Tuesday, June 12, 2012

Maria Bartiromo on JPM loss: "It's not taxpayer money, it's JPM's money, so leave them alone!"

Maria said, "It's not taxpayer money, it's JPM's money. They took a trading loss. What's the big deal? It happens. Leave them alone."

Well, it is taxpayer money and it is a big deal. Sorry Maria.

Bank deposits are guaranteed by the gov't (taxpayers). Without that guarantee, JPM would be far, far, smaller in terms of assets. And they'd have far, far, less of "their money" to play around with.

This is risk taking that could, potentially, trigger another taxpayer bailout so in effect, they are, again, playing with taxpayer money. Actually, playing in anything, is playing with taxpayer money by virtue of that deposit guarantee and their government charter that allows them to create money out of thin air.

Anyway, if JPM is so in love with risk, why doesn't Jamie Dimon instruct his bank to make loans instead of speculating in illiquid credit instruments? They'd make a lot more money, the risk would be less and it would greater serve the public purpose, which is why banks exist in the first place.

14 comments:

Roger Erickson said...

Translation: "Hey, JPM advertises with my company. What's a little graft among biz partners?"

FDO15 said...

Banks exist to serve public purpose? What planet do MMTers live on?

Banks exist to make a profit for their shareholders. Just like all public companies. Just ask Warren Mosler if his bank is a charity or if it's serving its owners seeking to make a profit.

Sheesh, you guys don't seem to understand much about the way our system is designed.

Tom Hickey said...

"National banks, for example, serve both public and private purposes, but they are “organized by private persons pursuant to federal law and operated for private gain.” 9 C.J.S. Banks and Banking § 514, at 460 (1996)."

http://www.law.fsu.edu/journals/lawreview/downloads/363/lund.pdf, p. 325

FD015 said...

MMT hates private banks and money manager capitalism. How can you also claim that banks serve public purpose? Or is this one of those vague comments in MMT that is intended to blur the lines of everything? Which one is it now? Do banks serve public purpose, private purpose or both? Those of us with banking experience know banks almost exclusively serve private purpose and exist almost entirely to make money for their shareholders, but I guess out there in MMT la-la land the banks are charitable organizations designed around making the world a better place. Hahahaha.

Don't you guys get bored of contradicting yourselves every 10 seconds?

Tom Hickey said...

MMT hates private banks and money manager capitalism.

MMT economists, especially Randy Wray following Minsky, have criticized money managerism as a perversion of the fiduciary aspect of finance. MMT economists have also the institutional structure of banking and the financial sector as it presently exists for similar reasons and offered proposals for reform. Warren's proposals are quite specific for example. Which MMT economist is on record as against private banking other than Bill Mitchell and he has said explicitly that this is a personal preference consonant with MMT but not dictated by it. As you know, Warren is a bank owner,so he can't hate banks all that much, can he.

How can you also claim that banks serve public purpose?

Banks are chartered as private entities with both private and public purpose. Banks are principally fiduciary institutions rather than like other firms as chiefly profit-oriented entities.

For this reason, banks are given access to the interbank system run by the cb and they have the extraordinary privileges that access to that system provides in creating credit money denominated by the unit of account. Moreover, they have government guarantees that are essentially government subsidies.

For this they are expected to be run in the public interest, since state money, to which they have privileged access, is a public utility established under the control of the legislative branch in the US Constitution, Article 1, section 8. Congress delegates that power as it wishes and can take it back anytime, too, as banks that have lost their charters can attest.

However, Government has allowed changes in the institutional structure that has reduced private fiduciary liability and transferred it to government through guarantees. This has been taken as a license by some in the financial sector to disregard their fiduciary responsibilities in favor of rent-seeking and to take on excessive risk in doing so.

The reins need to be tightened to prevent another crisis like we are now going through and the losses of the banks are being transferred to government.

Crossover said...

Isnt it a bit contradictory for an MMTer to say "Well, it is taxpayer money and it is a big deal. Sorry Maria. Bank deposits are guaranteed by the gov't (taxpayers)" when MMT advocates that taxes dont fund anything ?

beowulf said...
This comment has been removed by the author.
Matt Franko said...

Cross,

Two sector analyis by Mike here: govt vs non-govt.

Banks are part of the govt sector in this analysis, Bartiromo doesnt recognize these 2 sectors.

Dimon is not running a f-ing Dairy Queen...

Crossover said...

Didnt think of it that way Matt.Thanks.

Anonymous said...

Matt, I still see a contradiction in these comments. Banks don't create taxpayer money "out of thin air" in the MMT paradigm because bank money isn't used to pay taxes according to MMT.

Also, the bailouts aren't "funded" with taxpayer money so Mike's comment about bailouts doesn't apply here. The government wouldn't fund bank recapitalizations with taxpayer money. It just changes numbers in the computer system.

MMT is caught with its foot in its mouth again regarding the funding ideas here.

Bob said...

Last time the over leveraged fantasy financial instruments collapsing resulted in at least 8 million jobs lost, and the greatest mis-allocation of US capitol in the history of this country that went into an asset that wasn't needed and didn't help anyone except the central bank members. Jamie Dimon should be ridden like a wild bronco being busted by Ron Paul who should be wearing spurs and yelling Yippie Kieyah!!! Than Dimon should be fired and made to clean toilets in Yankee stadium, at least he can do some good for once!

Matt Franko said...

Anon,

Mike is using the word 'taxpayer' to simply represent the authority of the govt sector...

Bartiromo doesnt understand how banks work, not even close (moronette)...

rsp

Leverage said...

Given what gives government money value is the willingness of the people to pay taxes (and the ability of the government to enforce it), all the government money is taxpayer's money.

Obviously the FED can create reserves at will as they have been doing last years and giving them to banks, it does not require any previous taxpayer funding. But you must keep the illusion right?!

That derivatives are now being insured by FDIC speaks volumes of how this is not banks own capital which is at stake, but taxpayer's money which will have to bail out through the printing press these irresponsible bankers.

Anonymous said...

I can't decide whether FDO15 is actually an asshole or just really, really stupid.