Incoming Bailouts

All the major media outlets are talking about the “surprise” $2 billion loss reported by JPMorgan:

JPMorgan Chase, the biggest US bank, has revealed a surprise trading loss of $2bn (£1.2bn) on complex investments made by its traders.

Of course anybody who pays attention to the game recognize this play. JPMorgan is basically positioning itself to receive some government cash. It’s no secret that the state likes to give bankers tons of cash in the form of bailouts and the headlines are making sure to point out that JPMorgan is the biggest bank in the United States. If smaller banks qualified for bailouts you know the biggest bank in America is “too big to fail.”

Here’s how the game usually works. A private entity wants to get a large chunk of money from the state and the politicians want cushy jobs when they exit politics. This situation is mutually beneficial because the banks can offer cushy jobs to the politicians in exchange for huge chunks for state money. Politicians also want to maintain their power so they package up the handout in a manner they believe the public will support. In the case of large banks the package is one of economics, they will tell the public that the United States economy will suffer greatly if the bank fails. What the politicians neglect to mention is the fact capitalism requires bad businesses to fail because bad businesses have misallocated resources and those recourse must now be property allocated.

I’m predict JPMorgan will receive some kind of large handout from the state in the coming months. Perhaps they won’t be the only receivers either.