Banksters are the true leeches of society, sanctioned to receive without
having to "contribute" to justify the gift. It's maddening to know they
continue to get undeserved welfare subsidies, let alone respect.
They neither work for society, nor for the planet--quite the opposite.
Yet most who need a Basic Income subsidy because of chaotic societal
structure will be groveling decades longer before they and their
families are granted a fighting chance just for basics. With the
well-educated and influential in society tacitly rooting for Wall Street
by not speaking out against corporate subsidies, yet getting all riled
up about (far cheaper) beneficial programs like Basic Income, what
chance does society have towards diversifying, towards change?
Biased resentments develop strangely. Putting on a suit and going to
work, pretending to stimulate the economy while continuing to rip off
government and individuals is deemed welfare-worthy, even though the end
result is global impoverishment. At length we discuss the business
world's strategies, though such strategies are primarily profit driven,
but those living at or below the poverty line, who consist of people
equally deserving of sharing in profits from (ideally sustainable) world
resources, with potential and capacity to advance this civilization, are
rarely discussed, but for the need of regulating any possible assistance
in the strictest of terms. Terms which the feds wouldn't dare impose on
the 'Suits'. Being born into disadvantage deserves scorn and scrutiny;
no second, third, or fourth chances like the banks, the insurance
corporations, or Wall Street have enjoyed. Imagine a welfare recipient
being allowed to keep their part-time job at Burger King after failing
to report earnings! Would never happen, recipient gets cut off. Criminal
for life. Bankers do same, and continue to rip off society with even
fewer regulations to prevent disaster. Get bonuses.
Steer these subsidies towards life, and the jobs will come.
*Natalia* *Kuzmyn*
http://www.bloomberg.com/news/2012-06-18/dear-mr-dimon-is-your-bank-getting-corporate-welfare-.html
Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare?
When JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon
<http://topics.bloomberg.com/jamie-dimon/> testifies in the U.S. House
today, he will present himself as a champion of free-market capitalism
in opposition to an overweening government. His position would be more
convincing if his bank weren't such a beneficiary of corporate welfare.
To be precise, JPMorgan receives a government subsidy worth about $14
billion a year, according to research published by the International
Monetary Fund <http://topics.bloomberg.com/international-monetary-fund/>
and our own analysis of bank balance sheets. The money helps the bank
pay big salaries and bonuses. More important, it distorts markets,
fueling crises such as the recent subprime-lending disaster and the
sovereign-debt debacle that is now threatening to destroy the euro and
sink the global economy.
How can all this be? Let's take it step by step.
In recent decades, governments and central banks around the world have
developed a consistent pattern of behavior when trouble strikes banks
that are large or interconnected enough to threaten the broader economy:
They step in to ensure that all the bank's creditors, not just
depositors, are paid in full. Although typically necessary to prevent
permanent economic damage, such bailouts encourage a reckless confidence
among creditors. They assume the government will always make them whole,
so they become willing to lend at lower rates, particularly to
systemically important banks.
Implicit Subsidy
With each new banking crisis, the value of the implicit subsidy grows.
In a recent paper
<http://www.imf.org/external/pubs/ft/wp/2012/wp12128.pdf>, two
economists -- Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the
University of Mainz -- estimated that as of 2009 the expectation of
government support was shaving about 0.8 percentage point off large
banks' borrowing costs. That's up from 0.6 percentage point in 2007,
before the financial crisis prompted a global round of bank bailouts.
To estimate the dollar value of the subsidy in the U.S., we multiplied
it by the debt and deposits of 18 of the country's largest banks,
including JPMorgan, Bank of America Corp. and Citigroup Inc. The result:
about $76 billion a year. The number is roughly equivalent to the banks'
total profits over the past 12 months, or more than the federal
government spends every year on education.
JPMorgan's share of the subsidy is $14 billion a year, or about 77
percent of its net income for the past four quarters. In other words,
U.S. taxpayers helped foot the bill for the multibillion-dollar trading
loss that is the focus of today's hearing. They've also provided more
direct support: Dimon noted in a recent conference call that the Home
Affordable Refinancing Program, which allows banks to generate income by
modifying government-guaranteed mortgages, made a significant
contribution to JPMorgan's earnings in the first three months of 2012.
Like all subsidies, the taxpayer largesse distorts supply. If the
government supports corn farmers, you get too much corn. If the
government subsidizes banks, you get too much credit. As of March,
households, companies and government in the U.S. had amassed debts of
$38.6 trillion <http://www.bloomberg.com/quote/DOUTTOTL:IND>, or 2.5
times the country's gross domestic product. That's up from 1.3 times in
1980. The picture is similar in the euro area, where debt outstanding
<http://www.bloomberg.com/quote/EUDSTLAO:IND> is 1.8 times GDP, double
the level of 1995.
The oversupply of credit -- also supported in the U.S. by
government-backed lenders Fannie Mae
<http://topics.bloomberg.com/fannie-mae/> and Freddie Mac
<http://topics.bloomberg.com/freddie-mac/>, and by tax breaks on
mortgage interest -- encourages risky behavior. People buy houses they
can't afford, companies borrow too much for acquisitions, and banks
employ excessive leverage to boost the returns they can offer their
shareholders. The result is a bloated finance industry
<http://www.bloomberg.com/quote/GDVAINSU:IND>: As of 2011, the sector
accounted for 8.3 percent of the U.S. economy
<http://topics.bloomberg.com/u.s.-economy/>, compared with 4.9 percent
in 1980.
Costly Cycle
Inevitably, the debt burden becomes overwhelming, precipitating crises
in which banks suffer losses, private credit dries up, and people cut
back on spending to pay down their debts. The onus then shifts to
central banks and governments as they engineer bailouts and boost their
spending to prevent economic collapse -- a pattern that has repeated
itself throughout the developed world, according to research by
economists Carmen Reinhart and Kenneth Rogoff
<http://www.carmenreinhart.com/research/recent-working-papers-by-topic/>. This
costly cycle has helped increase sovereign debts
<http://www.bloomberg.com/quote/IGS%25USA:IND> to the point where they
now threaten the solvency of governments.
The solution: Minimize the subsidy. Require banks' shareholders to put
up enough capital to make bailouts highly unlikely (we advocate 20
percent of assets
<http://www.bloomberg.com/news/2012-05-06/rules-for-bank-capital-still-broken-after-four-years.html>).
Allow some creditors to take losses when a bank gets into trouble, so
they won't assume they're safe (an approach regulators in the U.S. and
Europe <http://topics.bloomberg.com/europe/> are considering). Cut off
subsidies to traders, such as the folks in London who lost billions for
JPMorgan, by forbidding speculative trading activity at banks (the goal
of the Volcker rule in the U.S. and financial ring-fencing in the U.K.).
Why hasn't this been done? One partial explanation can be found in the
amount of money banks put into election campaigns and into lobbying,
which has recently included efforts to water down the Dodd-Frank
financial-reform legislation. According to the nonprofit Center for
Responsive Politics, the broad financial industry -- a category that
includes real estate companies and insurers -- has spent $285 million on
political giving in the 2012 election cycle. That's much more than any
other industry spends <http://www.opensecrets.org/industries/index.php>.
Lawmakers and regulators need to recognize just how costly business as
usual will be. When Dimon pushes back against capital requirements
<http://topics.bloomberg.com/capital-requirements/> or the Volcker rule,
it's worth remembering that he's pushing for a form of corporate welfare
that, left unchecked, could lead to a crisis too big for the government
to contain.
Read more opinion online from Bloomberg View
<http://www.bloomberg.com/view/>. Subscribe to receive a daily e-mail
<http://bloomberg.us2.list-manage2.com/subscribe?u=98bac6cd6075b07f398b277fa&id=2ebec5a5b8>
highlighting new View editorials, columns and op-ed articles.
Today's highlights: the editors on Greek elections
<http://www.bloomberg.com/news/2012-06-18/germany-must-make-greece-s-vote-count.html?cmpid=BVrelated>;
Jeffrey Goldberg <http://topics.bloomberg.com/jeffrey-goldberg/> on
Romney, Mormons and Jews
<http://www.bloomberg.com/news/2012-06-18/let-mad-lib-test-settle-mormon-campaign-debate.html?cmpid=BVrelated>;
Ramesh Ponnuru <http://topics.bloomberg.com/ramesh-ponnuru/> on Grover
Norquist's latest fight
<http://www.bloomberg.com/news/2012-06-18/grover-norquist-isn-t-losing-the-no-tax-battle.html?cmpid=BVrelated>;
Betsey Stevenson <http://topics.bloomberg.com/betsey-stevenson/> and
Justin Wolfers <http://topics.bloomberg.com/justin-wolfers/> on equal
opportunity in sports
<http://www.bloomberg.com/news/2012-06-18/equal-opportunity-in-sports-makes-both-sexes-richer.html?cmpid=BVrelated>;
Thomas Cooley <http://topics.bloomberg.com/thomas-cooley/>, Matthew
Richardson <http://topics.bloomberg.com/matthew-richardson/> and Kermit
Schoenholtz on rescuing Europe's banks
<http://www.bloomberg.com/news/2012-06-18/saving-euro-starts-with-banks-cooley-richardson-schoenholtz.html?cmpid=BVrelated>;
Simon Serfaty and Alexis Serfaty on optimistic news for Europe
<http://www.bloomberg.com/news/2012-06-18/greek-vote-another-reason-to-bet-on-europe.html?cmpid=BVrelated>;
Amy Monahan on the courts and voters' pension reforms
<http://www.bloomberg.com/news/2012-06-18/pension-reforms-have-their-day-in-court.html?cmpid=BVrelated>.
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