I wish President Obama would draw the obvious connection between Bain Capital and JPMorgan Chase.
That way his so-called "attack" on private equity is neither a
personal attack on Mitt Romney nor a generalized attack on American
It's an attack on a particular kind of capitalism that Romney and
JPMorgan both practice: Using other peoples' money to make big bets
which, if they go wrong, can wreak havoc on the economy.
It's the substitution of casino capitalism for real capitalism, the
dominance of the betting parlor over the real business of America,
financial innovation rather than product innovation.
It's been terrible for the American economy and for our democracy.
It's also why Obama has to come out swinging about JPMorgan. The
JPMorgan Chase debacle would have been prevented if the Volcker Rule
were sufficiently strict, prohibiting banks from using commercial
deposits to make bets except very specific offsetting bets (hedges) on narrow classes of trades.
But Jamie Dimon and JPMorgan have been lobbying like mad to loosen
the Volcker Rule and widen that exception to include the very kind of
reckless bets JPMorgan made. And they're still at it, as evidenced by
Dimon's current claim that the rule that eventually emerges would allow
As a practical matter, the Volcker Rule is hopeless. It was intended
to be Glass-Steagall lite -- a more nuanced version of the original
Depression-era law that separated commercial from investment banking.
But JPMorgan has proven that any nuance -- any exception -- will be
stretched beyond recognition by the big banks.
So much money can be made when these bets turn out well that the big banks will stop at nothing to keep the spigot open.
There's no alternative but to resurrect Glass-Steagall as a whole.
Even then, the biggest banks are still too big to fail or to regulate.
We also need to heed the recent advice of the Dallas branch of the
Federal Reserve, and break them up.
At the same time, there's no point to the "carried interest" loophole
that allows private-equity managers like Mitt Romney to treat their
incomes as capital gains, taxed at only 15 percent, when they've risked
no money of their own.
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If private equity were good for America it wouldn't need this or the
other tax preference it depends on, elevating debt over equity. But the
private equity industry has huge political clout, which is why these tax
Get it? Bain Capital and JPMorgan are parts of the same problem. The President should be leading the charge against both.