Jamie Dimon head of the biggest US bank, JP Morgan, announced that one of his departments lost $2,000,000,000 in about six weeks. There might be more red ink on that account in the months ahead, maybe another billion dollar loss. A department that was set up to protect the company against losses mostly used the money to make risky bets on certain papers called “derivatives”.
Driving in my car I was listening to Bloomberg news. Their guys explained the problem. The Fed/government has flooded the banks with liquidity, meaning letting them borrow money for free. The idea is to get the economy going again. But even though the banks get the money for free the banks are not happy. They want to “invest” that money in paper, but CD’s and such are not making that much money. They only give a single digit return. And the bankers want more. So that’s why they’re taking increasing risks.
Now you are me would probably be happy with a middle or high single digit. After all a single digit return can go up to 9%. (I just looked up the return on CD’s The best I could find was Doral bank giving a whopping 1.15%.) But banksters, to use Jesse Jackson’s happy phrase, expect lots more and so they gamble.
Oh, the liberals say we need more regulation. But didn’t they say that the Dodd-Frank law was going to take care of all that? Not a single commentator says that the JP Morgan gambles violated Dodd-Frank.
Years of “reform” amount to little more than a shampoo job for the rugs of the capitalist casino. They had get the stink out of the Great Recession. A little (hot) air freshner and they’re back in business.