Sunday, June 17, 2012

A Perfect Articulation of Our Economic Moral Peril

Why does JP Morgan's $2 billion loss matter to the rest of us?

While Morgan boss Jamie Dimon has tried to spin the basis for the error as a hedge (i.e. a prudent investment move) gone wrong, it was actually, quite clearly, an Enron-ish mad speculation. Such speculation can wreak havoc with the economy. And if so, taxpayers not only have to cope with the fallout, but also bail out the perpetrator, since an operation like Morgan is too big to fail. That's the moral peril, but the full picture hinges on the political component.

I've never heard all the strands tied together so clearly as they were by Lawrence Lessig on Saturday's "Up w/Chris Hayes". Finally, a concise and completely coherent explanation of the issues the Occupy movement keeps blurrily railing against:
"The real story here is the fact that these guys are gambling because there's a government that's going to back them up. There's a bail-out that's going to come. And the most striking thing...for me was: here's a guy who's already demonstrated they can blow up the economy. And now another explosion goes off.

The fundamental reason why we should be afraid of them is the regulatory structure that makes it so that when they blow up we all go down with them. And the Senate is filled with a bunch of people who only want to make this guy happy. Now why is that?

It's because they know that this guy has the power to blackmail both the Democratic and Republican Party parties because if you don't have some kind of support from Wall Street, you lose the election! So it is the power he has in the political system that makes this so terrifying. This is the first financial crisis in the history of United States where the people who caused the crisis have enough power to block any effective reform that led to that crisis. And that's what we should be terrified about."
Here's the entire segment (as I've previously noted, you really need to stay on your toes to follow discussion on this show...or at least I do!):

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