Dec. 21, 2017—Alexander Hamilton would be turning over in his grave at the celebrations of the tax bill just passed by the U.S. Congress. The speculators just got a huge win—and the consequences for the physical economy will ultimately be disastrous.
JPMorgan Chase CEO Jamie Dimon had no shame about exposing the nub of the bill’s impact. Answering a question, during a Dec. 13 event of the Axios Smarter Faster Revolution in Ann Arbor, Michigan, about whether the bill would result in job creation, Dimon said: “You need a competitive tax system … companies will retain more capital and start to use it over time… Some will raise wages. Some will buy companies. Some may do dividends and buybacks. Don’t act like that is a bad thing. That is their money. Think of it as a QE4. That money gets recirculated in the American system.”
“The benefit is not going to be immediate,” he added.
That could qualify as the understatement of the year. The Quantitative Easing (QE) policy to which Dimon referred as a good thing was a continuation of the massive bank bailout which the U.S. government and the Federal Reserve carried out in the wake of the 2007-2008 crisis. First came TARP (of which JPMorgan Chase got $25 billion), and then a series of QE programs, whereby the Federal Reserve purchased securities from the banks in order to allegedly “put money into the economy.”
But much of this money, which the huge Wall Street banks like JPMorgan Chase got virtually scot-free, remains parked at the Federal Reserve, and is not going into the economy at all. The Fed has $4.5 trillion of these banks’ “assets” sitting on its balance sheet, and only stopped rolling them all over this fall. That money is not doing anything but earning interest for bankers.
And, as a post on this blog exposed back in August, according to FDIC vice-chair Thomas Hoenig, 99% of the net income of these highly profitable money-center banks is going into dividends, and buybacks of their own stock—just as Dimon said.
Let’s be clear. This is not banking—it’s government-supported speculation for private profit, which Hamilton, Washington, and other leading American System thinkers considered criminal activity, against the interest of the nation. Their view was that credit and money should be linked to productive activity. Stock market bubbles are the very antithesis of that. And they ultimately crash.
The record shows that JPMorgan Chase, like the other major Wall-Street banks, is not deterred in its pursuit of profit by charges of criminal activity. According to a study done by dividend.com, JPMorgan Chase was fined $35.2 billion between 2011 and 2014 by the Federal government for fraudulent banking activities (mortgage fraud, the London Whale, etc.). At the same time, the bank was making record profits, and Dimon, who has been CEO since 2004, was being compensated handsomely.
And for those who buy the idea that this gift to the big banks and corporations will “trickle down” to help economic growth, it is sobering to listen to Bruce Bartlett, Ronald Reagan’s domestic policy adviser. In a Sept. 28 oped in the Washington Post this year, Bartlett confessed that the idea that the 1986 tax cuts boosted growth was a myth he helped create. He then pointed to the October 1987 stock market crash, at that time the largest collapse since 1929, and the series of crises thereafter, including the ongoing collapse of real wages.
What the American economy and worker need is Hamiltonian credit, directed to rebuilding with the highest technologies a nation devastated by hurricanes, wildfires, and floods. But that requires new institutions devoted to issuing that credit on a long-term basis.