Wall Street Opposes Socialism (Unless It's For Them)

 

The giant financial institutions don't like the idea of government helping ordinary citizens. They call that socialism. But they love for the government to bail them out of trouble and provide loopholes and other financial advantages. In other words. They believe socialism should be reserved for Wall Street!

Here's part of what Robert Reich says about this ridiculous view:

The stock market is gyrating wildly in light of Putin’s aggression in Ukraine, but Wall Street traders are doing just fine. Bad news is good news for traders who make money off volatility.

After all, in the year of Delta and Omicron, climate chaos, Trump Republican attacks on democracy, bitter divisiveness, a calamitous exit from Afghanistan, and accelerating inflation, the Street’s biggest banks have reaped record profits. Bonuses are through the front Porsche. Hundreds of traders have racked up seven and eight-figure bonanzas. Morgan Stanley paid out $35 million to its CEO, James Gorman. Goldman Sachs, $35 million to David Solomon. Bank of America, $32 million to Brian Moynihan. Citigroup, $22.5 million to Jane Fraser. And, not the least, JPMorgan, which paid out $34.5 million to Jamie Dimon — plus a retention bonus of $50 million.

Dimon has become a spokesman for the Street and one of the most influential CEOs on Capitol Hill. His public statements are a barometer for what America’s financial oligarchs are thinking.

They are not fretting about what the Fed’s incipient fight against inflation is likely to do to jobs and wages. They’re not worried about the shrinkage of America’s middle class or the precariousness of the working class and poor. They are unsettled by what they consider creeping socialism. In an annual letter to JPMorgan shareholders, Dimon warned that socialism would be a “disaster for our country” because it produces “stagnation, corruption and often worse.”

It should be remembered that Dimon was at the helm in 2008 when JPMorgan received a $25 billion socialist-like bailout after it and other Wall Street banks almost tanked because of their reckless loans. Instead of letting the market punish the banks (which is what capitalism is supposed to do), the Obama administration bailed them out and eventually levied paltry fines which the banks treated as the cost of doing business. According to the Justice Department, JPMorgan acknowledged it had regularly and knowingly sold mortgages that should have never been sold. (Presumably this is where the “stagnation, corruption and often worse” come in.)

Millions of Americans lost their homes, savings, and jobs in the financial crisis. But neither Dimon nor any other top Wall Street executive was held accountable. If this isn’t socialism for rich bankers, what is it?

America’s five largest banks, including Dimon’s JPMorgan, now control almost half of all deposits, up from 12 percent in the early 1990s. Because of their size, these banks are now considered “too big to fail.” This translates into a hidden subsidy of some $83 billion a year — the total estimated discount that creditors and depositors give banks whose solvency is effectively guaranteed by the government. More socialism for rich bankers.

Dimon was instrumental in getting the big Trump tax cuts through Congress. They have saved JPMorgan and the other big banks over $50 billion so far.

But Dimon and JPMorgan are doing their bit to make sure average Americans experience the full consequences of harsh capitalism. Although federal regulators waived overdraft fees for big banks when the economy took a dive in 2020, Dimon and JPMorgan refused to waive overdraft fees for borrowers struggling to make ends meet amid pandemic lockdowns. Dimon and JPMorgan reaped $1.46 billion in overdraft fees — the most of any big bank. . . .

Dimon isn’t really concerned about widening inequality. He’s not really concerned about socialism, either. Nor about any of the other crises hitting America, which expose Americans to more economic uncertainty and insecurity than the citizens of any other advanced economy. His real worry is that one day America might end the type of socialism he and other denizens of Wall Street depend on – bailouts, regulatory loopholes, subsidies, and tax breaks.

Trump's $12 Billion Bailout For Farmers Is Not A Good Plan

(This image of a soybean field is from Britannica.com.)

Donald Trump thought he could bully other nations into giving the United States more favorable trading terms. He did this by imposing tariffs on foreign products entering the United States and threatening to impose even more tariffs if those nations don't bend to his will. Unfortunately, his trade war is not going well.

The first hits were taken by American farmers. A perfect example is the farmers who raise soybeans. China buys about 30% of American-grown soybeans. But instead of giving in to Trump, they just cancelled their orders for U.S. soybeans. Instead, they are growing a million new acres of the plant themselves, and have signed contracts to buy the rest of what they need from South America and Russia.

And soybeans aren't the only product affected. The longer the trade war lasts, the more damage will be incurred by American farmers and factories -- and consumers, who will have to pay higher prices for many goods.

Trump realizes that he's losing support among farmers (who in 2016 were among his most loyal supporters), so he has devised a bailout to help the farmers. He's borrowing $12 billion to give farmers some aid. But this plan has some serious flaws, and I believe will not be workable as a solution. Here's why:

1. It is a short-term bailout. It is only for the rest of this year. What about next year?

2. Trump had already overseen a ballooning deficit that's approaching a trillion dollars a year. Borrowing $12 billion more is not going to help that.

3. The bailout assumes that Trump will be able to negotiate new trade deals in a short period of time. There is no evidence that is possible. While Trump has bragged about being a great negotiator and dealmaker, in the first 18 months of his term he has not been able to make a single new deal. He has trashed some agreements, but been unable to negotiate any new ones.

4. Even if Trump was to end his trade war now, there is no reason to believe that the countries that found other places to buy needed goods would return to the U.S. market. Why would they when Trump has shown he cannot be trusted to keep those markets stable.

5. Trump seems to think that a trade war is easily won because other countries need the United States. The truth is that the United States needs the markets and products of other countries as much as they need ours.

Trump's trade war was a very bad idea, and his bailout for farmers is equally bad. Neither will work. We live in an era where nations must respect the global marketplace -- even the United States. Trump's economic bullying might have worked 50 to 70 years ago, but not now.

Where Is The Teabagger Outrage Now ?

(The image of a teabagger above is from theliberal.com.)

There were two significant events that led to the uprising of the movement known as the "Tea Party" (i.e., teabaggers). The first was a $700 billion bailout of the giant Wall Street banks in the waning days of the Bush administration, and the second was the election of an African-American president.

There is nothing they, or their elected representatives, can do about the first. President Obama was re-elected to a second term, and will get to fill out the full eight years allowed an American president. But the second, preventing another bailout, is something that could be accomplished.

Ironically, it was Democrats who took action to prevent another Wall Street bailout. They did it by passing a Wall Street reform bill, that among other things, prevented the Wall Street banks from playing the stock market with their consumer's funds (which are federally insured). They could still gamble on the stock market, but they would have to do it with their own money -- which means they would lose their own money, and if they screwed up, it would take another act of Congress to bail them out (which would be very unlikely in the present political climate).

But in opposition to the stated wishes of their teabagger base (and most other Americans), the congressional Republicans opposed that reform -- and now they are trying to overturn that reform. A provision slipped into the budget bill would let those Wall Street banks use their customer's money to play the stock market.

This would be a huge boon for those banks. If they make money in the stock market, then they would get to keep all of it. But if they lose money, like they did in the past, the taxpayers would have to make up those losses -- because that customer money is protected by the federal government (through organizations like the FDIC). In other words, they would get an automatic bailout, without having to beg Congress for it this time.

My question is -- where is the teabagger outrage over this? Are bailouts OK when it is their own elected representatives that provide it? Their leaders have been bought off by the Wall Street banks. Why aren't the teabaggers raising hell about this? As far as I can see, all the opposition to this future Wall Street bailout (and it is just a matter of time before it happens) is coming almost exclusively from Democrats and liberals.

It just goes to show that the teabagger movement was never real. It was just a Republican Party invention, and never really had any true beliefs (other than to elect more Republicans). The teabagger base has been used and sold out by Republican leaders. Why aren't they outraged?

Incompetent Or Insane ?

I must admit I am flabbergasted by the hutzpah of the giant financial and insurance corporation known as AIG. Their financial division screws up so bad that the company nearly goes belly-up. The only thing that saves the company is a bailout of billions of dollars from the federal government.

It can be argued whether the bailout should have happened, but the fact is that it did. I would have thought the company would have learned something from its close call, but evidently they didn't. They are now wanting to pay out $2.4 million in executive bonuses next week.

That would be bad enough, but they are also seeking permission to pay out an additional $235 million in bonuses to the very financial division that nearly ruined the whole company! They are calling these "retention bonuses", saying they need to pay the bonuses to retain these employees.

Now I don't know about you readers, but if I had screwed up so bad it nearly put my employer out of business, I would have been fired. I certainly wouldn't have received a bonus to encourage me to stay on the job. How on earth can AIG even consider paying these guys any kind of bonus? Is AIG leadership just incompetent or totally insane?

Personally, I don't think any company that has received any government bailout money should be allowed to give even a penny in bonus to any employee, until every nickel of the government has been repaid.

It sounds to me like AIG has $237.4 million that they don't need. That money should be used to repay the taxpayers of the United States. We didn't bailout that company so incompetent executives could get rich while we pay higher taxes!

Republican Bag Of Ideas Is Empty

In the last year-and-a-half of his presidency, Bush oversaw the loss of a couple of million American jobs. This month, another 200,000 jobs were lost, and most economists believe the next few months could be just as bad (if not worse). Our nation is quickly sliding from a recession into another depression like that experienced in the 1930's.

Our new president has come up with a stimulus package that would "provide income support to the poor and recently unemployed, distribute aid to state governments, seek relatively quick employment gains through public works spending and aim to spark consumer and business spending through targeted tax cuts." The plan is huge and most of the money would be borrowed, but most economists believe if it is implemented quickly it could be a big boost to the economy.

President Obama has reached out to Republicans to try and get their ideas to see if the plan could be improved. That was a useless gesture. The Republicans are completely out of ideas and have decided their only course of action is to try and obstruct the plan offered by Obama and the Democrats. The only thing the Republicans can come up with is to give their rich buddies some more tax breaks.

Of course, the last time they did that, it just resulted in huge deficits and did nothing for the economy. The truth is that Obama's plan includes some tax cuts, but it is for the working and middle classes. These cuts make sense, because this is money that will have to be spent, helping to spur the economy.

But those aren't the cuts the Republicans want. They want tax cuts for the rich, claiming it will result in job creation. Nonsense! Even in good times, a tax cut for the rich results in only 30% of it being invested in ways that would create jobs. In these uncertain times, it would do nothing. It would simply be hoarded and cause the deficit to be even larger than necessary.

It's bad enough that we must create a huge deficit to stimulate the economy. But if we must do it, the money should go to help those who need it -- and that's not those who are rich. They can take care of themselves. Those without jobs, those losing their homes and those having trouble feeding their families are the ones who need help.

But the Republicans are out of ideas. Most of their old ideas of deregulation, help the rich and letting the corporations write our laws, are what has put us in this mess in the first place. Those ideas have created the biggest gap between the rich and the rest of America in over a hundred years and destroyed our economy.

Their idea of giving all the money to the rich and waiting for it to trickle down to the rest of us, has been shown to be a joke. The times this country is most prosperous is when the common man has money, because then it will be spent and the economy stimulated. Money does not trickle down in a capitalist economy -- it flows upward.

The fact is that the bag of Republican ideas is empty, and has been since the neocons took control of the party.

I Agree With Bush (OMG, Did I Say That !)

The Big Three American automakers (GM, Chrysler, Ford) have made bad decisions one after another for the last few years, and now they find themselves in financial trouble. It's not as if they were doing their best and just got caught by a bad economy. While foreign carmakers looked at the future and began to alter the cars they were offering to fit that future, the American automakers cast their lot with ever bigger gas-guzzlers as though the supply of cheap oil was endless.

Now that they are in trouble, they want the American government and people to bail them out with billions of dollars. They don't deserve it because they created the mess they're now in, but sadly if we allow them to go under as they deserve, it would affect many thousands of workers and suppliers. These workers and suppliers are not responsible for the mess and shouldn't have to suffer. In addition, if the workers lose their jobs and the suppliers go out of business, our fragile economy will be seriously damaged.

Something must be done -- but what? Congressional Democrats want to create an additional $25 billion to give to the car companies, possibly out of the already approved $700 billion bailout package for saving our financial institutions. Bush is opposed to this. He points to a previously approved $25 billion to help automakers create more fuel-efficient and alternative fuel cars, and wants to loosen the rules on that money and let the car companies use it to save themselves.

Frankly, though it gags me to say it, I have to agree with Bush on this matter. Why create an additional $25 billion debt for taxpayers, when the first $25 billion is still waiting to be used. I know that money was to help them transition to autos that use less or no gasoline. But they are going to have to do that anyway if they are to survive, and if they don't survive why waste an additional $25 billion on them?

As for tapping into the $700 billion bailout, we are going to need every penny of that to try to fix the credit crises (and it might not be enough anyway). It would be a bad precedent to start handing this money out to failing companies having nothing to do with the credit crises.

It bothers me to be agreeing with The Worst President Ever, but I guess even a broken clock is right a couple of times a day.