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Matt Taibbi on Just How Screwed Americans Were By the Bailout

In a new article, Taibbi argues the government did not just bail out Wall Street, but also lied on the financial sector’s behalf.

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JAMIE DIMON: I think you were misinformed. And I think that misinformation is leading to a lot of the problems we’re having today. JPMorgan took TARP because we were asked to by the secretary of Treasury of the United States of America, with the FDIC in the room, head of the New York Fed, Tim Geithner, chairman of the Federal Reserve, Ben Bernanke. We did not, at that point, need TARP. We were asked to, because we were told—I think correctly so—that if the nine banks there—and some may have needed it—take this TARP, we can get it to the—all these other banks and stop the system from going down. We did not—

SEN. JEFF MERKLEY: I’m going to cut you—

JAMIE DIMON: We did not borrow from the Federal Reserve, except when they asked us to. They said, "Please use these facilities, because it makes it easier for other" —

SEN. JEFF MERKLEY: We would all like to be asking—

JAMIE DIMON: And we were not bailed out by AIG, OK? If AIG itself would have—we would have had a direct loss of maybe a billion or $2 billion if AIG went down, and we would have been OK.

SEN. JEFF MERKLEY: Then you have a difference of opinion with many analysts of the situation who felt the AIG bailout did benefit you enormously. And I’m not going to carry that argument with you now.

JAMIE DIMON: Well, but they’re factually—

SEN. JEFF MERKLEY: Sir—

JAMIE DIMON: They’re factually wrong.

SEN. JEFF MERKLEY: Sir, this is not your hearing. I’m asking you to respond to questions. And I also only have five minutes.

AMY GOODMAN: That was Oregon Democratic Senator Jeff Merkley questioning JPMorgan Chase’s Jamie Dimon. Matt Taibbi, the significance of this exchange?

MATT TAIBBI: Well, I think that’s one of the things that’s really interesting. And one of the things that I write about in this article is that this is what Neil Barofsky, the bailout inspector, calls the "original sin" of the bailout, which is this moment in time where—right after TARP was passed, where the government elected to call companies that were unhealthy and insolvent "healthy" and "solvent." When they scrapped the plan to buy up troubled assets—remember, TARP was the Troubled Asset Relief Program—well, they scrapped that idea a few days after the bill was passed and decided to just dump a whole bunch of money onto the balance sheets of these banks. This was called the Capital Purchase Program. They spent $125 billion right off the bat. It was spent on nine companies. And one of the things they said was, all of these companies are healthy and viable. And it turned out later, according to numerous sources, including all the SIGTARP reports, including—according to Barofsky and other sources, that they didn’t even check to see if these companies were solvent at the time. They had no interest in discovering that, one way or the other. And, in fact, many of these companies were on the brink of failure at the time. Barofsky was told specifically that Morgan Stanley and Goldman Sachs were both on the brink of disaster when they were given this money.

It’s interesting that Jamie Dimon talks about how his company didn’t need that Fed money. You know, it came out in the—in Bloomberg’s Freedom of Information request, when they got all the data from the audit of the Federal Reserve, it came out that his company, at that time, in late 2008, had a $50 [billion] or $60 billion line of credit with the Fed on top of all the money they were getting through the TARP bailout, through the bailout of Bear Stearns and other facilities. So, apparently, they didn’t need all that money, you know, that $100 billion or whatever it was they got from the federal government; it was just they were taking it because they were being polite, they were being—and they were asked to by the federal government. And this fiction, that they didn’t need the money, that they were healthy all the time, the government—we not only gave them money, but we vouched for them, and now we’re stuck vouching for them basically forever. And that’s the ongoing bailout that has become the real problem.

 
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