“My administration is the only thing between you and the pitchforks.” – Barrack Obama March 27, 2009
The president was speaking to the heads of America’s largest banks in the White House shortly after his election. At this extraordinary meeting, Obama and his administration made it very clear that the big banks would play ball or have problems.
The CEOs of the big banks genuflected, as was wise. Jamie Dimon, Ken Lewis, and others knew what was expected of them. The play for these men was to roll over, which they did. And to write checks to Democrats, which they did.
They had already written big checks to Obama in the 2008 campaign. Wall Street piled onto the Obama bandwagon when things began to look obvious. Goldman Sachs employees for instance were Obama’s largest contributor after the University of California system. JP Morgan and Citi were not far behind.
They all got protection from the “pitchforks,” courtesy of President Obama. In particular, they got protection from legal actions connected to the Crash.
A little more than midway through the first Obama term, Wall Street began to wonder if the play was no longer to roll over, but to back the Republican candidate. Here was a candidate who came from their ranks. Who likely would not exact a political toll for protection, but would do it as a matter of natural disposition. Wall Street had more faith in Mitt Romney than Main Street did and Wall Street went in whole hog.
Compare the top donors for Obama in 2012 versus the top donors for Mitt Romney. Then compare the top donors for Obama in 2012 with the top donors in 2008.
For all the “protection” Obama had given Wall Street, they had abandoned him in the second election. All fat and happy on TARP money and the extraordinary actions of the Federal Reserve, the banks were feeling their oats again. Problem is, Wall Street threw in with the wrong guy.
Even Jeff Immelt, CEO of GE, the head of Obama’s job council , which was not really about jobs but rather an Obama campaign fundraising vehicle, got squishy about his support for Obama. Despite GE’s reliance on its relationship with the Obama administration, there was an unconfirmed rumor in 2012 that Immelt would vote for Romney.
Check out this picture of Obama and Immelt’s first meeting after Obama won his second term.
Immelt got away with an uncomfortable handshake. Jamie Dimon, CEO of JP Morgan would not get away so easily.
On Friday of last week, JP Morgan announced that it would take a quarterly loss for the first time since 2004 thanks to legal costs and a $7.2 billion fine handed down from the Justice Department. Eric Holder, who earlier this year threw up his hands and said he couldn’t prosecute HSBC because if he did the world banking system might collapse (the too big to jail doctrine), decided along with New York State prosecutors that it was time for Dimon to pay. He hadn’t played the game as agreed.
There is something decidedly curious about the charges. They largely stem from activities of Bear Sterns, a firm that Morgan acquired at the request of the government. This proves the old saying: there is no honor among cronies. Do the government a favor and get slapped whenever the government chooses.
And why the move right now? It seems to have to do with the statute of limitations. With time running out on many of the banks violations during the run-up to the Crash, the decision was probably made by the White House to make a move before absolutely no flesh could be carved away.
Additionally the fine is a good reminder to all the big banks that the midterm elections are coming and that throwing money at Democratic candidates is a lot less expensive than scrutiny from the Justice Department.
Get the check book out boys and send some of that newly printed cash our way. All will be forgiven.