Let’s start with two recent events that highlight the damage American capitalism has done to American political institutions. I’m talking about the appearances of Jamie Dimon before the Senate Banking Committee on June 13 and the House Financial Services Committee on June 19.
Dimon is chairman and CEO of JPMorgan Chase, the largest bank in the U.S., with assets over $2 trillion. He is a familiar figure on TV, with his elegantly coiffed white hair and serene demeanor. He is widely and lavishly praised (even by President Obama) for his financial wisdom.
Dimon had been summoned to explain his bank’s recent loss of $2-3 billion dollars in risky trades at its London branch. (Current estimates of the loss range from $6-9 billion.)
All these investigations should remind us that the weak Dodd-Frank reform law of 2010 has left JPMorgan Chase and other Wall Street giants too big to fail (TBTF). The financial world knows the U.S. government will bail them out if they go broke, just as it did in 2008.
Their TBTF status raises their credit rating and lowers their borrowing costs. In the case of JPMorgan Chase, this amounts to a $14 billion government subsidy, according to an article in Bloomberg.com (“Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare?”).
Republican senators on the Banking Committee received Dimon with a fawning frenzy. For instance, Sen. Bob Corker (R-Tenn.) asked Dimon, “What would you do to make our system safer?” And Sen. Mike Crapo (R-Ida.) asked, “What should the function of regulators be?” Sen. Jim DeMint (R-South Carolina) solicited Dimon’s “ideas on what you think we need to do.” It was like a delegation of hens imploring the fox for his recipe.
JPMorgan Chase, described by President Obama as “one of the best managed banks,” is a habitual criminal. Try googling “JPMorgan Chase crimes.” I stopped counting after finding $6 billion in settlements for various kinds of bid-rigging, bribery and fraud. In a decent, law-abiding country that values accountability, Dimon’s corrupt firm would have been shut down.
The Senate committee was roundly criticized for its obsequious behavior. Perhaps as a result, when Dimon went before before the House Financial Services Committee six days later, several members of both parties asked critical questions.
However, committee chairman Rep. Spencer Bachus (R-Alabama) was watching his back. Bachus, “who has received more money from JPMorgan Chase than any other donor except one over his career … consistently interrupted even members of his own party when they went too hard on Dimon” (npr.org). In a newspaper interview in 2010, after he was appointed committee chair, Bachus said: “My view is that Washington and the regulators are there to serve the banks.”
Lying within Bachus’s 6th district are parts of Jefferson County that include the suburbs of his native Birmingham. In 1997, JPMorgan Chase sold Jefferson County a financing package for a $300-million sewer project. The package included derivatives that went bad, leaving the county with $3 billion in debt. This led the county in 2010 to declare the largest municipal bankruptcy in U.S. history.
According to Bloomberg News, “In 2009, JPMorgan agreed to a $722 million settlement with the Securities and Exchange Commission over payments its bankers allegedly made to people tied to (Jefferson) county politicians to win (the financing contract).”
This sordid crime against his home town did not deflect Rep. Bachus from his mission to “serve” Jamie Dimon’s bank.
There’s nothing very special about this “Mr. Dimon goes to Washington” story. It’s business as usual in the moral swamp that is the government of the United States. And it’s the logical, predictable outcome of a capitalist political system.
In a capitalist political system, the primary role of a national government is to protect and facilitate a national market in which firms operate with a minimum of government intervention. Competition and economies of scale result in huge corporations as dominant social institutions.
Money is power — it commands not only goods and services in private markets, but also the services of those who govern. Only those who control large corporations can provide the money politicians need to campaign for national office in the world’s largest economy.
So, in a capitalist political system, the primary role of government is to nurture a private market that will in turn subordinate government to the profits of the wealthy minority who control large corporations.
Why would any society want to do this? Ask our two political parties.
Brian Cooney is emeritus professor of philosophy at Centre College.