The resurgence of JPMorgan and Goldman Sachs gives both banks more financial clout than any other players on the Street, says economist and former Clinton labor chief Robert Reich.
Their strength allows the two banks to offer multi-million pay packages, possess enough economic clout to charge clients whopping fees, and gives both even more political heft in Washington, Reich says.
Antitrust law was designed to prevent just this sort of market power and political heft, Reich writes at TPM Cafe. "Where are the antitrusters when we need them?" he asks.
"Alternatively, why isn't the government charging Goldman and JPMorgan a large insurance fee for classifying both firms as ‘too big to fail’ and therefore automatically bailed out if the risks they take turn sour?"
When JP Morgan and Goldman repaid their federal bailout monies they were freed from stricter government oversight — a freedom that has let both firms take tougher and more vocal stands in Washington against proposed financial regulations they dislike, Reich notes.
“JP is mounting a furious lobbying campaign against regulations that would funnel derivatives trading through exchanges where regulators can monitor them, and thereby crimp JP's profits,” Reich says.
He adds that JP Morgan’s derivatives contracts represent 40 percent of the derivatives held by all bank.
“Anyone who's been paying attention over the last 10 months knows that unregulated derivatives have been at the center of the storm,” Reich observes.
At least 42 non-financial companies and trade associations are also lobbying the Congress to push back on proposals that regulate the over-the-counter derivatives market, the Wall Street Journal reports.
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