"A second fallacy," writes Harrison, "is that these large, universal institutions were primarily to blame for the financial crisis. As most serious observers acknowledge, a combination of bad lending and risk management by banks, poor regulation and ill-advised consumer behavior all played a role." (The word "serious" is almost always deployed in situations like this; it's a common ploy for discrediting legitimate critics.)
And who was it that engaged in all that "bad lending and risk management by banks"? The five top banks held 96 percent of the derivatives market last time I looked, and nearly as much before the crisis. That's where most of that "bad lending and risk management" took place.
In fact, JPMorgan Chase held 44 percent of the entire derivatives market -- all by itself.
As for "risk management" -- supposedly the strength of Harrison's successor Jamie Dimon -- the bank reportedly could lose as much as $9 billion in "London Whale" losses from a unit that a) Had not been following the bank's highly publicized risk management procedures and b) reported directly to Dimon.
The Worst of the Worst
Harrison writes: "None of the first institutions to fail during the crisis -- Countrywide, Bear Stearns, IndyMac, Fannie Mae and Freddie Mac, Merrill Lynch, Lehman Brothers, the American International Group -- were universal banks."
His point appears to be that these institutions had inferior controls; that they failed; and therefore justice was done. If big banks survived, Harrison seems to argue, it's because they were managed more effectively.
Yet a lawsuit from the Federal government says that too-big-to-fail Bank of America was worse than Countrywide, the company it purchased. "Even the top executives of Countrywide Financial Corp., the notorious mortgage lender... complained to each other... that BOA's appetite for risky products was greater than that of Countrywide," the lawsuit said.
The lawsuit named 16 other banks, including Citigroup, Goldman Sachs, and... oh, this is awkward... JPMorgan Chase.
The Devil Inside
So why didn't those institutions go down with the others? Because they were able to endanger their depositors' money in order to keep afloat just long enough for the government to rescue them -- because they were too big to faill. (The list of sued banks includes a number of foreign institutions which were also the recipients of U.S. taxpayer largesse, including the now-notorious Barclays Bank).
JPMorgan Chase, like its peers, received massive aid during the period of crisis, despite Dimon's claims at the time about its "fortress balance sheet." (Dimon's misleading statements about the "London whale" have already prompted the SEC to investigate whether he deceived investors; his "fortress" comments might be an appropriate subject for another such investigation.)
Harrison's right that there was "poor regulation." But what he fails to mention is the role his bank and other too-big-to-fails have played -- and are still playing -- in weakening regulations and regulators. Dimon's key Board position at the Federal Reserve would be a good place to start. So would the role that Dimon has played in trying to weaken Dodd/Frank. And so would Harrison's own political contributions -- as a Romney bundler this year, as a frequent contributor to Republicans, and as a targeted supporter of influential Democrats like former Finance Committee Chair Chris Dodd and Timothy Johnson.
When Dimon testified before the Senate Banking Committee, only two of the Senators before him had not been the beneficiaries of his bank's largesse. Now that's political muscle.
At this point the reader may be wondering how much more embarrassment Harrison's going to cause himself. Stick around.
The Buck Stops There
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