Wall Street bigger and badder than ever

Being a banker means never having to say sorry. Or worry where that next million is going to come from.

Financial results are in for 2016 for the biggest U.S. banks and — surprise! — profits continue to reach the stratosphere. And with Goldman Sachs in firmer control of the U.S. Treasury Department than ever before, the good times will continue to roll for Wall Street. For the rest of us, that’s another story.

No less than six “Government Sachs” executives have been nominated to high-level posts in the new Trump administration. As a candidate, Donald Trump attacked opponents for their ties to Goldman Sachs during the campaign, but the joke is on those who naïvely believed the real estate mogul was going to “drain the swamp.” Heading the list is the treasury secretary nominee, Steve Mnuchin, who spent years at Goldman Sachs before earning the title “foreclosure king” as chairman and chief executive officer of OneWest Bank.

Occupy Wall Street (photo by David Shankbone)

Occupy Wall Street (photo by David Shankbone)

Mr. Mnuchin, who bought distressed mortgages and evicted thousands of homeowners during the financial crisis, further demonstrated his humanitarian streak when he announced that, as treasury secretary, he would oversee “the largest tax change since Reagan” and said his “No 1 priority is tax reform.” More tax cuts for the wealthy and corporations. Hurray! How many more people would pay for this by losing their ability to keep their homes was not indicated.

The Guardian, however, did report that “Mnuchin went on to sell OneWest last year for more than double what he paid the Federal Deposit Insurance Corporation for the assets in the teeth of the financial crisis.” The California Reinvestment Coalition has calculated that Mr. Mnuchin’s bank was responsible for more than 36,000 foreclosures in in that state alone, and reported he disproportionally foreclosed on seniors. It did so frequently using harassment and other aggressive tactics, even to the point of changing the locks on a senior’s home in a blizzard.

Vampire squid” indeed. Those are the sort of tactics that surely endeared Mr. Mnuchin to President Trump.

Citigroup hopes to replicate destruction of Detroit

No roundup of the year in banking, however, would be complete without the wit and wisdom of JPMorgan Chief Executive Officer Jamie Dimon. When we last checked in a year ago, Mr. Dimon insisted that declining incomes for working people was no big deal, because they are better off by virtue of possessing iPhones, while in 2014 he complained that — oh the humanity! — “banks are under assault.” As we look back at 2016, he has again provided us with comic relief.

Somehow keeping himself composed as he told Bloomberg News that “business [has] been beaten down as if we’re terrible people,” he upheld the work of banks in saving Detroit. You can’t make this up: He said, “Detroit is a perfect example where civil society, not-for-profits, government, business all work together to improve the lives of American citizens. If you can duplicate what they’ve done in Detroit around the country, you’re going to have a huge renaissance.” He finished by declaring “JPMorgan didn’t jeopardize the system. We did not cause the crisis. We have three times more capital than we had back then. We saved 30,000 jobs.”

Goldman Sachs headquarters (photo by Quantumquark)

Goldman Sachs headquarters (photo by Quantumquark)

We’ll pause here so you can enjoy a hearty laugh. There is no need to point out the tremendous damage major banks did to economies around the world, and the trillions of dollars of handouts given to them as a reward for their destructive behavior. There is little need to point out the damage done to Detroit, but as a reminder, complex and poorly understood derivatives were decisive in Detroit’s fiscal downfall.

These derivatives were sold to the city as a form of “insurance” against possible increases in interest rates, but when interest rates fell and Detroit’s credit rating was cut, hundreds of millions were siphoned from city coffers into Wall Street pockets, and the banks that sold the derivatives jumped to the head of the line of creditors. No money for pensions or government services, but plenty for financiers.

Mr. Dimon does seem to be rather well compensated for his difficulties, “earning” $27.6 million for 2015, tops among banking chief executive officers. Goldman Sachs’ Lloyd Blankfein didn’t do too badly himself, hauling in $23.4 million in compensation. Another nine topped $10 million.

Bigger and badder than ever

These bloated salaries did not, so to speak, break the banks. Once again, profits for the six biggest U.S. banks were massive — nearly $93 billion for 2016.

Here’s a breakdown of the six banks for 2016, three of which reported record profits.

  • JPMorgan Chase & Company reported net income of $24.7 billion on revenue of $99.1 billion, the bank’s highest-ever profit, beating out the record set just the year before. These massive profits led to a massive bonanza for speculators — JPMorgan handed out $15 billion in dividends and stock buybacks.
  • Bank of America Corporation racked up $17.9 billion in net income on revenue of $83.7 billion, both increases from a year ago, which, in turn had tripled 2014 earnings. Speculators did well here, too, as Bank of America ladled out $7.7 billion in dividends and stock buybacks, and plans on buying back another $4.3 billion of its stock in the first six months of 2017.
  • Citigroup Incorporated reported net income of $14.9 billion on revenues of $69.9 billion, both a little bit lower than a year earlier. But shed no tear for downtrodden speculators as Citigroup handed out $10.7 billion in dividends and stock buybacks. Five separate violations cost a total of $485 million in government penalties, but that seems to be no more than a minor speed bump.
  • Wells Fargo & Company had net income of $21.8 billion on revenue of $88.3 billion, a dip in profits from 2015 due to having to pay a penalty of $1.2 billion for shady mortgage lending practices and another $185 million in fines because of its illegal practices of opening fake accounts in the name of its depositors. Who says crime doesn’t pay? Speculators certainly won’t say that: Siphoning money from its account holders helped Wells Fargo be in a position to shovel $12.5 billion into financiers’ pockets through dividends and stock buybacks, almost equal to what it handed out a year earlier.
  • The Goldman Sachs Group Incorporated reported net income of $7.4 billion on revenue of $30.6 billion, a bigger profit and profit margin that a year earlier. The company did not break out its expenses for its purchases of the U.S. government in its latest financial report. Goldman Sachs spent $7 billion on buying back its stock and proudly declared itself first in the world in mergers and acquisitions, work that added billions to the investment bank’s bottom line while costing untold numbers of people their jobs. Profits would have been even bigger had it not been for a $5.1 billion fine for selling toxic mortgage securities to unsuspecting investors.
  • Morgan Stanley reported net income of $6.0 billion on revenue of $34.6 billion, a profit about two percent lower than that of 2015. Despite that slight dip in income, the bank somehow found the means to buy back $3.5 billion worth of its stock — a 67 percent increase from what it bought back a year ago. Morgan Stanley would have seen its profits increase for 2016 had it not had to pay $3.2 billion in penalties related to its role in the subprime-mortgage housing debacle.

Beyond the whip of Wall Street

The biggest banks not only extract more money from the rest of the economy than ever, but are bigger than ever — banks with more than $100 billion assets increased their market share from 17 percent in 1995 to 59 percent in 2014. This is the mad logic of capitalism — grow or die. Finance capital, despite being the whip enforcing trends that worsen inequality, is not immune from what it enforces on everyone else. One measure of the cancerous growth of financial products bearing little relationship with actual needs is this: In 11 business days financial speculators trade instruments and contracts valued at more than all the products and services produced by the entire world in one year.

Reducing banking and finance to a public utility would be the only way to break the grip of giant banks and financial institutions. One intermediate step that could be taken would be government banks that would fund public infrastructure projects and provide low-cost loans, and which would be the recipient of government revenue rather than commercial banks.

The Bank of North Dakota is an example of such an institution that already exists, with proposals for state banks being floated for Vermont, Washington state, Oregon and California. A New Jersey gubernatorial candidate, Phil Murphy, has made a public state bank the centerpiece of his campaign, arguing that students would benefit from low interest rates for college tuition, more loan capital would be made available and municipal governments would no longer have to pay high interest to Wall Street.

The Left Party of Germany has a detailed plan to bring banks under democratic control. Although the party’s proposal is specific to Germany, its basic ideas are transferable to any country. Any form of democratic control of an economy would be impossible without banking and finance being reduced to a public utility, and thus serving to benefit communities rather than existing as a parasite that exists to profit over every aspect of human activity, no matter the social cost.

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Let them eat iPhones

You say you are struggling to cover your rising expenses while your pay is stagnant? You should have become an executive at a bank. Break the economy and earn big rewards!

But don’t sweat it — you have a phone and that more than makes up for your lack of adequate wages, declining ability to access health care and lack of a pension. Just ask JPMorgan chief executive officer Jamie Dimon.

Mr. Dimon’s pay is more than 220 times that of the average employee at JPMorgan, reports Business Insider, but he says you underpaid employees shouldn’t complain — because you have iPhones! At least Marie Antoinette’s alleged belief in cake allowed France’s plebeians to eat, more than can be done with a phone. Here is what Mr. Dimon said in his latest attempt to show compassion, according to BloombergBusiness:

“ ‘It’s not right to say we’re worse off,’ Dimon said [last September 17] at an event in Detroit in response to a question about declining median income. ‘If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.’ ”

Cutting the pay of chief executive officers would do nothing to solve inequality, Mr. Dimon proclaimed. Instead, “investing in ‘intelligent infrastructure’ ” is what is needed. If possessing a “smart phone” is the key to happiness, apparently “smart buildings” would make us still happier. There’s progress for you — Marie Antoinette never offered anyone a bakery. But as you apply ketchup to your iPhone, you will surely digest smoothly with the knowledge that the chief executive officers of Goldman Sachs and JPMorgan officially became billionaires during 2015.

U.S. Treasury Department under new management (photo by takomabibelot)

U.S. Treasury Department under new management (photo by takomabibelot)

Goldman Sachs’ chief, Lloyd Blankfein — or Lord Blankcheck, as Occupy Wall Street activists memorably dubbed him — took home US$23 million last year, while Mr. Dimon “earned” $27 million, a healthy 35 percent raise. And shed no tears for those who have yet to reach the corporate pinnacle — three Goldman Sachs executives each took home $21 million and three JPMorgan execs each were awarded more than $10 million in stock alone.

Profits of biggest banks increase again

When we last heard from Mr. Dimon, about this time last year, he complained that “Banks are under assault,” adding that “We have five or six regulators coming at us on every issue.” As the six biggest banks in the U.S., which includes JPMorgan, racked up profits totaling $75 billion for 2014, you will be excused for having doubts about just how tough regulators are.

Profits for those banks were no more endangered in 2015, totaling almost $93 billion. Here is how they fared in the just concluded year:

  • JPMorgan Chase & Company: net income of $24.4 billion on revenue of $96.6 billion. JPMorgan reported its highest-ever net income in 2015, and paid out $11 billion to shareholders through stock buybacks and dividends.
  • Bank of America Corporation: net income of $15.9 billion on revenue of $82.5 billion. Net income more than tripled from 2014, and it nearly doubled the dividend it paid shareholders — the bank said it handed out $4.5 billion through common stock buybacks and dividends.
  • Citigroup Incorporated: net income of $17.2 billion on revenue of $76.4 billion. Although revenue was down slightly, net income more than doubled because Citigroup wasn’t troubled with having to pay out billions in fines over its toxic derivatives as it was in 2014.
  • Wells Fargo & Company: net income of $23 billion on revenue of $86.1 billion. The bank reported it handed out $12.6 billion through stock buybacks and dividends, yet it relentlessly demands its tellers pressure customers to open multiple accounts and pays those tellers too little to live on.
  • The Goldman Sachs Group Incorporated: net income of $6.1 billion on revenue of $33.8 billion. Goldman Sachs’ net income was below that of 2014 due to a $3.4 billion deduction (or “charge”) from its earnings due to its reaching a settlement with government regulators over its toxic mortgage-backed securities; profits would have risen without the fine. But please don’t shed any tears for the investment bank — it proudly reported that it “advised” on corporate mergers and acquisitions worth more than $1 trillion, work that by itself netted it billions of dollars while jobs disappeared.
  • Morgan Stanley: net income of $6.1 billion on revenues of $35.2 billion. Similar to its peer banks, Morgan Stanley shelled out $2.1 billion to buy back its stock in an effort to have its profits shared among fewer stockholders. Despite that profit, the bank has said it will lay off staff as part of an effort to “cut costs” under Wall Street pressure.

The biggest get bigger

Yes, the biggest banks keep getting bigger. The four banks with the largest holdings accounted for a composite 42 percent of all U.S. banking assets in 2014, a total that has steadily increased, both before and after the 2008 crash.

Wells Fargo Plaza, HoustonAnd not even the fines levied by regulators slow them down. Earlier this month, Goldman Sachs announced that it had agreed to $5 billion in penalties to settle claims arising from the marketing and selling of dodgy mortgage securities, although nearly $2 billion of that is “consumer relief” in the form of loan forgiveness, the bank said.

Banks have paid a total of $40 billion to settle claims by financial regulators and prosecutors, yet these penalties are bumps in the road for them, no more than a business expense. In part, perhaps that is because much of these penalties come in the form of mortgage modifications, rather than cash, and often these modifications are to loans that the banks service but don’t actually own — allowing them to get credit for modifying loans belonging to another company.

Banking of course is not the only industry undergoing consolidation. Mergers in 2015 were bigger than ever, with corporate deals worth $4.7 trillion. Investment banks earn huge fees for arranging mergers and acquisitions, none more so than the biggest U.S. banks. Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America and Citigroup ranked as numbers one through five in the world in terms of the value of the deals banks “advised” on.

Competitive pressure accounts for some corporate mergers — the capitalist imperative to grow or die does not abate even for the biggest corporations — but pressure to “enhance shareholder value” plays a significant role. “Enhancing shareholder value” is finance-speak for acceding to speculators’ demands for more short-term boosts to profits and higher stock prices, no matter the cost to others or the long-term damage to the company itself. Hedge-fund billionaires are among the fiercest in pressing these demands, continually demanding cuts to jobs that serve only to fatten their swollen wallets. The big banks, as major Wall Street players themselves, both apply this “market” pressure for the same reasons and further profit from acting as “advisers.”

Reforming such insanity is a hopelessly sisyphean task. What if instead banks became a public utility with an end to speculation? Proposals are being floated in the U.S. to create state banks, perhaps on the model of the successful Bank of North Dakota, and the Left Party of Germany has a detailed plan to bring banks under democratic control. Capitalist propaganda aside, there is no need for banking to exist as an uncontrollable behemoth extracting wealth from all other human activities. Why shouldn’t it be a utility under public control that exists to serve the productive economy? We can’t survive on iPhones alone.

Not even Wal-Mart is ruthless enough for Wall Street

As ruthless as Wal-Mart is, Wall Street has decided the retailer is not ruthless enough. Incredible though it might seem, financiers have been punishing Wal-Mart in part because the company has raised its minimum wage to $9 an hour.

Plans to increase slightly abysmally low pay and invest more money on Internet operations have Wall Street in an ornery mood because profits might be hurt. Is Wal-Mart Stores Inc. about to cease being a going concern? Hardly. For the first three quarters of this year, Wal-Mart has racked up a net income of US$11.8 billion — and the holiday season isn’t here yet. For the five previous fiscal years, the retailer reported a composite net income of $80.2 billion.

Alas, this isn’t good enough for Wall Street and its “what did you do for me this quarter” mentality. Traders have driven down the price of Wal-Mart stock by more than one-third in 2015, and a public statement on October 14 by the company that its earnings might be a little lower next year prompted the biggest one-day fall in its stock in 25 years.

Wal-Mart employees are joined at a rally by Reverend Billy and the Church of Stop Shopping in Vallejo, California (photo via Brave New Films)

Wal-Mart employees are joined at a rally by Reverend Billy and the Church of Stop Shopping in Vallejo, California (photo via Brave New Films)

Wal-Mart did attempt to offset that news by also announcing a new $20 billion buyback of shares, but not even blowing that kiss to financiers served to lift their moods. (A stock buyback is when a company buys its stock from shareholders at a premium to the trading price, which gives an immediate bonus to the seller and reduces the number of shares that divvy up the profits; news of this sort ordinarily sends financiers into paroxysms of ecstasy.)

This is the company that is the most ruthless in accelerating the trend of moving manufacturing to the locations with the lowest wages, legendary for its relentless pressure on its suppliers to manufacture at such low cost that they have no choice but to move their production to China, or Bangladesh, or Vietnam, because the suppliers can’t pay more than starvation wages and remain in business.

This is a company that pays it employees so little that they skip meals and organize food drives; receives so many government subsidies that the public pays about $1 million per store in the United States; and is estimated to avoid $1 billion per year in U.S. taxes through its use of tax loopholes.

We live under an economic system that is so insane that this has now been deemed by financiers to be insufficiently brutal.

The stack of billions is never high enough

How much further down can people be pushed? And when has so much money been amassed that even the most greedy are satiated? The answer to the first question has yet to be answered, but the answer to the second question seems to be “never.”

The four heirs to the Wal-Mart fortune are collectively worth $161 billion — they are the world’s richest family, richer even than the Koch brothers. The four are each, individually, among the 12 richest people on Earth. The Walton family pocket billions every year just from dividends — their company paid nearly $6.4 billion in dividends in 2014 alone, and the Walton family owns half the shares. The company spent another $6.1 billion in 2014 on buying back its stock. That’s $12.5 billion in one year handed out to financiers and the Walton family.

So it would seem that Wal-Mart could afford to pay its employees more.

Although the company said part of the pressure on profits will come from investments in building a larger Internet presence, it largely blamed its expected dip in profits on two planned boosts in pay, first to $9 an hour this year and then to $10 an hour in 2016. Reuters reported it this way:

“Wal-Mart Chief Executive Doug McMillon said a $1.5 billion investment in wages and training, including raising the minimum store wage to $10 an hour from $9, were needed to improve customer service and would account for three-quarters of the expected 6 percent to 12 percent drop in earnings per share next year.”

One and a half billion in wages and training for an unspecified period of time. Remember, this is a company that averages $16 billion in net profit per year. And in almost half the states of the U.S., mandatory minimum-wage raises would have forced stores in those states to raise the wage anyway.

Or to put this another way, the raises to $10 per hour — assuming the stated cost to the company is real — could be fully funded by cutting what the company spends on stock buybacks by one-quarter.

But it’s never Wall Street’s turn to cut back, is it?

No toleration of employee defense

Jess Levin, communications director for Making Change At Walmart, a campaign to advocate for Wal-Mart employees backed by the United Food & Commercial Workers, noted that pay raises could easily be offset by cutting hours:

“Walmart should be ashamed for trying to blame its failures on the so-called wage increases. The truth is that hard-working Walmart employees all across the country began seeing their hours cut soon after the new wages were announced. The idea that this truly drove down Walmart’s profits is a fairytale.”

What isn’t a fairy tale is Wal-Mart’s attacks on any attempt at organizing its stores. An In These Times report noted:

“A massive array of strategies has been tested, with little success: organizing department by department (when butchers at a Texas store voted for the union, Walmart eliminated all its butchers); organizing in Quebec, where laws favor unions (Walmart closed the store); organizing in strong union towns, like Las Vegas (several campaigns failed after supervisors intimidated a majority of workers out of unionizing).”

There are real-world consequences to these developments. A 2007 study by the Economic Policy Institute found that Wal-Mart alone was responsible for the loss of 200,000 U.S. jobs to China for the years 2001 to 2006, with Wal-Mart accounting for two-thirds of all U.S. manufacturing jobs lost during that period. Wal-Mart more recently has begun shifting manufacturing to countries like Bangladesh that are low-cost alternatives to China.

The Institute for Global Labour and Human Rights reports that garment workers in Bangladesh earn between 33 and 42 cents per hour, or up to $20 for a six-day, 48-hour work week. On the backs of those super-exploited workers, and on the backs of exploited store and warehouse employees, arise the fabulous wealth of the Walton family, Wal-Mart executives and financiers. Doug McMillion, the Wal-Mart chief executive officer, was paid $25.6 million for 2014 — or 24,500 times more than a Bangladeshi sweatshop worker working for a Wal-Mart subcontractor earns.

More is never enough — Wall Street is cracking its whip, demanding no letup in this massive upward flow of money. No slack is allowed. When do we stop believing this machine can be reformed?

Sure billionaires deserve their money: Killing jobs is hard work

More is never enough. A few examples of the wrath of speculators illustrate the “whip” of finance capital as the world’s corporations announced their results in recent weeks.

Among the words that do not go together are “shareholder activist.” Whether a sign of the debasement of language, or that the corporate media’s myopia has degenerated to the point where speculators trying to extract every possible dollar out of a corporation is what constitutes “activism” to them, as if this was some sort of selfless activity, these are the words often used to describe wolf packs that grow ever hungrier. Not even one of the world’s biggest corporations, E.I. du Pont de Nemours & Company, is immune.

DuPont, a chemical multi-national that produces many products that dominate their market, has racked up about US$17.8 billion in profits over the past five years, including $3.6 billion in 2014. Its stock price increased by 20 percent last year, better than the benchmark S&P 500 Index. DuPont recently sold off its performance chemicals business, and will hand out $4 billion to shareholders from the proceeds of the sale. Surely enough you say? Nope.

A hedge-fund manager — yep, one those “shareholder activists” — has declared war on DuPont management. The hedge funder, Nelson Peltz, is demanding that DuPont be broken up into two companies, under the theory that more profit can be extracted, and he is demanding that four seats on the DuPont board be given to him. So far, at least, DuPont management is resisting the hedge funder, but did announce $1 billion in cuts in a bid to pacify Wall Street. That means that more employees will pay for heightened extraction of money with their jobs. Mr. Peltz’s hedge fund specializes in buying “undervalued stocks,” according to Bloomberg, which is code for corporate raiding. It must pay well, for he is worth $1.9 billion.

DuPont chemical plant on Houston Ship Channel (photo by Blair Pittman for the U.S. Environmental Protection Agency)

DuPont chemical plant on Houston Ship Channel (photo by Blair Pittman for the U.S. Environmental Protection Agency)

One company that has given into speculators by selling off its best asset is Yahoo Inc. Although widely attacked in the business press for having no coherent plan for growth, Yahoo did report net income of $1.3 billion on revenue of $4.7 billion for 2013, a hefty profit margin, and remained profitable in 2014. Nonetheless, Yahoo said it will spin off into a separate company its most valuable asset, its stake in the Chinese online merchant Alibaba. This is being done so that more of the profits can distributed to speculators.

If Yahoo were to simply sell its stake, it would have to pay taxes. By spinning off its holding into a separate company, there will be no taxes paid, and thus more money will be stuffed into financiers’ pockets. “The decision,” The New York Times reported, “cheered shareholders because they will directly reap all the remaining profit from Yahoo’s prescient investment.” Yahoo will also lose its most valuable asset, making the company weaker (and presumably more likely to get rid of some of its workforce), but speculators will make a windfall. That is all that matters in these calculations.

Even an Internet darling, Google Inc., is losing its Wall Street halo. Grumbling was heard when Google’s revenue for the fourth quarter of 2014 was “only” 10 percent higher than the fourth quarter of a year earlier, a slower rate of growth than in the past. For the full year 2014, Google reported net income of $14.4 billion on revenue of $66 billion. Based on these results, it looks as if Google will remain a going concern. Nonetheless, Google stock is down 12 percent since September, a sign of financiers’ displeasure.

But perhaps happier days are on their way. The Associated Press reports that a “pep talk” by the company’s chief financial officer “left open the possibility that the company might funnel some of its $64 billion in cash back to shareholders, especially if a law is passed to allow money stashed in overseas accounts to be brought to the U.S. at lower tax rates.”

Ah, yes, all would be well if only multi-national corporations did not have to pay taxes. But despite the ceaseless demands by the world’s financiers for more governmental austerity, more cuts to jobs, wages and benefits, more punishment, the world can afford a raise. An Al Jazeera report by David Cay Johnston concludes that U.S.-based corporations held almost $7.9 trillion of liquid assets worldwide. That is more than double the yearly budget of the U.S. government.

The results are those familiar to all who are paying attention: Rising inequality and persistent economic stagnation as working people can no longer spend what they don’t have. Almost all of the gains in income are going to the top: From 2009 to 2012, 95 percent of all gains in income went to the top one percent. The “efficiency” that financiers demand is that ever larger cascades of money flow upward. How long will we allow this to go on?

Bigger rewards for holding the economy hostage

They are bigger and badder than ever. The heightened offensive against regulations launched by the financial industry carried forward by the new Republican Party majority in the United States Congress is one demonstration, but just in case you wish more evidence, bank profits got bigger in 2014.

The multibillion-dollar fines U.S. government agencies have assessed banks has merely dented profits, and only in some cases. Four of the six biggest banks in the U.S. — which together hold about two-thirds of all assets in the U.S. financial system — reported higher profits for 2014 than in 2013, and in the cases of the other two, it appears that an increase in fines paid was responsible for their decline in profits.

Overall, these six banks — JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — racked up a composite net income of US$75 billion on revenue of $413 billion.

The most comical comment during the banks’ announcements last week of their financial results was that of JPMorgan Chairman and Chief Executive Officer Jamie Dimon, who whined on a conference call with reporters that “Banks are under assault,” adding that “We have five or six regulators coming at us on every issue.”

Those regulators seemed to have taken it easy on JPMorgan last year. The company’s total legal costs for 2014 were $2.9 billion, compared to $11.1 billion in 2013, according to a report carried by financial news network CNBC. Nonetheless, JPMorgan’s $21 billion in profits for 2014 was considered a disappointment by Wall Street, because the fourth-quarter profit dipped slightly from the previous year’s fourth quarter. Thus, the company wasted no time in announcing that “Senior executives at JPMorgan Chase & Company are pressuring managers across the bank to cut costs,” according to Reuters.

Wall Street traders have already punished the company by sending its stock down in three of the first four trading days following its “disappointing” results. Not even Wall Street banks are immune from their own role as enforcers. Some low-level employees are about to pay for that with their jobs.

U.S. Treasury Department under new management (photo by takomabibelot)

U.S. Treasury Department under new management (photo by takomabibelot)

Never mind that the U.S. Treasury Department handed out $700 billion to Wall Street (among other measures), bailing out the very banks whose bottomless greed and reckless gambling brought on a global economic downturn now in its seventh year. A downturn paid for not by the banks, nor their executives, but through the endless austerity imposed on working people throughout the world. Not one Wall Street executive has been prosecuted.

JPMorgan has been assessed fines for a variety of crimes, among them mortgage fraud and currency-market manipulation. A compliance lawyer for JPMorgan tried to alert authorities to systematic irregularities in mortgage securities before the crash, but was ignored. Jamie Dimon, heroically holding up against the assault on his bank, earned $20 million for 2013. One suspects he will not be homeless once his 2014 compensation is totaled.

That his company will need to come up with billions of dollars by 2019 to meet Federal Reserve capital requirements, which will slow down its ability to speculate with money it doesn’t have in reserve, might just have something to do with his whining.

It pays to be a banker

The year 2014 was a very good one for banks. Here are the full-year results for the six largest banks, as reported by themselves.

• JPMorgan Chase & Company: net income of $21 billion on revenue of $97.9 billion. This was three billions dollars more than the year before, but still not good enough in the eyes of speculators.
• Bank of America Corporation: net income of $4.8 billion on revenue of $85.1 billion. The net income is down from 2013, but that appears to be due to “litigation expenses” of $16.4 billion, more than double the 2013 litigation expenses of $6.1 billion. Almost all of those extra expenses occurred in its consumer real estate division; the bank agreed in August to pay nearly $17 billion to settle charges that it sold toxic mortgages.
• Citigroup Incorporated: net income of $11.5 billion on revenue of $77.2 billion. Citigroup’s profits were lower than the year before, but the culprit is familiar — it reported legal costs of $4.8 billion in 2014, more than ten times the $430 million of 2013. Citigroup agreed in November to pay $1 billion for rigging foreign-exchange markets and agreed in July to pay $7 billion for selling bad mortgages.
• Wells Fargo & Company: net income of $23.1 billion on revenue of $84.3 billion. With profits up from 2013, Wells Fargo said it handed out $12.5 billion to shareholders through dividends and net share repurchases, five billion dollars more than a year earlier. This at the same time that many of its branch tellers can’t move out of their parents’ house because of low pay.
• The Goldman Sachs Group Inc.: net income of $8.5 billion on revenue of $34.5 billion. Those were higher than a year earlier. The average pay for Goldman Sachs employees for 2014 was $373,265, but as that includes secretaries and clerks, those involved in speculation make far more.
• Morgan Stanley: net income from continuing operations of $6.2 billion on revenue of $33.6 billion. This profit is more than double what the company made the year before, but nonetheless is not good enough. The company moved quickly to appease speculators, announcing it would cut the percentage of its revenue going to wages, pay higher dividends and buy back more stock.

What would they do if they weren’t under “assault”?

Subject to the same remorseless laws of capitalism as any other industry, the industry rapidly consolidated. The percentage of total industry assets owned by the five biggest U.S. commercial banks has increased more than four-fold since 1990. Nor is that something peculiar to U.S. banking — the five largest banks in the European Union hold 47 percent of their industry’s total assets.

The “assault on banks” must have been conducted with a wet noodle. Although by any ordinary human logic, these colossal sums of money should satiate the most asocial speculator, the remorseless logic of capitalism dictates that more is never enough, that profits have to increase steadily. Even the rate of the increase can be expected to increase.

While working at a financial news wire during the stock-market bubble years of the 1990s, I vividly recall one day when a major computer company reported a profit of more than $800 million for its latest three-month period, more than the year-earlier quarter, only for its stock price to be driven down. Curious, I discovered that “analysts” had forecast a profit even bigger, and the rate of the increase had been lower than the rate of the increase a year earlier. That was enough for speculators to lash out.

The financial industry acts as both a whip and a parasite in relation to productive capital (producers and merchants of tangible goods and services). The financial industry is a “parasite” because its ownership of stocks, bonds and other securities entitles it to skim off massive amounts of money as its share of the profits. It is also a “whip” because its institutions — stock, bond and currency-exchange markets and the firms that trade these and other securities on those markets — bid up or drive down prices, and do so strictly according to their own interests.

A management that fails to maximize profits in the short term and deliver higher stock prices in the longer term is in danger of being pushed out, not because diffuse shareholders possess that leverage individually, but because the financial industry as a whole, through the markets it controls, can sell off enough stock to make the price nosedive, leaving the company vulnerable to an unfriendly takeover by a speculator seeking to profit from the reduced value of the company. Executives who do what the “market” dictates, on the other hand, are showered with riches.

Moreover, companies with stock traded on exchanges are legally required to maximize profits for shareholders, above all other considerations. A company that fails to make a deal, or decides against selling itself to another company, is subject to being sued in courts because angry speculators will sell their stock, causing the price to decline and then complain that the company’s management failed to maximize “shareholder value.”

Governments representing the world’s four largest economies — the U.S., the E.U., China and Japan — committed US$16.3 trillion in 2008 and 2009 alone on bailouts of the financiers who brought down the global economy and, to a far smaller extent, for economic stimulus. These are the governments that are “assaulting” banks. Such is the looking-glass logic of capitalism.

Grip of giant banks on the economy stronger than ever

“Too big to fail” banks are bigger than ever. Holding the global economy hostage, extracting profits from every aspect of human activity and remaining well above the reach of the law are simply business as usual — not to mention extremely profitable.

The six largest banks in the United States — each among the world’s largest — reported composite net income of $76 billion for 2013. Yep: $76 billion in cold cash, for only six enterprises, and that total is the profit after paying out their colossal salaries and bonuses.

Wells Fargo Plaza, HoustonTo put the total in further perspective, the six banks enjoyed a profit margin of 18.4 percent. By way of comparison, the average corporate profit margin in mid-2013 was 9.3 percent. It would seem that financiers have managed to trudge on despite suffering the critiques of people who refuse to believe that their multimillion-dollar compensation is a God-given right.

No less than an authority than Gregory Mankiw says that’s so. Professor Mankiw was the chair of the council of economic advisers under former U.S. President George W. Bush and is currently the head of the economics department at Harvard University. But if you are expecting scholarship from someone with such credentials, you will be disappointed. For example, he wrote in his paper, “Defending the One Percent”:

“Those who work in commercial banks, investment banks, hedge funds and other financial firms are in charge of allocating capital and risk, as well as providing liquidity. They decide, in a decentralized and competitive way, which firms and industries need to shrink and which will be encouraged to grow. It makes sense that a nation would allocate many of its most talented and thus highly compensated individuals to this activity.”

So there you have it: Financiers do not self-select on the basis of lust for money without regard for the damage they do to others, but are anointed by society. Do you recall a referendum selecting them? I do not, either.

Accountability? How quaint!

Opportunities for upward flow of money were not in short supply last year. Here are the 2013 full-year results for the six largest banks, as reported by the companies themselves last week:

• JPMorgan Chase & Co.: net income of $17.9 billion on revenue of $96.6 billion. That was JPMorgan’s profit after setting aside $8.7 billion to cover legal expenses.
• Bank of America Corp.: net income of $11.4 billion on revenue of $89.8 billion.
• Citigroup Inc.: net income of $13.9 billion on revenue of $76.4 billion. Although Citigroup’s 2013 net income was close to double that of 2012, it was nonetheless considered disappointing! Not even Citigroup is immune from the pitiless system it and its peer institutions have created. Its stock price has dropped several points since last week, meaning the market is demanding it squeeze out more profits.
• Wells Fargo & Co.: net income of $21.9 billion on revenue of $83.8 billion.
• The Goldman Sachs Group Inc.: net income of $8.0 billion on revenue of $34.2 billion. Those profits are after compensation and benefits totaling $12.6 billion. The average compensation for a Goldman Sachs employee for 2013 was $383,000, lower than the $399,000 of 2012. Oh the humanity!
• Morgan Stanley: net income of $3.0 billion on revenue of $33.1 billion.

How big are these six banks? So big that they hold 67 percent of all the assets in the U.S. financial system, considerably more than they held five years ago.

Cause the crash and then profit from it

And what “services” do these too-big-to-fail financial institutions provide? Matt Taibbi, in the Rolling Stone article that gave Goldman Sachs the memorable moniker of “vampire squid,” summarized:

“Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest.”

Goldman Sachs and its peer intitutions seek to extract money from every aspect of human activity. These, and other banks, have never had to accept responsibility for bringing down the world’s economy. Other than a few individuals who have been hauled into court because their scheming was too blatant to ignore (who are always tagged “rogue traders” as if they don’t operate within a well-established system), it’s business as usual.

Why should the we be at the mercy of a tiny elite that knows no limits to its rapaciousness? A crucial component of a better world would be a drastically shrunken banking system, under democratic community control, oriented toward human need and rational investment, and prohibited to engage in any speculation. Banking should be a public utility. The point of a market is to serve humanity — yet under the current world capitalist system, human beings exist to serve markets. And markets are nothing but the aggregate interests of the most powerful industrialists and financiers.

Financiers may see themselves as untouchable monarchs when they look into a mirror, but we need not swallow such nonsense any more than our ancestors did when they ceased to believe that a king is chosen by God to rule over everyone.