by PAM MARTENS & RUSS MARTENS
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) became the law of the United States. Its promise to Americans was that it would reform the corrupt practices on Wall Street that had led to the worst financial collapse in 2008 since the Great Depression and the largest taxpayer bailout of Wall Street in history.
But here we are, 11 years later, with every one of those corrupt practices in full display at the Wall Street mega banks today. Losses from wild derivative bets check. Trading for the house (proprietary trading), check. Secret bailouts from the Fed, check. Credit Default swaps, check. The continuance of the private justice system on Wall Street, check. Banks paying rating agencies for ratings, check. Banks giving insanely leveraged loans to hedge funds, check.
And if we wanted to find the poster child for every failed financial reform promise, we need look no further than JPMorgan Chase, the largest federally-insured bank in the United States as well as, officially, the riskiest. The bank has also racked up five felony counts from the U.S. Department of Justice since Dodd-Frank was signed into law.
Just three years after Dodd-Frank became law, the Senate’s Permanent Subcommittee on Investigations released a 300-page report on how JPMorgan Chase had allowed traders in its London office to use bank depositors’ funds from its federally-insured U.S. bank to gamble in exotic derivatives and lose $6.2 billion. Proving just how weak and ineffective Dodd-Frank was at reining in the cowboy casino on Wall Street, the woman who was in charge of supervising JPMorgan’s traders in London, Ina Drew, didn’t even have a trading license.
Equally outrageous, even though the legislative intent of Congress in the Dodd-Frank Act was clearly to prevent federally-insured banks from owning hedge funds, JPMorgan Chase has skirted that mandate for the past 11 years, with no pushback from its federal regulators. Throughout that period and to this day, JPMorgan Chase has owned the hedge fund, Highbridge Capital Management. (Adding an extra element of revulsion, the purchase of the hedge fund by JPMorgan Chase was brokered with the assistance of the sexual pervert and predator, Jeffrey Epstein, according to the New York Times.)
To attempt to mollify progressives in 2010 that were demanding the restoration of the Glass-Steagall Act, which would have legally separated federally-insured commercial banks from the trading casinos (investment banks) on Wall Street, Section 619 was placed in the Dodd-Frank Act instead.
Section 619 was known as the Volcker Rule, named after former Federal Reserve Chairman Paul Volcker. It promised the following:
“PROHIBITION.—Unless otherwise provided in this section, a banking entity shall not— (A) engage in proprietary trading; or (B) acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund. ”
The public, correctly, took that language to mean that going forward federally-insured banks would not be allowed to trade for the house and blow themselves up as they did in 2008, nor would they be allowed to own hedge funds and blow themselves up as they did in 2008.
Wall Street on Parade for more