JPMorgan Chase has announced profits of $11.9 billion in 2009, and the other large banks we bailed out are expected to follow.
Ah, we can heave a sigh of relief. All must be well with the financial system!
The bankers are prancing merrily along, returning to their derivative ways and awarding large bonuses. (JPMorgan, for example, has set aside $26.9 billion for compensation for 2009.)
Some analysts far smarter than I am have pointed out the bubble once again brewing as the financial wizards work their balance-sheet magic. What’s more appalling is that the banks do not seem interested in assisting the rest of us out of the financial mess they helped create.
My fear is we have lost the tangible moment to repair our broken financial-regulatory system. We must recapture the outrage from a year ago and continue to demand meaningful financial reform from the federal government.
Back then, the banking crisis was still fresh in our minds. Many of us were frustrated by a system consumed by greed — and the billions in taxpayer money being spent to bail out those foolhardy bankers.
Yes, we had to suffer bailout pain to prevent the global economy from spiraling downward. The key was seizing that opportunity to change the broken free-market ethos that had hijacked our economic thinking.
But efforts to overhaul the financial regulatory system — emasculated by the Financial Services Modernization Act of 1999 — stalled. The bill passed recently by the House gave new meaning to the phrase “watered down.”
Now, we are hearing reports about the billions in bonuses. Big dollars speak to people. Perhaps the outrage will be rekindled.
President Obama has tried to attack the bonuses, but that’s not enough. He should focus on the financial system.
A few suggestions:
- Consolidate the plethora of financial agencies into one oversight body.
- Do not allow investment houses, commercial banks, and insurance agencies to cross-breed.
- Limit how big banks may become.
Have we not learned the lessons of the Great Depression and the S&L crisis of the 1980s/90s? In a completely free market, there are too many willing to risk it all, regardless of how many it may hurt.
Mr. President, reform now — before the momentum is lost once again. And let’s make sure the Financial Crisis Inquiry Commission (which started meetings this week) accomplishes something real, something that will actually prevent such a crisis from happening again.
(Addendum 1/16/09: The commission hearings confirm we should not listen to Wall Street, according to an excellent column by economist Paul Krugman.)