[Cross-posted on Blue Mass Group.]
This Saturday marks the anniversary of a very inauspicious occasion.
the Sept. 15, 2008 collapse of Lehman Brothers. It's worth noting that the retrospectives we might see of that anniversary could further the narrative that the Obama campaign and Democrats want to tell: that the country is better off from four years ago beginning on Sept. 15, 2008. It's also an opportunity for third-party validators to talk about the deep hole the country was in from 2008 to early 2009.
Of course, the immediate impact of the Lehman Brothers collapse was profound.
Fearing that the crisis in the financial industry could stun the broader economy, investors drove stocks down almost 5 percent Monday, sending the Dow Jones industrial average and Standard & Poor's 500-stock index to their lowest levels in two years.
The Dow fell 504.48 points, its biggest one-day point drop since Sept. 17, 2001, the first trading day after the Sept. 11 terrorist attacks.
The economic crisis our nation endured has been so severe, we are still repairing the damage to this day. (One study put the cost of the crisis on the U.S. at approaching $13 Trillion, a figure equal to about 80% of our current national debt.) But what does this have to do with Massachusetts' junior Senator, Republican Scott Brown? Why specifically wish him a Happy Lehman Brothers Day? Because Republican Scott Brown clearly never learned any lessons from the financial crisis.
You may recall that, earlier this year, JPMorgan Chase announced massive losses due to gambling on risky bets.
Losses on JPMorgan Chase's bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.
When Jamie Dimon, the bank's chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.
Upon the announcement of these massive losses, JP Morgan Chase's CEO, Jamie Dimon, was brought before the Senate Banking Committee to explain what happened. During Dimon's testimony, he made what was for someone in his position a stunning admission.
Dimon Says Volcker Rule May Have Cut Credit-Derivatives Loss
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said a proposed U.S. ban on proprietary trading may have limited the bank's derivatives-trading losses of at least $2 billion.
"It may very well have stopped parts of what this portfolio morphed into," Dimon said, referring to the so-called Volcker rule during testimony at the Senate Banking Committee today. "It's possible. I just don't know."
Reflect on that for a moment. The CEO of JPMorgan Chase capitulated to the notion that stronger (and quite appropriate) regulation may have saved the firm from itself and stemmed at least part of the firm's massive losses. For someone in Dimon's position, this really is a stunning and profound admission. Further, it serves as confirmation to the overwhelming majority of Americans who believe that we need stronger regulations on Wall Street.
However, Republican Scott Brown is not among those who believe that we need stronger regulations on Wall Street. After all, that Volcker Rule that JPMorgan Chase CEO Jamie Dimon says may have helped limit the firm's massive losses, why wasn't that rule more stringent?
The temptations of Scott Brown
When Massachusetts Republican Scott Brown addressed supporters after his upset victory in January, he declared there would be "no more closed-door meetings or back-room deals by an out-of-touch party leadership."
Some would argue that's exactly what he just did in the final push on Wall Street reform.
After private talks with Treasury Secretary Timothy Geithner, Senate Banking Committee Chairman Chris Dodd and other top Democrats, Brown scored a series of exemptions from the "Volcker rule" -- which would bar certain forms of proprietary trading -- a provision pushed by big Massachusetts banks and financial firms, including State Street Corp. and Mass Mutual.
Of course, that's not all.
Senator Brown sought to loosen bank rules
Senator Scott Brown has trumpeted his role in casting the deciding vote in favor of the 2010 Wall Street overhaul, but records show that after he voted for the law, he worked to shield banks and other financial institutions from some of its tough provisions.
E-mails between Brown's legislative director and US Treasury Department officials show that Brown advocated for a loose interpretation of the law so that banks could more easily engage in high-risk investments. [...]
Brown's role in helping to loosen the Volcker rule in advance of casting his vote on Dodd-Frank has been well-documented. Notably, he helped create a provision that allows banks to invest up to 3 percent of their money in riskier investments such as hedge funds and private equity funds, and to own up to 3 percent of an individual fund - additions that won him Wall Street support.
But e-mails obtained by the Globe show that Brown's work on behalf of the financial sector did not stop when the law was passed. In the second stage, as regulators began the less publicly scrutinized task of writing rules amid heavy pressure from the banking sector, Brown urged the regulators to interpret the 3 percent rule broadly and to offer banks some leeway to invest in hedge funds and private equity funds.
Republican Scott Brown worked diligently - both before and after the passage of financial reform - to allow big banks and Wall Street firms to continue with their reckless gambling unabated. We've already begun to see the impact of Brown's enabling in JPMorgan Chase's massive losses. Perhaps Brown simply didn't read the newspaper on September 15, 2008 (or on just about any day since).
On the campaign trail, Republican Scott Brown likes to spew the line, "Banks should not act like casinos with our money." Of course, we know that Brown simply does not believe this because he has worked so hard specifically to allow banks to do just that: continue to act like casinos with our money. The excessive greed, recklessness, irresponsibility, and unaccountability that defined the economic crisis remain alive and well in the work Brown has done to water down financial reform.
For his work on behalf of Wall Street, Republican Scott Brown has been handsomely rewarded. Scroll through Brown's biggest campaign donors, and we see a Who's Who of the banking investment industry. Fidelity (FMR), Goldman Sachs, JPMorgan Chase, and Bain Capital all populate Brown's top ten sources of contributions, with numerous banks, private equity firms, and hedge funds throughout the top 100. All told, the securities and investment industries have donated over $2 Million to Brown's campaign coffers.
One could easily say that, despite all of their risky investments, Republican Scott Brown has been Wall Street's best bet! After all, Brown is one of Wall Street's favorite Senators.
Because Republican Scott Brown never learned the lessons of the economic crisis, because he worked so hard to water down Wall Street regulations, and because he has diligently operated behind the scenes to let banks act like casinos with our money, we should all wish Republican Scott Brown a Happy Lehman Brothers Day.