Open letter to President Obama (Part 133 B)

Michael Savage May 17 2012 hr 3 segment 3.wmv

Published on May 17, 2012 by

The Savage Nation

Savage guest Mark Calabria from the Cato Institute discusses J P Morgan in this segment.

www.cato.org

_________________

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

The free market works much better than federal officials do. Take a look at how how our money is managed every year by the federal government. The federal government has 2.1 trillion coming in and 3.6 trillion going out!! I sincerely hope the federal government will stay out of Wall Street business!!! TARP was a joke and it ended up with a government takeover of GM.

Mike Brownfield

May 15, 2012 at 8:55 am

The lingering headline on the front pages this week is that JP Morgan Chase suffered a massive loss on a hedging strategy, costing them $2 billion. That’s no small mistake, and it’s an example of how bad decisions in the free market can cost big money. But just because mistakes have consequences doesn’t mean that the mighty hand of government needs to step in to save us from ourselves. However, that’s what some on the left are now calling for.

The news of this blunder hit last week when JP Morgan CEO Jamie Dimon revealed that the bank took a $2 billion loss over the past six weeks in a strategy intended to hedge against risks to the bank’s assets that could come from market volatility caused by the Euro crisis. On Sunday’s Meet the Press, Dimon admitted, “In hindsight, we took far too much risk. The strategy we had was badly vetted. It was badly monitored. It should never have happened.”

The company is certainly paying the price in losses, as are those responsible for the bad decision making. The Los Angeles Times reports that the bank’s stock fell 12% since it disclosed the loss last week, the executive who oversaw the department responsible for the loss retired on Monday, and JP Morgan’s reputation as an extremely well managed bank has been damaged.

But does the flawed strategy and the resulting loss mean that Washington should step in with more regulation of Wall Street? Yesterday, White House press secretary Jay Carney used the news of JP Morgan’s loss to call for more regulations, remarking, “The president fought very hard against Republicans and Wall Street lobbyists to get Wall Street reform passed . . . I think that this event merely reinforces why the President was right to take on this fight and why we still need to make sure it’s implemented.”

Likewise, former Obama adviser Elizabeth Warren called for Dimon to resign from the New York Federal Reserve Board and slammed Wall Street. “What happened here is not just about JP Morgan case, it’s about the kind of attitudes, that the bank should be regulating themselves instead of having real oversight,” Warren said. “We have to say as a country, no, the banks cannot regulate themselves.”

What’s needed is some perspective, not more regulation from Washington. Heritage’s David C. John explains that while JP Morgan’s loss represents a clear failure of management, it’s not a systemic problem that requires or would be fixed by additional regulation. For starters, JP Morgan is a $2.3 trillion bank with a net worth of $189 billion, meaning that this loss reduced the bank’s capital ratio from 8.4 percent to 8.2 percent. In other words, the bank can absorb the loss, and it’s nowhere close to needing any form of federal intervention.

Some more perspective could be gleaned by examining the $3.2 billion loss the U.S. Post Office experienced in the most recent quarter, or the billions lost on risky green energy bets made by President Obama and Energy Secretary Steven Chu. Only those losses weren’t incurred by private investors, but by you the taxpayer.

What’s more, John explains, the regulations that are now being called for — particularly the so-called Volcker Rule — would not have prevented the losses since it would not have affected this transaction. Finally, John writes, the system worked as is. “JPMorgan Chase losses were not discovered by regulators; they were discovered by the bank itself conducting its own management reviews.”

What America is witnessing is the left using the news of JP Morgan’s bad judgment as an excuse for more government regulation. But as even Carney acknowledged, regulations “can’t prevent bad decisions from being made on Wall Street.”

For all the wrangling over JP Morgan’s loss, John points out that the bank is still expected to make a healthy profit for all of 2012. Yes, it made a mistake, and yes, that mistake cost a lot of money. But risks, mistakes and costs are part of capitalism. They’re the price we pay for all the benefits that a free market affords us.

____________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

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