Friendly Persuasion

I'm still in a snit over Jamie Dimon's visit to the Senate last week. It was like old home week, and, all things considered, I guess that's understandable. Dimon has given plenty of money to campaigns (mostly Democrats), and his company, the one that lost $2 billion gambling at the paper casino, has also been very generous to various congress critters. Open Secrets provides some details on that generosity and other connections the Wall Street bank has with Congress, especially the Senate Banking Committee.

Combined contributions from JPMorgan Chase PACs and employees favored Democrats from 2002-2008, before trending Republican in the 2010 elections and, thus far, in the 2012 cycle as well. Those numbers do not, however, tell the full story, as donations from JPMorgan Chase's PACS -- which are officially on behalf of the corporation -- typically swing Republican. JP Morgan's main PAC for candidate contributions has favored Republicans each year since 1996, with the exception of a near-tie in 2002. A second company PAC has focused on contributions to Republican-aligned PACs and party committees in 2010 and 2012.

JPMorgan Chase has been relatively non-partisan in its giving to Banking Committee members, however. Its PAC money has found its way to all but six of the committee's senators. While Daniel Akaka (D-HI) and Herb Kohl (D-WI) are both retiring and have no need for campaign funds, Robert Menendez (D-NJ), Pat Toomey (R-PA), Michael Johanns (R-NE) and Jeff Merkley (D-OR) have all faced reelection from 2008-2012 and have had to do without support from JPMorgan Chase's PACS.

Besides campaign contributions, JPMorgan Chase has other ways to grease the wheels with the committee: Naomi Camper, currently the co-head of the bank's federal government relations group, was an aide for committee Chair Tim Johnson from 2001-2004. Additionally, Kate Childress -- who The New Republic credited for spearheading a campaign to weaken the proposed regulation of derivatives during the 2009 debate over financial reform -- was a staff director for the panel prior to joining JPMorgan Chase as a lobbyist.

That's some history, eh?

No wonder we can't get any decent regulation of Wall Street and the banks.

Not So New News

I'm posting David Horsey's cartoon and comments not because it contains a startling new revelation but because it points to a serious problem affecting far too many people in our nation.

A couple of weeks ago, JPMorgan Chase & Co. revealed losses on risky investments that, thus far, total more than $2 billion. It seems that, even after the near-death experience of the 2008 global financial meltdown, hotshot investment bankers at JPMorgan were rolling the dice and betting enormous amounts of other people’s money on high-risk ventures.

Then, after Facebook’s first public stock offering fell far short of expectations, it was revealed that Morgan Stanley, the bank that managed the IPO, had quietly warned big investors that buying into Facebook might not be such a great idea. More modest investors, as always, were left out of the loop. ...

In years long gone, this sort of behavior would not have mattered quite so much to the public at large. Wall Street was a place for men in striped suits with money to spare; it was not a place for the typical working man. But, over the last couple of decades, the financial lives of the majority of Americans have become enmeshed with the ups and downs of the market.

Many have bought into mutual funds, an affordable and supposedly reliable way for the small investor to reap a little profit from the bigger investment game. Many have also become investors, whether they like it or not, as pension plans have been replaced by 401(k) schemes. This change seemed like a sensible step considering the trajectory of the stock market in the 20th century. [Emphasis added]

And that's the point. The Wall Street banksters are walking away with no penalties, while the rest of us are suffering more than just bloody noses. It is one thing to acknowledge that Wall Street is a crazy casino, it is another to acknowledge that we are being forced to bet in that tilted venue with no recourse, at least no recourse that looks reasonably forthcoming.

Horsey's conclusion captures our dilemma nicely.

It is as if the U.S. financial system is a churning ocean on which the captains of finance rove in their treasure ships while the rest of us are left to drift in tiny vessels, surrounded by sharks, with no oars or compasses or clues about how to find safe harbor.

This.

Welcome To The Real World

So, it's been a momentous few days for Mark Zuckerberg. Friday's Facebook IPO moved him from mere millionaire to billionaire. Saturday he got married. Monday Facebook's stock dipped. He's still a billionaire (I suspect), but he's lost a chunk of change, more than 99% of the people will make in ten lifetimes.

David Horsey, whose cartoon heads this post, has a few salient comments on the whole affair.

Congratulations to Mark Zuckerberg on his surprise wedding last Saturday. I certainly hope his marriage gets off to a better start than Friday’s initial public offering of shares in his social networking colossus, Facebook.

Wall Street analysts are now saying the opening share price of $38 was too high for investors wary of buying into a business that delivers millions of messages and photos from college drinking parties but produces a comparatively modest revenue stream. As a result, at the close of trading on Tuesday, Facebook's estimated market value had dropped to $85 billion from the $104-billion value set by the IPO.

That means a lot of people lost money, not just Mark Zuckerberg, but hey! that's the market at work. As Horsey points out, "the market" is for suckers, for gamblers, it's one big casino, and nothing points that out more than this Facebook episode. Only the house and its shills win. And that's an historical fact, Jack.

People who were talked out of a pension and into a 401k 15 years ago have, more often than not, seen that nest egg go rotten. Wall Street has become a bigger gamble than Las Vegas, and there aren't even free drinks to soften the blow when you lose. Everybody is in the market these days, but only a few very big players actually get to play. Hedge fund managers, derivatives hawkers and slick guys in suits from banks that are too big to fail place all the bets and roll all the dice. We just stand on the sidelines watching our modest investments take a stomach-churning roller coaster ride. [Emphasis added.}

What is really exceptional about the Facebook debacle is that even some of the major players got screwed, and got screwed royally.

As Facebook shares continued their slide, regulators launched inquiries into whether privileged Wall Street insiders were alerted to the company's weakening financial projections, leading them to shun the stock or dump shares just as buying was opened to the public.

Morgan Stanley, which led the Wall Street effort to bring the social network public, came under fire following reports that the bank had told some favored clients that the bank was cutting its revenue estimates for Facebook. The lowered expectations came after the tech giant expressed caution in a public filing about its advertising sales on mobile devices. [Emphasis added]

Apparently there is a ranking even within the ownership class. What a surprise, eh? The only difference is that some of the big boys are not having any of this crap and have the money and the muscle to get the SEC and other regulatory agencies to move in and have a look-see, something the rest of us don't have.

If it weren't for the fact that a lot of little investors got caught up in this debacle (yes, they were foolish, but it was a safe investment, so they were told), this might be fun to watch.