Blodget: Big banks are ‘kids playing with dynamite’

JP Morgan CEO Jaime Dimon would have us all believe that his banks’ $2 billion trading loss was “just a stupid mistake.” But Henry Blodget (@hblodget), CEO and Editor-in Chief of Business Insider, agrees that this is just the latest indication that the shadow banking system has not gone through enough reform.

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Here Comes the Story of the “Hurricane”

“Everything is context-driven. After ten benign years in the context of where we were…How would you look at the risk of a hurricane? The season after we had four hurricanes on the East Coast, which was actually extraordinary versus the year before, rates got very low… that year after 4 hurricanes… rates went up spectacularly… Is the risk of hurricanes any different any of those times?”
-Lloyd Blankfein, CEO of Goldman Sachs (January 12, 2010)

It is true that our economy was hit by hurricane Mr. Blankfein, but it was one created by you and your cohorts.

The financial services industry lobbied for the repeal of the Glass Steagall Act in 1999. That allowed banks to use their custodial power over your money to assume huge risks in investment markets.

They also lobbied for the Commodity Futures Modernization Act of 2000, which allowed banks to trade their crooked insurance in secret and exempted from all supervisory authority.

And to help grow the hurricane, then CEO of Goldman Sachs Hank Paulson made a personal plea to the SEC to allow banks to leverage more money against their capital. As much as $4,000 for every $100 in capital they held.

Wall Street may claim this was caused by a perfect storm, but the only thing perfect about it was their ability to line their pockets at the expense of our country.

Look at just the past few years of compensation for some of the CEO’s testifying today. Numbers that don’t even include the expected record-breaking 2009 bonuses.

  • $410 million for Goldman Sachs CEO Lloyd Blankfein over 3 years
  • $195 million in that timespan for JP Morgan CEO Jamie Dimon
  • $132 million for just two years work at Morgan Stanley for John Mack

Brian Moynihan has just stepped into his role as CEO of bank of America. But he stands to do just fine… His predecessor Ken Lewis made 150 million for 5 years before stepping down.

Unfortunately for the rest of us, their man-made money-making hurricane has devastated this country.

  • The deficit has skyrocketed over the past ten years. Our national debt now more than 12 trillion dollars.
  • More than 2 million families have lost their homes to foreclosure in the last 3 years. And seniors are denied interest on their savings, just so banks can receive tons of cheap money to try to gamble their way out of their hole.

So to you hurricane-makers, we say it’s time for you to come clean on your actions, let us fix your crooked system and finally pay us back for your destruction.

Today, Morgan Stanley CEO John Mack and JP Morgan’s Jamie Dimon talked about clawbacks they’ve instituted for their banks to recoup future losses… but what about the clawbacks for the bonuses you made over the past 10 years? The ones you made on the massive fraud that the American taxpayer is currently paying for?

Not to mention, the record-breaking bonuses to be awarded next week gambling with our bailout money. Take a listen to Mr. Mack’s justification during a recess this morning.

Potentially record profits Mr. Mack but they are clearly the result of a windfall of taxpayer support. So it only makes sense that this country follow the lead of Great Britain and France and enact a windfall profits tax.

Look at it this way: If we found out Katrina was the result somebody’s get-rich quick scheme, wouldn’t we demand restitution?

The Case Against Geithner

As we sit here today, Wall Street continues to exploit a policy of government-sponsored giveaways and secrecy to pay themselves billions.

Record-setting bonuses due to banks like Goldman Sachs as early next week.

Yet instead of acting as our cop, Secretary Tim Geithner has become central to what may be a cover-up of the greatest theft in U.S. history.

Here is the evidence.

COUNT 1: The AIG Emails:

Recently-released emails show Geithner’s New York Federal Reserve Bank directing AIG to keep details of the 100-cents-on-the-dollar bailout secret in 2008 — A reversal of the traditional role of government, which is to force companies to become more transparent, not less.

A Treasury Spokeswoman says: “Secretary Geithner played no role in these decisions and indeed, by November 24, he was recused from working on issues involving specific companies, including AIG.”

Friday, the White House also defended the Treasury Secretary:

Gibbs: These decisions did not rise to his level at the fed.
CNN’s Ed Henry: How do you know that he wasn’t involved? He was the leader of the New York Fed.

Gibbs: Right, but he wasn’t on the emails that have been talked about and wasn’t party to the decision that was being made.

He wasn’t party to a decision to hide $62 billion dollar payouts to firms that became insolvent during his 5-year watch at the New York Fed?

Congressman Darrell Issa speculates that maybe Geithner wasn’t on the emails in question because his people felt so strongly they already knew their boss’s intentions, they didn’t feel the need to bother him with the details.

COUNT 2: He wasn’t even a regulator!

In Geithner’s own words during confirmation hearings in March:

“First of all, I’ve never been a regulator…I’m not a regulator.”

According to the New York fed bank’s website, that was your job!! And I quote from the Fed’s website: “As part of our core mission, we supervise and regulate financial institutions in the Second District.”

That district of course is the epicenter for bailed out banks and billion dollar bonuses.

Count 3: “The Christmas Eve Taxpayer Massacre.”

As you were wrapping those last presents, Geithner’s Treasury Department lifted the 400-billion dollar cap on taxpayer responsibility for potential losses for Fannie Mae and Freddie Mac.

The new cap? Unlimited taxpayer funds! Interesting timing… Christmas eve, Tim?

Still no word on recovering the hundreds of millions paid to the CEOs who created this mess.

COUNT 4: He’s too cozy with certain banks.

Remember those call logs when he first started… 80 contacts with Goldman Sachs, JP Morgan, and CitiGroup CEOs in just 7 months!

But Bank of America’s CEO only got three calls. Apparently Bank of America is not one of Geithner’s favorites, especially when you consider that there are still many unanswered questions about Tim Geithner’s role in threatening to fire Bank of America management if they didn’t go through with a deal to buy Merrill lynch.

COUNT 5: TARP Special Investigator Neil Barofsky’s report says Geithner’s New York Fed overpaid the big banks through AIG by billions of dollars.

Geithner says it had to be done. Maybe so, maybe not, but this takes us to our final point.

Since then, the Treasury Secretary has yet to really prove whose side he’s on — the Wall Street big wigs or the American taxpayer? Here’s the litmus test: Mr. Geithner, show us the past ten years of AIG emails or step down so that we can get somebody who will. A crime has been committed against the American taxpayer and right now you are standing at the door of the crime scene refusing to let anyone in.

Show us you’re not involved Mr. Geithner, prove the white house correct in defending you. All we are asking for is the transparency promised by the President you serve.

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