Friday, May 11, 2012

Mitt Romney: Enabling the Wall St. Gambling Addicts

So apparently JP Morgan has managed to piss away $2 billion in what they've been claiming was a hedge scheme, designed to minimize their risk on loans, but which in fact became an important generator of profits in its own right.

(All images from Wikimedia Commons)

If this sounds familiar, it's because it's PRECISELY the kind of greed that helped cause the Bush financial crisis. The irony is particularly sharp when one considers the fact that Jamie Dimon, the CEO of Morgan Chase, has been insisting that the financial crisis is NOT grounds for additional regulation of the financial markets. He has pointed to his own firm's avoidance of the worst consequences of the meltdown as evidence that competently managed financial institutions are perfectly capable of moderating their own behaviors, and not dragging the entire financial system into another debacle, like the one we're still trying to climb out of.

It's all arrogant bullshit, of course. I'm sure Mr. Dimon thinks he's much smarter than the rest of us, and of course he's got his net worth of $200 million to PROVE how much smarter he is than all the rest of us. I mean, anyone that rich MUST be smart, right?

In fact, gross differences in human "intelligence" don't exist, outside organic brain damage. Human intelligence is constrained by our neurology, and the very brightest among us make the same kinds of mistakes in the same set of circumstances, over and over, as though we were no brighter than a chimp.

Dimon's compensation is a function of how much his company makes, and his company makes more money on risky investments than it does safe investments. The other side of the equation is not true. If JP Morgan Chase loses its shirt, Dimon still makes his base salary of $2 million. The incentives here are to maximize profit, not minimize risk. This is also true of the people  who work for Dimon; Ina DrewAchilles Macris and Bruno Iskil. If you pay people to gamble, they're going to gamble. They may deny gambling, they may insist they're not gambling, they'll probably convince themselves that what they're doing isn't a gamble for anyone as smart as they are...

but, they'll gamble. Preferably with the shareholders money, rather than their own.

None of this is a surprise to anyone, except for the megalomaniacs on Wall St. and the sheep who keep buying their self-promotional bullshit. But this latest teachable moment gives us another metric by which to measure Willard Romney.

Romney has claimed, loudly and frequently throughout the primary that financial regulation, and particularly Dodd-Frank, are not only unnecessary, but actively harmful. He has pledged an outright repeal of the legislation, while remaining characteristically vague about the regulations he'd replace it with.

On the surface, it's an odd position for a candidate for national political office to take. A recent Harris poll demonstrated overwhelming popular support for stricter regulation of the nation's financial institutions.

But of course, Governor Romney has his reasons for advocating less stringent controls on the titans of industry who nearly destroyed our economy.

This latest debacle provides an excellent reality test of his public assertions regarding the need for and effects of such regulation.