The Banks lose and the people pay

Why do the losses of Jamie Dimon at JPMorgan Chase matter? The Federal Reserve allowed investment banks to convert to bank holding companies, now owning commercial banks, which are FDIC insured.

William Greider writes in the Nation magazine, “JPMorgan Chase parks all of its vast derivatives holdings in its commercial bank subsidiary, which means the tax payer is on the hook for these losses since commercial banks are FDIC insured.” Greider further states “In the event of a collapse, the banks can use its deposit base to pay off the derivatives, while leaving the Federal Deposit Insurance Corporation to reimburse depositors if their money runs out. JPMorgan has contracts totaling $72 trillion and 99 percent of them are booked at its FDIC- insured bank.”

Continuing-“We are “insuring” other big boys of banking in the same way. Citigroup has nearly all of its $53 trillion in derivatives in its FDIC-insured bank; Goldman Sachs has $44 trillion parked at and FDIC-backed institution. After Bank of America purchased Merrill Lynch, BoA began transferring the securities firm’s derivatives to the FDIC-insured bank, which now holds $47 trillion in contracts.” And the Ryan Republicans want to invest Social Security with these same bankers?

FDIC insurance is New Deal legislation designed to prevent runs on banks and to protect Mom and Pop investors, not to allow banks risk free betting while refusing to allow homeowners to refinance at historically low rates. Why is it only the New Deal social programs or banking regulations that need to be repealed so our economy can regain its health? Why aren’t the deficit hounds looking into these banking budget busters?

As of this writing, the losses at JPMorgan Chase aren’t fully known, with estimates ranging between $2 to $7 billion. What is known, especially by the bankers, is that full responsibility for their risk taking rests with the US tax payer, even though the majority of the tax payers don’t know it.

William Greider closes with “..someone is going to have to take on Jamie Dimon and his banking friends. If neither Congress nor the Federal Reserve has the nerve, the bankers could be setting us up for an even uglier crash.”

But let’s keep looking at Social Security, Medicare, Medicaid and another New Deal program, unemployment insurance. The banksters have us convinced that somewhere amongst government cut backs on the dead beats and welfare bums lies economic salvation.