Wall Street Forgets Its Job Is to Create Jobs
By William D. CohanJun 24, 2012 6:05 PM ET
Conventional wisdom has it that congressional hearings rarely shed new light and devolve quickly into a stream of sound bites that members can use in their re- election campaigns.
By that measure, Jamie Dimon’s appearances before the Senate Banking Committee and House Financial Services Committee -- in which the JPMorgan Chase & Co. (JPM) chief executive officer had to explain how his bank lost more than $2 billion on a poorly executed proprietary trade -- mostly didn’t disappoint.
For instance, at the very end of the House hearing, after most of the other representatives had left and Dimon was itching to get back to New York, Al Green, a Texas Democrat, managed to elicit from Dimon a promise the banker surely hopes he’ll never have to keep. After Green explained his concept of “too small to live off” -- his idea that too many people in the U.S. live below the poverty line while executives on Wall Street rake in tens of millions of dollars in compensation -- Dimon said he would show up “any place that you’d like” to discuss it further.
“What I want to talk to you about,” Green said, “is this: $47,000 is what it costs a family of four to live off in Houston. The poverty level is $23,000 a year. The average janitor, working full time, will make about $18,000 a year. That’s working full time and living below the poverty line.”
Making Sense
What the annual compensation of an average janitor living in Houston has to do with why Dimon allowed his traders to take huge risks with his depositors’ money is not at all clear, but the exchange should give you a feel for what the hearings were like, in case you had better things to do. (Still, I enjoyed that Green said he would pay his own way to get to wherever they continue their discussion and not use any “congressional funds,” while Dimon will probably resort to his private jet -- assuming he has to travel to the meeting.)
There was at least one five-minute period that cut through the pointlessness. For that, we can thank Representative Gary Ackerman, a Democrat from New York who is retiring after this term, his 15th. Ackerman did a bit of pontificating, but he also made a whole lot of sense when he got his hands on the microphone.
“I used to think that all of Wall Street was on the level,” he explained, “that it facilitated investing, that it allowed people and institutions to put their money into something that they believed in and believed would be helpful and beneficial and grow and make money and especially help the economy and, on the side, create a lot of jobs and be good for our country and good for America.”
Then he picked up steam. “Now, a lot of what we’re doing with this hedging -- and you could call it protecting your investment or whatever -- but it’s basically gambling,” he said. “You’re just betting that you might have been wrong. It doesn’t help anything succeed anymore. It doesn’t encourage anything anymore.”
Fully warmed up, Ackerman got to his point about what all the hedging on Wall Street accomplishes. “I don’t see how that creates one job in America,” he said. “I don’t see how it helps the American economy. I don’t see how it helps the housing market or the building market or the let’s-make-steel or widgets market.”
Ackerman is right. The only beneficiaries of hedges, if they work out, are the bankers and traders who profit from a gamble they took with their depositors’ and shareholders’ money in the first place.
more:
http://www.bloomberg.com/news/2012-06-24/wall-street-forgets-its-job-is-to-create-jobs.html
DO SOMETHING!
| 