borrowers didn\u2019t owe as much and could remain in their homes.<\/p>\n

Yet the big banks, led by Dimon, opposed this. They thought they\u2019d do better by squeezing as much possible out of distressed homeowners, and then collecting as much as they could on foreclosed homes.<\/p>\n

In April 2008, Dimon and the banks succeeded: the Senate voted down a bill that would have allowed bankruptcy judges to modify mortgages to help distressed homeowners.<\/p>\n

In the run-up to the 2020 election, Dimon warned<\/a> against policies that Bernie Sanders and Alexandria Ocasio-Cortez were then advocating, including Medicare for All, paid sick leave and free public higher education. Dimon said they amounted to \u201csocialism\u201d.<\/p>\n

\u201cSocialism,\u201d he wrote<\/a>, \u201cinevitably produces stagnation, corruption and often worse \u2013 such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives \u2013 which they frequently do to maintain power,\u201d adding that socialism would be \u201ca disaster for our country\u201d.<\/p>\n

Dimon also warned against \u201cover-regulation\u201d of banking, cautioning that in the next financial crisis, big institutions like JPMorgan won\u2019t be able to provide the lending they did during the last crisis.<\/p>\n

\u201cWhen the next real downturn begins,\u201d he wrote, \u201cbanks will be constrained \u2013 both psychologically and by new regulations \u2013 from lending freely into the marketplace, as many of us did in 2008 and 2009. New regulations mean that banks will have to maintain more liquidity going into a downturn, be prepared for the impacts of even tougher stress tests and hold more capital.\u201d<\/p>\n

But, as demonstrated again this past week, American capitalism needs strict guardrails. Otherwise, it is subject to periodic crises that summon bailouts.<\/p>\n

The result is socialism for the rich while everyone else is subject to harsh penalties: bankers get bailed out and the biggest banks and bankers do even better. Yet average people who cannot pay their mortgages lose their homes.<\/p>\n

Meanwhile, almost 30 million Americans still lack health insurance, most workers who lose their job aren\u2019t eligible for unemployment insurance, most have no paid sick leave, child labor is on the rise and nearly 51m households can\u2019t afford basic monthly expenses such as housing, food, childcare and transportation.<\/p>\n

Is it any wonder that many Americans see the system as rigged against them? Is it surprising that some become susceptible to dangerous snake-oil peddled by power-hungry demagogues?<\/p>\n

_______________________________________________<\/em><\/p>\n

\"\"<\/a> Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center. He served as Secretary of Labor in the Clinton administration, for which<\/em> Time Magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. He has written 17 other books, including the best sellers<\/em> Aftershock, The Work of Nations, Beyond Outrage, Saving Capitalism: For the Many, Not the Few<\/a> and <\/em>The Common Good<\/a>. His new book<\/em>, The System: Who Rigged It, How We Fix It<\/a>, is out now<\/em>.\u00a0 He is a founding editor of the<\/em> American Prospect magazine, founder of<\/em> Inequality Media, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentaries<\/em> Inequality for All, streaming on YouTube, and<\/em> Saving Capitalism, now streaming on Netflix. robertreich.substack.com<\/a><\/em><\/p>\n

Go to Original \u2013 theguardian.com<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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