6 Ways the Big Banks Are Getting Back-Door Bailouts and Making Big Money From Taxpayers
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Bankers love to rail against government interference in the “free market.” Jamie Dimon, grilled this week in front of Congress over JP Morgan Chase's massive recent losses, famously complained last year that some regulations are “anti-American.” And Lloyd Blankfein, CEO of Goldman Sachs, warned ominously that increased regulations might make the bank seek out another location to do its business: “Operations can be moved globally and capital can be accessed globally,” he said.
Even while some of them occasionally have the grace to admit that they wouldn't still be around without the massive taxpayer bailouts of 2008 (and continued access to ultra-cheap loans from the Federal Reserve), they still like to claim that they're free-market entities, subject to the whims of the invisible hand, and that the government's meddling can only be destructive.
Yet those same banks are happy to make their money from the same governments about which they love to whine. Most of us know about the big, official bailouts. But the banks get much more than that from federal and state governments. Those lobbying dollars and campaign donations aren't just to keep regulators away; they lead to lucrative contracts where banks are paid to administer government services, and are put in position to skim fees off the very same taxpayers who pay for those services.
The big banks have their tentacles in every aspect of government—despite right-wing hand-wringing about government bureaucracy, the big banks are often actually the ones coming between you and your money. So who's really getting rich off “welfare”? JP Morgan and Bank of America.
Below are six ways the big banks rake in cash every day from services that are supposed to help working Americans.
1. Big Contracts for Food Stamps
Suzanne Merkelson at Republic Reports points out that Supplemental Nutrition Assistance Program (SNAP) benefits—the program formerly known as food stamps, which provides food aid to families—increased to $72 billion last year (from $30 billion in 2007).
And as the lousy economy keeps people relying on benefits to feed their families, big banks keep benefiting from the program too. A new paper [PDF] from Michele Simon finds that SNAP “represents the largest, most overlooked corporate subsidy in the farm bill.” Merkelson writes:
While SNAP is a federal program, USDA and the states work together to administer the program. States contract with banks, who authorize payments (Electronic Bank Transfers or EBTs) from the Federal Reserve to retailers. J.P. Morgan Chase has contracts in half the states “indicating a lack of competition and significant market power,” according to Simon. How much are these deals worth? In New York, one seven-year deal originally gave the bank $112 million for its services, but was recently amended to add another $14.3 million.
JP Morgan spends a bunch of money lobbying the Department of Agriculture on this program, making sure they get what they want—a big paycheck from state taxpayers.
And the best part? When you have a problem with your JP Morgan SNAP benefits card? You call a JP Morgan call center for help—and that call center just might be in India.
So to recap: big bank makes money off a program that helps people who are unemployed—and creates jobs in India with that money, rather than creating them here in the US.
2. Making Money Off the Unemployed
The banks get paid directly by the state to handle the SNAP program, but that's far from the only program designed to help the victims of the lousy economy that has turned into a cash cow for the banks that created the crisis in the first place.