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What if "the smartest guys in the room designed their credit default swaps (but) forgot to ask one thing - what if the parties on the other side of the bet don't have the money to pay up?"
When crises erupt, they don't. Turmoil hits markets. Lack of oversight makes it inevitable. Bankers get bailouts. Who said crime doesn't pay? Ordinary people are hardest hit.
JP Morgan's loss relates directly to European finance capital's crisis. It also shows how its banks and America's are interconnected. Trouble on one side of the Atlantic assures it on the other. Contagion then spreads globally.
In 2008, speculative excess brought down investment and commercial banks, insurers, and shadow banks. They're still troubled. So isn't Western finance capital.
JP Morgan was considered America's most stable. Its troubles reveal an entirely different picture. Bill Black thinks it may be "the new Fannie Mae."
In 2008, its sub prime portfolio blew up. It unraveled piece by piece. It's nationalized so taxpayers pay the tab. It remains sick on life support.
Earlier problems aren't resolved. Nothing's been done to fix things. Speculative excesses continue. Some analysts think it's worse than ever. Massive balance sheet losses remain. Bailouts conceal them. Trillions of dollars given banks bought time, nothing else.
Phony stress tests conceal the gravity of today's crisis. Mark-to-mark accounting was suspended. False reporting followed. Morgan's loss was inevitable. It signals much more to come.
Senators didn't hold Dimon's feet to the fire. The nationally televised hearing was more love fest than grilling. Why not when 16 of the committee's 22 members get Morgan campaign cash. If they're friendly, plenty more will follow.
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