President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.
The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”
"I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system.”
The free-market system ? I must have a far different idea of what constitutes the free-market system than our President does. In my version of the free market system, companies like Goldman Sachs and JPMorgan don't get to have the taxpayers bail them out when their risky business schemes run amok and result in massive losses for their companies, as well as for the financial system in general. When those companies get bailed out, that isn't the free-market system, it's the welfare state. Perhaps Obama the wealth redistributor has the two confused. Maybe he thinks the welfare state IS the free-market system. As for me, I'm not even too crazy about what the welfare state does to poor people in this country. I'm certainly not going to advocate it for the wealthy.
Let's examine these "savvy businessmen" that President Obama knows, the men whom Obama doesn't begrudge their multi-million dollar bonuses.
We'll start with JPMorgan. You may remember them for a "savvy" little derivative they cooked up in 1994 known as the credit default swap (CDS). The thinking behind the CDS went like this - J.P. Morgan loaned out huge amounts of money in 1994, tens of billions of dollars. By federal law, J.P. Morgan had to keep huge capital reserves on hand in case some of those loans went bad. So the "savvy businessmen" at J.P. Morgan designed a way to free up those capital reserves and mitigate their loan risk at the same time. A third party would serve as an insurance company to guarantee the loans in return for regular premium payments from the banks. The CDS was born, and within a few years, CDS business was booming big time. You may also remember the third party who served as the insurance company for the credit default swaps. It is known as AIG.
As always, it's important to remember that George W. Bush was the President in the 1990's when the CDS's were created and became popular, because everything is Bush's fault.
In fairness to Obama's acquaintance Jamie Dimon, he wasn't at JPMorgan when the CDS was created. Nope. But a few years after the CDS became the hot new financial instrument, Dimon and a partner formed the largest financial conglomerate the world had ever seen. That company was Citigroup. Dimon went on to become CEO of Bank One in 2000, and President of JPMorgan in 2004. He is also on the board of the New York Federal Reserve Bank, and following the real estate crash, credit crisis, and financial system collapse brought on by massive overleveraging on derivatives like the JPMorgan-created CDS, Dimon of the NY Federal Reserve made decisions to lend Dimon of JPMorgan $55 billion to bail out Bear Stearns. Nice work if you can get it. Then JPMorgan bought Washington Mutual. Too big to fail became too bigger to fail.
Here are the bailouts given to Jamie Dimon's various companies:
Citigroup - $45 billion ($25 billion has not yet been repaid) plus additional federal aid
Bank One - merged with JPMorgan in 2004 when Dimon became President of JPMorgan
JPMorgan - $25 billion (all repaid)
And the insurance company, AIG ? They have been bailed out and given other federal aid to the tune of $180 billion. $45 billion of AIG's bailout money has not been repaid, but it was recently announced that AIG is paying their employees $100 million more in bonuses. And the money AIG received from the government went to pay the insurance claims of other banks, like CDS creator JPMorgan, Citigroup, Goldman Sachs, etc.
These are some "savvy" mo-fos alright, as long as the American taxpayers serve as THEIR insurance company, insulating the "savvy" schemers against all losses and responsibility for their own actions. Who could ever begrudge multi-million dollar bonuses for such upstanding men as these ? These "savvy" turds really flesh out the old saying 'laughing all the way to the bank.' And the bank is us, the American people. Another word for us is the 'marks.' The banks make their profits from us in the first place, and then when the banks lose the money, we pay again to bail them out. And that is the greatest scheme of all, stamped with a seal of approval by the federal government.
Now let's turn to Goldman Sachs, who got a nifty little $10 billion bailout, all of which has been repaid. Goldman Sachs also got $12.9 billion of the AIG bailout money, more than any other firm, according to the NY Times. Lots of "savvy businessmen" at Goldman Sachs too. Remember who told America that the financial system was on the brink of collapse, and that we needed to pony up $700 billion for TARP ? That was Bush Treasury Secretary Hank Paulson, who coincidentally was the former CEO of...drumroll please...Goldman Sachs. Small world, isn't it ? Paulson left Goldman Sachs in 2006 to become the Treasury Secretary, near the apex of of the housing bubble. Paulson was at Goldman Sachs for 32 years. Maybe HE should have seen the financial troubles coming, don't ya think ? When guys like Paulson or current Treasury Secretary Tim Geithner, former President of the NY Federal Reserve Bank, tell us how much they hated the bailouts, it comes across as more than a tad disingenuous. These were the guys who watched the financial world spin out of control and didn't say squat until it all blew up in their faces. As Paulson said yesterday, "I do not get concerned about the second guessing, because this was very complicated. It's very hard for people to understand the technicalities." Sure Hank, whatever. Why should anyone second-guess the actions of Goldman Sachs or the rest of the Wall Street gamblers ? Btw, Paulson, overseer of the largest financial bailout in American history, considers himself a champion of the free market. I guess shame is not a trait these guys possess.
When Obama's "savvy businessman" Lloyd Blankfein took over for Paulson as the CEO of Goldman Sachs in 2006, he earned the big bucks right away, as the housing bubble peaked. The risky derivatives financial scheme was paying off nicely at that time. Blankfein earned over $53 million in 2006, and over $53 million again in 2007.
Finally, we should get to WHY Obama calls these men "savvy" and doesn't "begrudge" them their bonuses, while he continually demonizes others who engaged in the exact same business practices.....
Could it be because Goldman Sachs was the largest private donor to Obama's campaign, donating nearly $1 million ? Goldman Sachs was Obama's second largest donor overall. JPMorgan was sixth on the Obama campaign donation list. Standing in third place is Harvard University (every single person mentioned by name in this post attended Harvard University. Another big coincidence, eh ?).
These might be "savvy" men, but they certainly think the rest of us are a bunch of dummies. Maybe they're right, because we keep letting them get away with it.
Btw, credit default swaps, the trading of credit default swaps, and maybe even the insider trading of credit default swaps IS STILL LEGAL. Suckers.
AIG should be dissolved. Goldman Sachs should be broken up and sold. Citigroup should be broken up and sold. THAT is how the free market is supposed to work, no matter what our President might believe.
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