Former Senator Barney Frank was on CNBC today talking about Dodd-Frank act, but that’s not what interested me today. What interested me today was that Barney Frank said that both J.P. Morgan and Wells Fargo (via Wachovia) were forced to take the bailout money.
Former Senator Frank said that both banks did not want to take bailout money because they (the banks) said that they didn’t need it and that they were solvent. Pretty much they were forced to take that money for the betterment of the country, and the world. So those banks that realized the risk involved with CDOs and the whole sack of “you know what” back then did their part in helping solve the financial systemic crisis that the world was experiencing at the time.
J.P. Morgan then helped the world by purchasing the insolvent firms Washington Mutual and the Bears Stern assets. So J.P. Morgan was wearing the big “S” on their chest, and what happens, the government decided to go after J.P. Morgan shareholders in the form of lawsuits because of the Bears Stern (and maybe WM) previous risky moves that J.P. Morgan saved. And that’s what’s confusing me… It’s kind of like a dog biting the hand that feels it no? Or maybe you save someone from a burning building and they sue you because some other guy started the fire but you put it out.
I hear the Media and the “one percenters” complain about J.P. Morgan (and indirectly Jaime Dimon) taking the bailout (which they were forced to do), and then questioning Jaime Dimon, who by all accounts President Obama and Barney Frank support.
This is why I think that we live in Bizarro world sometimes.
I think there is so much misinformation and added confusion by large media channels and political advisors, not to mention comedy shows like John Stewart’s show, that the truth and reality of the such issues get lost and twisted, at least in my opinion.
I think that when sources like Barney Frank (a Democrat), come out and support a business (JP Morgan), then we are probably getting a pretty good picture of the truth on what happened…
That’s my two cents on why neither Jaime Dimon or the business J.P. Morgan should have any lawsuit brought against them for saving us.
Bests,
Don
I remember very well that both JPM and Wells-Fargo said they didn’t need the bailout money. However, a little forensic accounting would’ve told a different story. Both organizations’ balance sheets were chock full of “mark-to-fantasy” CDO’s, both had sold credit default swaps out the ears, both engaged in lots of fancy accounting to keep the worst performing assets completely off their books. I don’t for one second believe their protestations. They were every bit as dirty as all the other “bad banks” and were every bit as close to insolvency. The fact is that the government bailed out ALL the “Too Big to Fails” simply because the TBTF’s had guns pointed at the heads of the politicians whom they owned – and whom they still own.
Had the money that got dumped into the TBTF’s coffers gone directly into the economy instead, every private mortgage in American could’ve been paid off. How much better do you suppose the economy would be doing then?
/rant off
Perhaps, but I don’t think Barney Frank is really intimidated by anybody. I hate to admit it, but I’ve grown to respect the way Barney Frank operates… he calls it like he sees it.
As for the “marked-to-fantasy”, I think it was silly to insist that the banks “mark-to-market”, during a recession…
People are people, and nobody likes to fail. This was not a grand plan of the banks, and to be honest I were in such a position, I probably would follow since there was no perceived risk (Moody’s and Standards and Poor said so!, lol). Jaime Dimon didn’t go all in (and neither did Wells Fargo). If their balance sheets look questionable now, it’s because they bailed out the country by taking over bad assets from the failed banks…
Thanks for commenting, but I respectfully disagree.
@Money Reasons,
I’m a really big fan of your blog, but I respectfully disagree with you on this comment.
First, Wells Fargo was listed as one the 50 safest global banks, even after assuming the liabilities of Wachovia. They weren’t even remotely close to needing a bailout and would have easily survived the financial crisis and later stress testing without it. They were forced to take the bailout by the Fed and that is common knowledge.
Second, all of the dangerous precursors to the financial crises of 2008 happened on Barney Frank’s and Chris Dodd’s watch. Despite the fact they named the reform bill after these two, they were both huge contributors. The real heroes who stood up before and during the financial crisis were Sheila Bair, Mary Schapiro and Elizabeth Warren. Bill Clinton was the one who gutted the Glass-Steagall act, which allowed the crisis of 2008 to happen in the first place.
You are totally right about Barney Frank, I actually reconsidered that comment and was going to contradict myself with a new comment reversing my thoughts about Frank, but you summed it up perfectly!
When I was writing this, Frank was on the TV sticking up for Jamie Dimon, but later I realized what he was a bit part of the problem. Then he comes back on TV saying he wasn’t when there are clips of him in the past proving that he was.
I didn’t realize about Bill Clinton’s role in this mess! Thanks for the input, I’ll have to go and check that out.
Wasn’t BofA also forced to buy Merrill Lynch? Granted, BofA was already planning to buy Merrill Lynch, but there are many stories that BofA chairman, Ken Lewis, wanted to renegotiate the buyout, but was told by Paulson and Bernanke that the deal had to go through right away with no changes, and that the Government would provide a rescue package to BofA to take the deal.
I think BofA actually wanted Merrill Lynch anyway, so they weren’t forced to buy them. As far as I know none of the companies were forced to buy the “in trouble” companies.
BofA had problems anyway though, I’m pretty sure both BofA and Citi (especially Citi) needed the bailout.
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If you haven’t seen it yet there is an HBO original movie that is AMAZING. https://www.hbo.com/movies/too-big-to-fail
It centers around Paulson and is just fantastic
IMHO, Henry (Hank) Paulson was the guy that saved the financial system. Not Bush or Obama, but we’ll mainly be the ones that know that.
Oh, I forgot the mention that Warren Buffett had a big part of the bailout idea too. I didn’t know that Warren had a hand in fixing things…