Obama's Favorite Banker Jamie Dimon Bitches About Regulations, Has Short Memory

“I have a great fear someone’s going to write a book in 20 years and the book is going to talk about all the things that we did in the middle of a crisis to actually slow down recovery.”  - Jamie Dimon, CEO JP Morgan Chase 

In hot pursuit of the “Bankster of the Year Award,” Jamie Dimon, the CEO of JP Morgan Chase, is gaining quickly on Lloyd “Doing God's Work” Blankfein, the CEO of Goldman Sachs. You’ve got to admire Dimon’s nerve to complain, as he recently did to Fed Chair Ben Bernanke, that the heavy hand of financial regulations is slowing down our pathetic economic recovery. It takes even more chutzpah to argue that the financial markets can actually police themselves instead.  

Dimon is banking on the spread of financial amnesia – that incurable disease that causes us to forget that the era of banking deregulation led to the worst crash since the Great Depression and caused the loss of over 8 million jobs in a matter of months. (How many jobs is that? It’s the equivalent of the entire workforce of New England.)  

If you didn’t black out completely, you should remember that Wall Street’s reckless (unregulated) gambling spree did us in. And you also should realize that we haven’t done nearly enough to prevent our financial elites from taking us down again.    

Through the haze of time, Dimon hopes we’ll forget that we bailed out his bank along with all the other big players on Wall Street. Although he and his PR minions claim that his bank was completely solvent and really didn’t need any help, the truth is that without the bailouts and the enormous government-backed guarantees of all manner of "toxic" assets, JP Morgan Chase would have gone under as well.  

Instead of letting them take their lumps as the "free market" would dictate, we now have fewer big banks that are even bigger and that have even more control over their markets. Of course these oligarchs want less regulation. They have returned to record profits and bonuses, and have not had to pay a dime in windfall taxes or surtaxes on their obscene bonuses. Only in finance can you puff up a bubble and rack up phony profits, wreck the economy when it bursts, get bailed out so that you can profit again like nothing happened, and then have the gall to complain about mild regulations that might make it just a bit harder to rip us off again. Oh…and get even bigger when all is said and done. 

And should they fail? They know we have no choice but to bail them out again because they have been deemed by the US government as “systematically important financial institutions.”  

But Mr. Dimon’s Teflon image as Obama’s favorite banker is now under assault. Due to the Pulitzer Prize-winning reporting of ProPublica’s Jesse Eising and Jake Bernstein, we’ve learned that the hedge fund Magnetar and JP Morgan Chase were in cahoots on some particularly slimy deals.  

It turns out that JP Morgan Chase worked with Magnetar to structure a $1.1 billion collateralized debt obligation (CDO) deal called Squared that was purposely structured to fail spectacularly. (A CDO squared is a CDO composed of slices of other CDOs, which in turn are composed of slices of large pools of often shaky mortgages.) Magnetar was permitted to select the most toxic mortgage pools to put into these CDOs, and then to bet enormous sums that they would fail. JP Morgan let them rig the game because of the enormous fees that would accrue to Dimon and company for putting the scheme together. 

Unfortunately, making the deal work also required that JP Morgan sell the damaged goods to its clients by convincing them the securities were highly rated and would not fail. Low and behold, when the CDOs blew up just as Magnetar had planned, the hedge fund walked off with $290 million and JP Morgan “earned” $20 million, while the clients lost their shirts. The word “fleecing” comes to mind. Here’s how Eising and Bernstein put it: