Quote: (05-13-2012 08:05 AM)Roosh Wrote:The problem here is what's called a "moral hazard." Michael Douglas talked about it in the second Wall Street movie. Even though the movie sucked, that little tidbit was informative.
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If you’re wondering why you should care if some idiot trader (who apparently has been making $100 million a year at Chase, a company that has been the recipient of at least $390 billion in emergency Fed loans) loses $2 billion for Jamie Dimon, here’s why: because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.
Read more: http://www.rollingstone.com/politics/blo...z1ukqP0Lnf
A moral hazard is the tendency to take higher risks because the party taking the risk doesn't bear the costs. JPM took money in the past and they did pay it back. But they engaged in the same behavior again because they know that bailouts will be there in the future. And the problem is compounded because the repeal of Glass-Steagal has allowed commercial banks to play the same high stakes poker as the investment banks. And they do it with your money whether you want them to or not. Yes, your money is insured, but only up to a point, and since the taxpayers(you) are the insurer, you you have to pay to cover the loss of your money. They put all the risk on you, while they reap the profits.
The official reason for the repeal was to make life more convenient for outfits who move large sums of money around (which is a poor reason to begin with.) The real reason they did it was because Wall Street owns DC. And despite how the news always talks about Americans not saving money, the fact is, many do. The commercial banks wanted to go gambling with the depositors money. And there was no risk in it for them.