US banks want socialism for themselves - and capitalism for everyone else | Robert Reich

Greg Becker, the former CEO of Silicon Valley Bank, sold $3.6m of SBV shares on 27 February, just days before the bank disclosed a large loss that triggered its stock slide and collapse. Over the previous two years, Becker sold nearly $30m of stock.

Recall that the 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. In the early 1990s, the five largest banks had accounted for only 12% of US bank deposits. After the crisis, they accounted for nearly half.

Some of this hidden federal subsidy goes into the pockets of bank executives. Last year alone, Dimon earned $34.5m.

Dimon was at the helm in 2008 when JPMorgan received $25bn from the federal government to help stem the financial crisis which had been brought on largely by the careless and fraudulent lending practices of JPMorgan and other big banks. Dimon earned $20m that year.

What free market system? Taxpayers had just bailed out the banks, and the bank CEOs were still raking in fat paychecks. Yet 8.7 million Americans lost their jobs, causing the unemployment rate to soar to 10%. Total US household net worth dropped by $11.1tn. Housing prices dropped by a third nationwide from their 2006 peak, causing some 10 million people to lose their homes.

Rather than defend CEO paychecks, Obama might have demanded, as a condition of getting bailed out, that the banks help underwater homeowners on Main Street.

In April 2008, Dimon and the banks succeeded: the Senate voted down a bill that would have allowed bankruptcy judges to modify mortgages to help distressed homeowners.

But, as demonstrated again this past week, American capitalism needs strict guardrails. Otherwise, it is subject to periodic crises that summon bailouts.

The result is socialism for the rich while everyone else is subject to harsh penalties: bankers get bailed out and the biggest banks and bankers do even better. Yet average people who cannot pay their mortgages lose their homes.

Is it any wonder that many Americans see the system as rigged against them? Is it surprising that some become susceptible to dangerous snake-oil peddled by power-hungry demagogues?