"JPMorgan" Shows Us the 'Volcker Rule' Is All Hat and No Cattle While the Administration and Congress Fiddle Away

Apr 18, 2010 | Updated May 25, 2011

This morning Bloomberg announced "JPMorgan to Buy Non-U.S. Parts of RBS Sempra for $1.7 Billion" and went on to comment:

"The purchase, led by JPMorgan global commodities chief Blythe Masters, expands the bank's commodities division just as U.S. President Barack Obama tries to curb banks' trading of securities for their own account. JPMorgan held talks to buy RBS Sempra's North American gas and power trading units as well, two people with knowledge of the talks said this month."

(Also please see "Did The Huffington Post...")

In proceeding with the Sempra purchase, it reveals the patent emptiness of the government's influence over the banking sector. This is highlighted in this instance by the Administration's inability to to enforce either by law or persuasion its much heralded "Volcker Rule." Named for the former Federal Reserve Chairman Paul Volcker, the plan would bar commercial banks from owning hedge funds and limit their proprietary trading; that is, trading as principals for their own account. So much for banking reform, so much for the salutary influence of Paul Volcker on a Wall Street-riddled administration that has already helped enrich the likes of JPMorgan, Goldman (perhaps better said 'Godman' as in "We are doing God's work") Sachs with access to near free money, FDIC guaranteed deposits, TARP programs,munificent counterparty paydowns, implicit guarantees of being too big to fail, access to the Fed window and programs, all at government expense.

A week ago President Obama was quoted, referring to JPMorgan CEO Jamie Dimon and Goldman CEO Lloyd Blankfein, as saying, "I know both these guys; they are very savvy businessman," and then added (sadly or misguidedly), "I, like most of the American people, don't begrudge people success or wealth. That is part of the free-market system." He thereby conveyed onto the crony capitalism of Dimon and Blankfein the same meaning to American 'success' as that of a Bill Gates, whose great wealth was derived through personal vision and whose achievements enriched us all, becoming a singular example to the American meritocracy in which we all once had great pride.

Actually the issue should be turned on its head. It is not a matter of how well President Obama "knows both these guys." Rather, it has become a matter of how well they know him. Clearly well enough to conclude in the present situation, and certainly in too many others, when it comes to Wall Street his bark is worse than his bite.

So now we have a situation where, in essence, government protected/guaranteed funds will be used as chips to play bigtime casino at the commodity roulette table. But don't despair. We should all be raising a glass of bubbly because in a sense we have all become part owners, along with JPMorgan, of Sempra's trading operations. You see, if the trades go bad and it all blows up for JPMorgan, guess who will given the opportunity to round up the cattle!?