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NationofChange / News Analysis
Published: Wednesday 23 May 2012
“It’s an attack on a particular kind of capitalism that Romney and JPMorgan both practice: Using other peoples’ money to make big bets which, if they go wrong, can wreak havoc on the economy.”
Why Obama Should be Attacking Casino Capitalism — Both Romney’s Bain and JPMorgan
I wish President Obama would draw the obvious connection between Bain Capital and JPMorgan Chase.
That way his so-called “attack” on private equity is neither a personal attack on Mitt Romney nor a generalized attack on American business.
It’s an attack on a particular kind of capitalism that Romney and JPMorgan both practice: Using other peoples’ money to make big bets which, if they go wrong, can wreak havoc on the economy.
It’s the substitution of casino capitalism for real capitalism, the dominance of the betting parlor over the real business of America, financial innovation rather than product innovation.
It’s been terrible for the American economy and for our democracy.
It’s also why Obama has to come out swinging about JPMorgan. The JPMorgan Chase debacle would have been prevented if the Volcker Rule were sufficiently strict, prohibiting banks from using commercial deposits to make bets except very specific offsetting bets (hedges) on narrow classes of trades.
But Jamie Dimon and JPMorgan have been lobbying like mad to loosen the Volcker Rule and widen that exception to include the very kind of reckless bets JPMorgan made. And they’re still at it, as evidenced by Dimon’s current claim that the rule that eventually emerges would allow those bets.
As a practical matter, the Volcker Rule is hopeless. It was intended to be Glass-Steagall lite — a more nuanced version of the original Depression-era law that separated commercial from investment banking. But JPMorgan has proven that any nuance — any exception — will be stretched beyond recognition by the big banks.
So much money can be made when these bets turn out well that the big banks will stop at nothing to keep the spigot open.
There’s no alternative but to resurrect Glass-Steagall as a whole. Even then, the biggest banks are still too big to fail or to regulate. We also need to heed the recent advice of the Dallas branch of the Federal Reserve, and break them up.
At the same time, there’s no point to the “carried interest” loophole that allows private-equity managers like Mitt Romney to treat their incomes as capital gains, taxed at only 15 percent, when they’ve risked no money of their own.
If private equity were good for America it wouldn’t need this or the other tax preference it depends on, elevating debt over equity. But the private equity industry has huge political clout, which is why these tax preferences remain.
Get it? Bain Capital and JPMorgan are parts of the same problem. The President should be leading the charge against both.
This article was originally posted on Robert Reich's blog.
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ABOUT Robert Reich
ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
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By Kiley Kroh
13 comments on "Why Obama Should be Attacking Casino Capitalism — Both Romney’s Bain and JPMorgan"
May 24, 2012 4:36pm
I suppose we could believe that a second term Obama will prove to be more of a progressive than the first term version, but I won't be holding my breath. I suppose that some of us that are living in districts represented by mooks like ryan or boehner or cantor could take a shot at voting them out and we may then have a congress that isn't a wholly owned subsidiary of koch industries and possibly that would change things somewhat, but quite possibly not...... I will be voting Obama for one reason and its not his gutsy stand against the rapaciousness of Wall St. or the remarkable achievements in health care. It is this; the next nomination to the Supreme Court. Obama will be gone in either a few months or in four years. Either way we sill still be living with the legacy of the bush's horrendous nominations, (and I refer to "the" bushs because of bush 41's cynically ugly nomination of clarence thomas, the most repugnant, incompetent and corrupt turd to ever dawn the robes of a Justice). I would like to think if we cannot reclaim our legislative branch, or the executive, we just might have a shot at redeeming the judiciary. It might be the only shot we have at redeeming our democracy, an idea that should appeal to conservatives that are not the knee-jerk "liberal bad, conservative good" variety.
May 23, 2012 8:53pm
While he's at it, why doesn't Dr. Reich advise the People to withdraw financial support from the government which is currently wasting and defrauding on several orders of magnitude greater than Bain and Chase combined?
May 23, 2012 5:29pm
I have a great deal of respect for Mr. Reich. I would like to know where he would recommend investing money.
May 23, 2012 3:21pm
Our gutless president won't attack the casinos any more than he will go after the corporate bankster big wigs - and he has 2000 pages of affadavits and proof of wrongdoing by the banksters.
Is there ANYONE out there for WE, the People??
WE need help.
May 23, 2012 5:55pm
Shall I respond to this one or to its duplicate? (LOL)
Gutless you say because he tried for about 2 years and half to work some type of agreement with the GOP but this one is driven by the TP who wants to get the power by any means using similar methods Hitler practiced.
As far as this problem is concerned revert to the FED where you will find JP Morgan being simultaneously decision maker and client.
I would be good from now on to SUPPORT the President, to give him the means to be more than self-confident but mainly feel SUPPORTED. Otherwise you will end having a president used to dig into your pockets to raise the funds needed for gambling on the stock and currency exchanges.
The right is spreading a LIE: it is not true that the economic law of supply and demand works in any case: often it is the contrary and the banking industry is taking this opportunity to dig into your pockets!
May 23, 2012 3:21pm
Our gutless president won't attack the casinos any more than he will go after the corporate bankster big wigs - and he has 2000 pages of affadavits and proof of wrongdoing by the banksters.
Is there ANYONE out there for WE, the People??
WE need help.
May 23, 2012 2:17pm
As I recall from listening to progressive economists, the root of our vulnerability to these gambles is through the FDIC, the deposit insurance the government backs savings banks with.
How hard is it to enforce rules that publicly insured deposits must be privately covered 100 percent by banks if they are going to speculate with those deposits?
And if banks can't cover them, they can't speculate?
And bubbles don't count, no matter how much someone says your house, or tulip bulb, or facebook share is worth. It is that deposit or asset's replacement cost, as in new construction, or in constant dollars as compared to an essential commodity like organic corn or apples.
That is a little easier for many of us to understand than Glass-Steagall or other, sometimes arcane economics references- although I am sure there are other important Glass-Steagall measures that can also be expressed in simple language.
This principle is one thing right wing pundits appear to understand, that simple language is powerful- even if it's dead wrong.
But if it's simple, it's easy to check- assuming you want to know.
May 23, 2012 1:34pm
Fire Geithner NOW! Appoint ex Sen. Dorgan as Sec of Treasury and make Robert Reich head of the council of econ advisers, reinstate Glass-Steagall and put the Wall Street felons in prison
May 23, 2012 12:32pm
I do not care which Political Party you belong to, e3wveryone should support putting a stop to the Vultures and Vampires on Wall Street.
A Vulture is a Huge bird that eats the flesh off of the carcass. Much as a Investment Company or a Investment Institution does to companies that they invest in. They take everything off the bones and leave it destroyed.
A Vampire is a being that sucks the life blood out of its victim. Much as a Investment Company or a Investment Institution does to companies that they invest in. TRhey suck all of the lifes blood out and leave it to die.
May 23, 2012 12:30pm
As usual, we liberals are dreaming, smoking those funny cigarettes, or just plain kidding ourselves. Over the past 100 years we managed to break up only 2 major corporate monsters. Standard Oil and AT&T (Ma Bell) are the only success stories. The only way that these huge banks are going to be broken up into controlable size is if we can manage to elect a strongly Democratic Congress. Considering the volume of money that the banks would spend to prevent such a breakup, it would take a congressional shift of 1933 proportions. Not going to happen. What we need now is for some really smart folks to figure out how we common folk can protect ourselves as the giant corporations take over the government. If Scott Walker survives next Tuesday, it's all over but the shouting.
May 23, 2012 1:32pm
Walker will survive because Obama is making certin that the DNC starves The Wisconsin Recall Effort as cash.
When will people realize that Obama is a 1%er and the rest of us can drop dead for all he cares.
May 23, 2012 11:25am
Obama wouldn't dream of attacking billionaire "Savvy Businessmen" who own him and his elected public office.
May 23, 2012 11:22am
professor-recent news reports claim that jamie diamond (CEO JPMorgan) has visited white house/obama over 100 times in past year. what does this say about the possibility of obama attacking JPM? (also what is the difference between the private meetings dick cheney held with the oil/gas indusrty execs and (if true) the meetings at the obama white house with vampire banksters?) you are correct pres obama should be leading the charge-but then again-he's a compromiser-not a leader. now what?