This week, megabanks gave their customers yet more reasons to break up with them and support community investing institutions instead.
JP Morgan Chase CEO Jamie Dimon answered questions in front of the Senate Banking Committee yesterday, and admitted that his bank made mistakes regarding billions of dollars of losses from trades. Dimon has even admitted that some of the activity involved may have been illegal. The Senate Banking Committee unfortunately went pretty light on Mr. Dimon. That’s a shame, because as Richard Eskow points out in the Huffington Post, Dimon’s action raises a number of troubling issues, including: 1) why is Mr. Dimon on the Board of Governors of the Federal Reserve Bank of New York, when his firm is benefitting greatly from this entity? Isn’t that a major conflict of interest?; 2) Doesn’t Mr. Dimon owe his shareholders an apology for going along with risky practices when he has a duty under Sarbanes Oxley to ensure that the bank’s risk mitigation strategies are sound?; and 3) since Chase has been implicated in foreclosure fraud, shouldn’t they be making a commitment to helping America’s many homeowners who are underwater?
In addition, JP Morgan Chase’s recent losses raise the significant question of why is Chase (as well as other megabanks) gambling with FDIC-insured dollars? As William Greider points out in The Nation, banking reform should have ended the practice of banks gambling with FDIC-insured funds. But, banks and their regulators have found convenient loopholes to allow megabanks to once again take enormous risks that could lead to another bailout. Of course, Chase and the other megabanks campaign relentlessly against increased banking regulation and shower Congress with exorbitant campaign contributions to make sure effective regulation never happens.
Wells Fargo made the news this week owing to an affidavit of a former loan officer, Beth Jacobson, who describes how she and fellow employees steered African American borrowers to subprime loans regardless of their credit. Ms. Jacobson, who now seeks to help homeowners who are underwater on their mortgages, also describes how she provided mortgages to people who could not afford to repay them. The story was headline news in the Washington Post and is getting picked up all over the web. While the number of lawsuits against banks continues to rise, the question still remains: why doesn’t the US Government break up the mega-banks, prosecute high-level banking executives, and create a truly sound financial system?
With election season coming up, it’s a good time to press candidates on where they stand on real banking reform. And, if you haven’t done so already, it is always a good day to break up with your megabank.