Too Big to Fail
Submitted by: luaptifer on Tue, 03/18/2008 - 10:39
tags:
Set Up Buzz!
The title is a phrase used in the banking world to describe entities which are cornerstones of the financial system and there's NO WAY they can be permitted to fail.
JPM, or J.P. Morgan is too big to fail because it is one of the Member Banks of the Federal Reserve Banking System.
The Federal Reserve Bank is even MORE too big to fail as they would tend to see it.
Watch this video on YouTube: Bear Stearns, Jim Cramer, The Federal Reserve, JP Morgan
So they just decided to trade off the well-being of Bear Stearns investors (aka 'sacrificed') to prop up JPM which props up the FRB.
We never elected the Federal Reserve Bank.
FYI1: Many people and institutions are being hurt right now as the result of the financial systemic calamity. I don't like that.
But it's important to understand that why they are hurting is because the banks own us. It's why 'deregulation' always plays out as it does, to favor the banks and finaciers in the end. I have no qualms about naming Bill Clinton as part of the problem because, though perhaps strong-armed to do it, he repealed the Glass-Steagall Act which 'deregulated the banking system' and removed the barrier set up to protect Americans from the voracious appetite of the big money.
Deregulation...along the way, it may help you and me but that's a fringe benefit.
We'll continue to be fringe benefits unless the pigs have finally broken the system...And we collectively understand that to fix it the right way on the other side.
FYI2: In case you don't remember this minor point, if I recall the events correctly, after we invaded Iraq and had boots on the ground, before ANYONE else or ANY other institution went into our new colony, JPM went in to Iraq.
Set Up Buzz!
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Aug 30, 2003 J. P. Morgan Selected to Run New Trade Bank in Iraq
Iraq Timeline snippet: Iraq Timeline excerpted from Mideastweb (not certain of its bias but the timeframe is short and time points work for my purpose.)
I inserted the date NYT reported CPA's 'selection' of JP Morgan. It doesn't mention the fact in the linked article but I believe I remember it as the earliest 'private' interest allowed in. Trade bank, good excuse right?!
- Baghdad falls to US troops.
- President Bush declares an end to the Iraq war.
- A defiant letter from Saddam Hussein to the Iraqi people indicates that US assassination attempts have failed. Resistance to US occupation from unidentified sources includes sabotage of infrastructure and suicide bombings of US soldiers.
- First meeting of US - appointed Iraqi interim council
- Uday and Qusay Hussein, sons of Saddam killed in a shootout with US troops.
- Increasing evidence shows that US and British governments "improved" intelligence estimates to make a case that Iraq was still stockpiling WMD.
- UN compound bombed by unknown Iraqi forces, killing at least 20.
- Capture of Ali Majid ("Chemical Ali") by US forces is announced. Ali was questioned about WMD programs but has not revealed any new information.
- Explosion near Najaf Mosque kills over 90 including Shi'ite leader Ayatollah Mohammed Bakir al-Hakim.
- J. P. Morgan Selected to Run New Trade Bank in Iraq
- UN SC Resolution 1511 on Iraq - recognizes the legitimacy of the American supported provisional Iraqi government, and authorizes UN aid to Iraq under US supervision, while at the same time calling for submission of a time-table for Iraqi self governance.
Iraqi self governance.
J. P. Morgan Selected to Run New Trade Bank in Iraq
RBA's Commentary "betting down"
is very related... don't know if you saw it or not, Luaptifer... here's the link Betting Down.
I cried the day Clinton did that.
I am with you Luaptifer... It wasn't perfect, but that dike between insurance companies, banks and stock brokers was erected for a reason after the Depression...
And right now, we are witnessing just a small inkling of that reason. Even FDR bailed out the predators, although as part of the whole cloth solution.
Humm...
I tried the link to the video but it goes to a page with multiple videos?
It appears that you may have repaired the link?
or someone seems to have done me one better by embedding it. THANKS!
Just in case: http://www.youtube.com/watch?v=4sZCNlPwG8o
Not me but I was able to view it now
I agree with his advice on not listening to the talking heads on CNBC. Those guys were the first to start screaming for the Fed to act when the market had it's little correction in 2007. Funny how they are against government intervention until it helps them. Real fair weather free market friends there.
I feel some empathy for the Bear Stearns stockholders but then again, investing does come with a risk. If they had let the company go to bankruptcy, the shareholders have less rights to any funds than the creditors so that would not have been much better for them either. It's a tough call. I think the Fed and the government (executive, legislative and regulatory agencies) have been way behind the curve in dealing with this latest scenario and a crisis might have been averted had they been giving it proper attention. But I think most agree, the actions with Bear Stearns was very defensive and this statement from Bush on his visit to Wall Street to calm fears Monday:
is bullshit. If the capital markets were functioning efficiently and effectively, we wouldn't have seen the actions taken for the sale to JP Morgan.
I agree that there's plenty of blame to be shared
I also agree that BS', like any investor, knows they're entering into risky territory.
But the guy's point is important, regarding the Fed's choosing to bail JPM out in such a way, especially since it could stand as JPM bailing itself out depending upon how these decisions are made.
But his bottomline is most important, IMHO. That the FRB, essentially runs the country by how it manages the banking system. And that's effectively an expression of the collective will of the commercial banks. THere's quite alot that is not right about that picture.
So true
The FRB does have a lot of control. I am not sure this was a bailout for JPM or just a boon that they were chosen over Bear Stearns. It is certainly hard to argue that they didn't get a sweet deal with the Fed backing them up with $30 billion but I think JPM's shareholders might have a damn good case against management if they were to buy Bear Stearns without the Fed giving some support too.
The other problem in addition to the FRB having too much control is that they are limited in the actions they can take. Some of what led up to this monumental failure (again) is as you pointed out, deregulation and also the lack of enforcement of the regulations that are still in place. But it all shakes down to one thing, the little guy picking up the tab.