It had to happen sooner or later: Jamie Dimon, the bank CEO who's become the public face for our greedy and corrupt banking system, is openly backing the austerity plan pushed by former Senator Alan Simpson, the arrogant and abusive voice of our country's bought-and-sold elite "bipartisan" consensus. Will the Democratic Party led by Barack Obama stand up to that corporate consensus, or submit to it?
The Simpson-Bowles plan is designed to force the American people to pay for the wealth, greed and criminality of the banking class that Jamie Dimon has chosen to represent. The day after Dimon's testimony another institution announced that it was planning to impose the Simpson-Bowles austerity plan on us: the Presidential Administration of Barack Obama, as represented by Treasury Secretary Tim Geithner.
What did Jamie know?
The Senators dutifully made a show of their concern about JPMorgan Chase's multibillion dollar losses. They were shocked -- shocked! -- that gambling was gong on in his establishment.
That hearing should have focused on the need for tougher bank regulations, which Dimon has been vigorously fighting, and on the epidemic of criminal behavior and mismanagement within his own bank. The Senators should have grilled Dimon on the disparity between his public statements about his bank's financial conditions and risk controls and what we now know was really going on behind the scenes.
It's not only wrong to intentionally make misleading statements of that kind -- it's also a crime. Yet the Senators never raised the question that should have been at the core of their hearing:
What did Jamie know and when did he know it?
The Committee never asked Dimon about his statement that the unit behind these trades, the "CIO," had been using a "new risk management model" that reduced its daily risk of potential losses by nearly half -- from $167 billion under the old model to $67 billion.
The Committee didn't ask Dimon why this change, which was never announced publicly, didn't constitute a material misrepresentation under securities law.
The Committee didn't ask Dimon to elaborate on reports that the CIO unit reported to him directly, bypassing the usual chain of command.
The Committee didn't ask Dimon about reports that he personally approved the trades in question.
The Committee didn't ask Dimon about the many documented crimes committed by the bank under his leadership -- crimes that have led to billions of dollars in settlements.
The Committee didn't ask Dimon whether he could reassure them that the crimes have stopped.
The Committee didn't ask Dimon whether he would cooperate with authorities to make sure that the people who committed these crimes within his organization are brought to justice.
The Committee didn't ask Dimon about his own legal obligation under Sarbanes-Oxley to affirm that all risk controls and anti-fraud measures are in place and adequate.
The Committee didn't ask Dimon why he should be considered an expert on effective banking with a track record of this kind.
The Committee didn't ask Dimon for more details on the "clawbacks," or revoking of past bonuses, he said the bank would impose on some executives. And they didn't ask whether his pay would be clawed back too, since the unit reported directly to him and he reportedly approved the trades.
The Committee didn't ask Dimon how that or any other reasonable measure could be taken against a bank CEO who also holds the position of Board Chair, thereby making it impossible for shareholders to rebuke or restrain him, or why regulations should not forbid a dual role which gives a banker such unrestrained power.
The Committee didn't ask Dimon what he meant when he said that "some issues" about the multibillion-dollar loss had already come to light when he told investors and analysts that it was a "tempest in a teapot" on an April 13 phone call, and whether this was a deception that rose to the level of investor fraud.
The Committee didn't ask Dimon why he continues to call the CIO's trades "hedges," which are in effect a form of insurance against adverse changes in the business environment (the classic example of a true "hedge" would be an airline that buys oil derivatives to protect itself against the losses it would experience if fuel prices soared unexpectedly), when the CIO's bets appear to be much more like gambling-style hedge fund behavior. (Sen. Merkley tried to ask him, but was flummoxed by the five-minute rule and his servile colleagues).
The Committee didn't ask Dimon how anybody, much less Jamie Dimon, could argue against stronger regulations after a fiasco like this one.
But then, why would they? As George Zornick reported, almost all of the Senators on the Banking Committee have received campaign contributions from JPMorgan Chase.
The hearing should have been conducted with closed-captioning for the morally unimpaired, so that the real meaning of the questions and of Mr. Dimon's answers was clear to the audience. Unfortunately that closed captioning would have bordered on the obscene, since 90 percent of Dimon's responses would have led to a caption that read "I own you b*tches, so let's get this over with."
Senators Jeff Merkley and Bob Menendez tried to challenge Dimon, but were boxed in by the five-minute limit given to each Senator for questions and answers. Merkley asserted that JPMorgan Chase wouldn't have survived without the taxpayers' bailout. He's almost certainly right, but Dimon was allowed to repeat his assertion that JPM didn't need the money and only took it at the government's request "so that the other banks would take the money, too."
How did the Republicans do? Sen. Jim DeMint reassured Dimon that his colleagues "can hardly sit in judgment of your losing $2 billion." (The figure is actually $3 billion now, according to Dimon's reckoning, and possibly much more: But then, who's counting?) "You're not located in my state," said Sen. Mike Johanns of Nebraska, "and I doubt that you're probably considering locating in my state, although it'd be a great place for you to do business." Sen. Bob Corker of Tennessee just wanted to sit at the feet of the master: "If you were sitting on this side of the dais, what would you do to make our system safer?"
The role assigned to Republicans is that of openly servile solons who make no secret of their eagerness to serve at Wall Street's beck and call. "Washington exists to serve the banks," said Rep. Spencer Bachus of the House Banking Committee, "not the other way around." How did the Democrats fare?
Merkley and Sen. Bob Menendez of New Jersey struggled against the limitations imposed by the five-minute rule and their colleagues' servility. For the rest of them it was lob balls all the way. Dimon was allowed to strut, preen, and pontificate with an airly of thinly-disguised contempt -- an emotion that was well-earned on Wednesday.
Tell you what, Jamie: You can be on our bank's board if we can be on yours.
Not a single Senator asked Dimon about the propriety of his seat on the Board of the New York Gederal Reserve. JPM received $48 billion in secret, direct emergency loans, and it also benefited from the $107.3 billion in loans given to Morgan Stanley. All of that money was given to Dimon's institution while he held a power position on the Board of the New York Federal Reserve, and on the committee that decides the Fed's executives salaries and other compensation.
The Federal Reserve was created by an act of Congress. It is our bank, not theirs. Yet its boards are dominated by the very bankers that benefit from its generosity -- which is ultimately our generosity. The Committee didn't ask Dimon about that either.
Not a single Senator raised the obvious question: We bailed out JPMorgan Chase. So why don't we have a seat on your board, instead of the other way around?
What does Jamie know?
"This is not your hearing," Sen. Merkley told Dimon. The good Senator was sadly wrong. It was Dimon's hearing, and never more so than at the end, when he was given the opportunity to pontificate about the U.S. economy. That's a subject he understands even less than legitimate finance. That's when he gave his pitch for Simpson-Bowles, as Dana Milbank reported:
"If we had done something remotely like Simpson-Bowles," Dimon said in response to Sen. Michael Bennet, D-Colo., at the end of the hearing, "you would have increased confidence in America. You would have shown a real fix of the long-term fiscal problem. I think you would have had... a more effective tax system that is conducive to economic growth."
This is the common hoax: That more "trickle-down economics" would spur the economy, and that investor confidence would rise under austerity pollcies and bring the entire economy with it. How's that working' out for ya, Europe?
That wasn't Dimon's only pitch, of course. He also repeated his efforts to leave badly-managed and criminally-inclined organizations like his own free to operate without adult supervision -- that is to say, unregulated. He complained about the complexity of Dodd-Frank, saying "I would prefer a simple, clean, strong regulatory system with real intelligent design, and that's not what we did. We created a really complex [set of rules]... And it's not clear to me who has the responsibility or the authority."
What Dimon didn't say is that the complexity was only created because Washington chose to allow too-big-to-fail banks like his to keep existing. There's a simple, common-sense solution that doesn't require all the red tape: Break them up. But to accommodate Mr. Dimon and his peers, lawmakers chose instead to create some mild safeguards to reduce the likelihood that we'll have to bail the banks out instead.
But his Simpson-Bowles testimony was the centerpiece of his platform this week. That closed-captioning system would have read like this: We can no longer afford to pay your Medicare costs, and we want your Social Security trust fund for other purposes, because guys like me ruined the economy and the only other way to restore our society is by asking us to pay our fair share in taxes. And trust me, as long as I'm writing checks to the guys I'm looking at right now, that ain't gonna happen.
Not a single Senator asked Dimon why anybody would listen to the economic advice of anybody with a track record like his.
Dimon and Simpson
Ashford and Simpson were the songwriting duo that sang "Ain't No Mountain High Enough." Dimon and Simpson are the corporate-politics duo that want to give us "Ain't No Austerity Grim Enough."
Alan Simpson is the former Republican Senator who is now retired and enjoying a fat pension from the American people whose retirement security he has dedicated his remaining years to destroying. He's funded by right-wing billionaire Pete Peterson, who has also co-opted leading Democrats like Bill Clinton into his miserly efforts.
Simpson employs a variety of tools on behalf of the "bipartisan" power elite's agenda, most notably obscenity, dishonesty, and personal abuse. His last venomous outburst was directed against Nancy Altman and Eric Kingson of Social Security Works (with whom I've had a very pleasant working association).
Nancy and Eric are two of the most courteous and thoughtful people I know, and Simpson's snarling personal attack on them stands in stark contrast to their own civility. Simpson, of course, served as the co-chair of President Obama's "Deficit Commission" -- which addressed Social Security, too, even though Social Security doesn't contribute to the deficit. And the president who routinely chastises others for failing to disagree in a civil manner has yet to rebuke Simpson for his discourtesy.
Simpson's (relatively) silent partner is Erskine Bowles, the Clinton Democratic insider turned hedge fund millionaire.
And then there's Tim Geithner, who said on Thursday that the right economic path "really began with Bowles-Simpson and that's where it's going to end." Geithner said that the President's Fiscal Year budget "differs in slight -- in small respects from that basic framework, [but] is very close to that basic design. That's the neighborhood in which we've planned to govern."
Geithner said that this is "the only path to resolution politically [and] growing essentially economically, and I think that's where it's going to end up."
Geithner said Simpson-Bowles was the perfect recipe: "tax reforms that raise a modest amount of revenue tied to spending savings across the government that's still preserving some room to invest in things that matter to how we grow moving forward." He added, "There's no plausible way to get there economically or politically without that kind of balanced framework again that marries tax reform with broader spending reforms,"
Geithner is joining leading Democrats on the Hill like Sen. Max Baucus and Rep. Nancy Pelosi in backing the plan. And take careful note of the fact that they're all using the phrase "tax reform" instead of "tax increases." They don't just plan to pay for the wealth and misdeeds of the Dimon crowd with your Social Security and Medicare benefits. They also plan to raise your taxes, not theirs. The Simpson Bowles plan would actually lower the top tax rate for people like Jamie Dimon, while "tax reform" would tax away tax deductions for the middle class's health insurance, mortgages, and other expenses.
Welcome to Your Corporatocracy
And that's how things work in our Corporatocracy: They decide, we submit. The Unholy Trio of Dimon, Simpson, and Geithner ride across our national landscape like the Three Horsemen of the Economic, corporate-politics Apocalypse.
This year it's going to be incumbent on the Democratic Party to prove that it's something more than the oligarchy's more genteel rubber stamp. And it's not going to be able to do that unless it rejects the wildly unpopular and unfair Simpson-Bowles plan in favor of the only approach that can rescue the middle class and our economy over all.
But that would involve standing up to Jamie Dimon -- and his campaign checks.
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