Probing question asked by a JPMorgan employee asked of an un-named JPMorgan executive during an October 17 employee-only conference call. From this morning's New York Times story:
“Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”Here's the startling answer:
“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”More from NYTimes reporter Joe Nocera's morning story:
Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive... explained that “loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot.Today's remarkable NYTimes story reveals what the reporter refers to as the banking industry's "dirty little secret":
Given the way, that is, that Treasury Secretary Henry M. Paulson Jr. had decided to use the first installment of the $700 billion bailout money to recapitalize banks instead of buying up their toxic securities, which he had then sold to Congress and the American people as the best and fastest way to get the banks to start making loans again, and help prevent this recession from getting much, much worse.In short, Congress and the American people were sold a bill of goods with the passage of the recently passed Emergency Economic Stabilization Act of 2008 ("Treasury Secretary Paulson's bailout bill"). Rather than using these massive infusions of taxpayer cash to unclog the credit markets, and to infuse liquidity into the U'S. credit system, the greedy recipients of the taxpayers' historically unprecedented largesse intend instead to use these monies to feather their own nests, and to facilitate further acquistions, mergers and consolidations.
In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshot of a journalist.
This latest news is predictably going over like a lead balloon on Capitol Hill. This from Democratic Senator Dodd, when reporter Nocera asked the Senator what he was going to do if the loan situation didn’t improve:
“All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation,” he replied."Revolution," folks. That's the word now being used on Capitol Hill. So far all our federal legislature has done is to "roll over" and "beg."
He continued: “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”
We ask our gentle readers: Is there anyone here who's surprised by this latest development? Was it reasonable to expect that the same industry which brought on the current world economic crisis would suddenly begin to act in the public interest? Is there anyone here who actually believes that our Congress will have the guts to do anything about this?
Don't let the cat get your tongues, O gentle ones...
