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.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Arianna Huffington: JPMorgan, the Volcker Rule, and the Extreme Brevity of Financial Memory
Rep. Brad Miller: If We Can't Understand Them, We Should Just Break Them Up
Robert Scheer: Do the Bain Hustle
Mike Lux: Bain and the Inside-the-Beltway Gang
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| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
What has NOT been brought up enough, or even at all, when people talk about Romney's Private Equity involvement, is not just the fact that this venture may have been a very controversial program as far as people's jobs are concerned, but also THE WAY these firms make such a radically HUGE profit with what they do.
And that is the fact that Private Equities have a distinct formula of making a large part of their profit from something called "Carried Interest" that is only taxed 15%. Pitted against an environment where capital and costs are taxed the full 35%, this causes what they call a "Spread" that when applied in the contracts with their mathematical formulas leveraged over the long term, creates an unbelievable sum for profit that makes the whole idea of selling off the company irresistable to the investors. Of course, this is legal, but it paints the picture and gives a very telling layout of where these corporations are coming from, and how much they care about helping working people and the middle class. Ha! THEY DON'T!
foxes, henhouses, etc.....
ABC NEWS www.abc.com May 23,2012: ''Obama Jobs Council Has Buyout Execs Despite Bain Attacks''.
www.jillstein.org
O, as well as all the policy-makers, need to turn around and free themselves from the manipulation of the banking cartel.
An example would be like that of GM. Here we had a failing company, Obama had to close thousands of dealerships, cut several manufacturing plants, cut product lines and lay off thousands of workers to reorganize and stream line the company. He cut up the company and sold off the pieces. Saturn, Hummer, Saab, Pontic divisions. With Chrysler he did the same selling off the parts to save the whole.  The only different he protected the union workers, who were over paid, benefits double that of plants like BMW. The union worker were part of the problem in GM.  Bond holders  in pension funds across the country got screwed.