President Obama has apparently recorded an interview with "The View" which is due to air tomorrow [1].  In the interview, the President discusses the recent loss of $2.3 billion due to poor bets on derivatives by JPMorgan Chase the other day [2].  While the rest of the media will willfully gloss over the important underlying problem the President so cluelessly brings into focus, let's let Barack Obama speak for himself [3]:

JPMorgan is one of the best managed banks there is.  Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion and counting...  We don't know all the details. It's going to be investigated, but this is why we passed Wall Street reform.  This is the best, or one of the best managed banks. You could have a bank that isn't as strong, isn't as profitable making those same bets and we (the government) might have had to step in.

JP Morgan's market capitalization (the total value of all tradable shares of a public corporation) is approximately $136.7 billion [4].  The recent loss of $2.3 billion, which sent the markets into "shock," represents approximately 1.68% of the company's value, leaving it 98.32% intact (and this value was determined after the market shock and corresponding share drop).

But, according to the President, for any bank that wasn't as strong as JP Morgan who suffered such a loss, the federal government "might have had to step in."  Why?  Failure is an option, Mr. President, and perhaps one you should become more acquainted with before November arrives.

The lack of attention the media has paid to this comment is darn near criminal - it assumes that the government has a legitimate role to play in propping up banks that take large risks on derivatives and lose.  Isn't that the very definition of corporate welfare?  This is the core problem with socialism - when you aren't allowed to fail because you know the U.S. Treasury will be there to stop your fall [5] (since the President just said so), you're more inclined to take riskier bets since it won't be your money that must be coughed up to cover the losses - it will be the money of the American taxpayer.

Neither losses nor profits should be socialized.  Period.

Crony capitalism is currently a massive and foundational problem in the United States, and if we don't allow failure nothing will ever improve.

In love of liberty,

The Bulletproof Patriot

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  • http://www.callsam.biz sam

    I have experienced this many times on a personal level. I often wonder if this attitude is part of the human condition, or the human psyche. In the past 30 years, I have done what I thought was the right thing to do, by loaning money to someone I knew who felt that their personal emergency was so grave and huge, that they had no choice but to ask me to loan them the money to deal with it. I believed their story each time, and agreed to help them out. Looking back, I have probably loaned in the neighborhood of $20,000. Until a couple weeks ago, NOT ONE returned even one percent of the money I loaned them. Most never even mentioned it. Once the "emergency" was met, the money became a low priority to the borrower. I knew when I loaned it, that I probably would never see it again, and the cost of pressuring the borrower to return my money, would likely be the end of the friendship. And in some cases it has been. Since I value friendships, I learned to leave the people I loaned the money to, free to follow their promise or not, trusting in their consciences to urge them to do the right thing. So much for conscience. I never thought to ask the US Govt to "insure" my money. I agree that neither profits nor losses should be socialized. I further think that risk should not be insured with my tax dollars. It is not risk if the Govt will guarantee you don't lose your money. And if you are not willing to take the risk of loss, then don't take risk. A couple weeks ago, I was in mexico visiting my family, and one of their daughters, a young girl who works in a factory in Mexico, actually took part of her paycheck each week, and gave it to her mom to hold, and when I went to visit, she paid me the money I had loaned her, in full, within the time she had said. It was a first for me, and in that one case, my evaluation of the risk proved to be right. She had borrowed the money last year, to get her furniture out of lay-away at a store there. She had fallen behind in her payments for it, and was about to lose her investment as well as the furniture, and asked me for the money. The reason she had fallen behind on her payments was that when the economy crashed last year here in the USA, we stopped buying the car seats that her factory makes and that she inspects before they are shipped up here. And so, they shut the factory down for 2 months, and gave everybody an unpaid vacation. I guess that shows that risk can pay off, but waiting for conscience to be the reason is a poor risk. How did people come to the belief that all of life should be safe? That you should be able to do risky things with impunity? Insurance companies make lots of money betting on this belief.

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