LESSONS FROM MY KITCHEN
Louise Annarino
May 18, 2012
For years I was a good cook, and a great baker. Then a few years ago, nothing seemed to turn out right. Cakes fell on one side. Cookies were either burnt or raw. Pie crust was soggy. It was so difficult to produce a tasty product I nearly stopped trying. Friends and family stopped asking for a sweet from my kitchen, turned down my offerings, and made strained faces as they said they were “not hungry” when offered a treat. I gave up, believing my baking days were over; others would replace my efforts with their own. Recently, my oven died. A new oven was installed. Suddenly, my cooking and baking skills were restored, my productivity increased, and the demand for my sweets increased. The secret? I now used an oven whose heat was regulated. Baking, like any productive endeavor, is both an art and a science. There are rules to acknowledge, recipes to follow, and regulated patterns to maintain proper heat to alter the interaction of the ingredients for successful cakes-pies-cookies. Baking for a family is not without risk, but less demanding than baking for a huge family wedding. Baking a wedding cake and catering the event is an enterprise too big to fail. Throwing a burnt batch of cookies out to the birds is no big deal; failing to deliver a wedding cake is.
Regulations are not meant to restrict an enterprise, but to make it more productive. Following rules and regulations is not counterproductive; it assures the common good will be served by the success of the enterprise. It encourages growth and productivity. It assures certainty which reduces fear and risk to manageable proportions. regulations are good and necessary. Not just in kitchens, but in the corporate world as well.
What do we mean by too big to fail? Consider the nation’s biggest banks collective holdings: In 2008,the nation’s biggest banks held $6 trillion, 40% of the nation’s wealth; today, $8.5 trillion, 56% of the nation’s wealth. the bail out first orchestrated by president George Bush, and later adopted by president Obama, successfully avoided the loss and actually increased the gain of Wall Street Banks. While unemployment continues to drop slowly, wealth of the banks has increased quickly and dramatically.
The unemployment rate hovers around 8% at best, and in our minority communities it has slid to 40-50%.1 Meanwhile, CEO and upper level executives of Wall Street enjoy million dollar bonuses,on top of multiple-million dollar salaries. Wall Street’s golden boy, JPMorgan Chase chairman and CEO Jamie Dimon, earns about $20 million per year before bonuses and perks.2
This same Jamie Dimon recently announced his bank lost $2 billion in a “sloppy” and “stupid” trade whose “red flags” he and others had seen for months but which he had characterized as “a tempest in a teapot”. “We made a terrible, egregious mistake,” Dimon said in an interview that aired on Sunday on NBC’s Meet the Press. “There’s almost no excuse for it.”1 There is no “almost” about it, Mr. Dimon. There is NO excuse. Later, Mr. Dimon indicated the loss had doubled to $ 4 billion, a drop in the bucket for JPMorgan Chase, if not for its investors.3
The Obama administration and Democrats in Congress did manage to enact financial reform legislation to rein in such sloppy/stupid and speculative derivative trades, before the Republicans gained complete control of the House of Representatives in the 2010 election. The Dodd-Frank Bill may not have been strong enough for most economists, but has been under unceasing Republican attack. Republicans have blocked every effort to expand financial reform measures, and to implement rules to enforce Dodd-Frank; and, they have refused to confirm Richard Cordray to oversee the newly-created Consumer Financial Protection Bureau, forcing President Obama to make a recess appointment, also opposed by Senate and House Republicans.
The recess appointment to the new agency, hobbled by the lack of a permanent director, faces possible litigation as it tries to regulate banks and other financial institutions.The position of House Republican Leader,Rep. John Boehner and Senate Republican Leader, Mitch McConnel is best illustrated by Alabama Republican Rep. Spencer Bachus’, the chairman of the House Committee on Financial Services,comment, “President Obama has delegitimized the CFPB and has opened the agency up to legitimate legal challenges that will cripple it for years”. Clearly, every effort will be made to stop financial reform.4
It is not simply that Republicans oppose Dodd-Frank and the Volcker Rule which stops banks with government guaranteed deposits from proprietary trading; Mitt Romney has promised he will overturn it. The Volcker Rule prevents such banks from speculating with depositors’ money, backed by government guarantees supported by our tax dollars. While AIG used market derivatives to bet on the housing market causing a world-wide economic bust, JPMorgan Chase more recentlyused market derivatives to bet on corporate debt. Again, using depositors’ money backed by federal guarantees – using our tax dollars. Clearly, why would we expect anything else? What is the incentive to rein in risk when you are betting with someone else’s money, and the taxes collected by the federal government guarantee your failures will not result in your personal loss?
To add insult to injury, Republicans argue it is morally wrong to ask those who “earn” their wealth from the capital gains made from such investments to pay the same rate as those who “earn” their wealth from their own labor, instead of the 15% they now pay. Also, they pay nothing at all until they draw down their profits. If they reinvest and take loans against these profits/assets they pay zero on the gains, living off the loan whose costs may be deductible. They do all of this with depositors’ funds backed by tax-payers’ dollars.
This same strategy of using others’ money for one’s personal gain, without risking one’s own assets is a key feature of venture capitalists such as presidential candidate Mitt Romney and Bain Capital. Do banks and venture capitalists sometimes turn a profit for their investors and the companies they buy? Yes. But, at what cost? The recent JPMorgan Chase loss might have resulted in gain, had things gone differently. But the only risk was to depositors. Romney and Bain may have saved a few companies, while closing down most; but at what cost to down-sized workers who lost their jobs, retirees who lost retirement income and benefits, workers who lost health insurance coverage? Romney and Bain faced no risk of their own.If the company could not be saved it was sold off and Bain was reimbursed before workers or retirees, who lost most if not all in the company’s bankruptcy.
The willingness to risk loss is increased when using someone else’s money and your own potential loss is prevented by the structured guarantees which assure one will not lose one’s own profits;and, that one can avoid taxes on such ill gotten gains. Such gains are ill gotten and inherently immoral, but not illegal. That needs to change. Such change is being fought by ALEC, Koch Brothers et al, and an army of lobbyists.
Recently, the Ohio legislature, as have other state legislatures armed with sample legislation prepared and funded by ALEC, passed legislation requiring welfare recipients to take drug tests at their own cost. If they pass the test they are reimbursed. If they fail they are not reimbursed nor granted benefits for which they are otherwise entitled. The rationale? Welfare recipients are using other people’s money (government revenue) for food and shelter; and perhaps drugs. If we want to protect the funds of one set of persons from misuse by poor people-unemployed people-disabled people-and yes- those with drug or alcohol addiction in order to protect the common good, should we not also test CEO’s-investment capitalists-and bankers who are using other people’s money; and perhaps misusing it for their own gain at the expense of the common good? I can assure you the rate of drug and alcohol abuse is just as high among this group. And whom do you think launders the money for those who transport drugs into our communities? The banks.5 The street junkie denied benefits is probably not using the bank in this way, but the drug lords are doing so.
The patterns clearly favor the haves at the expense of the have nots. This is not new. What is new is that the middle class is now expendable to the haves and have joined the have nots. And the haves are doing all they can to keep the rest of us from seeing the pattern, regulating it, and saving ourselves from it.
This election is not about taking back our country; nor taking back Congress and presidency. It is about taking back ourselves. It is time to get in the kitchen, get fired up and ready to go!
1.Inner City Black Male Unemployment At 50 Percent, http://westorlandonews.com/category/opinion/roger-caldwell/ August 24, 2009
2.JPMorgan boss eats teapot tempest words
http://www.telegraphindia.com/1120514/jsp/foreign/story_15486300.jsp#.T7ORUI7QVIA
3.Morgan’s Corner: Banks reject any regulation, even as billions evaporate, Earl Morgan/For The Jersey Journal
4.Richard Cordray Recess Appointment Sparks More Bickering,Obama achieves goal by appointing consumer watchdog–but risks backlash in courts and in Congress,Alex M. Parker, http://www.usnews.com/news/articles/2012/01/04/richard-cordray-recess-appointment-sparks-more-bickering
5.How a big US bank laundered billions from Mexico’s murderous drug gangs,Ed Vulliamy The Observer, Saturday 2 April 2011 http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs
annarino writes 