“So we were asked to buy Bear Stearns. Some have said the Fed did us a favor to finance some of it. No, no, we did them a favor. Let’s get this one exactly right. We were asked to do it. We did it at great risk to ourselves… “
That was JP Morgan CEO Jamie Dimon, answering a question about a government lawsuit seeking damages from JP Morgan over Bear Stearns mortgage-backed securities.
As you probably know, JP Morgan just agreed to pay $13 billion to settle this lawsuit.
$13 billion.
It’s the biggest corporate settlement in history.
It’s also extortion, perpetrated by none other than the U.S. government.
Let’s not forget that JP Morgan was asked to buy Bear Stearns as it was collapsing in order to provide some stability to the financial sector…
The Fed even helped the acquisition by creating a $30 billion fund, called Maiden Lane, to take on some of the worst of Bear’s mortgage backed securities. Because of Maiden Lane, losses on Bear Stearns worst assets would fall to the Fed, not JP Morgan.
No doubt this was a sweet deal for JP Morgan.
But to come to Dimon five years later and demand a $13 billion payment is a shakedown.
It’s extortion by the government — and if Dimon tried to fight it, you can bet the consequences will get worse…
Our government is becoming more like the Mafia every day. It is squeezing both American citizens and corporations dry with taxes, fines, quantitative easing, bailouts, handouts, and holdouts.
“We Know Where You Live”
The U.S. government had its chance to prosecute Wall Street bankers.
President Obama even promised “to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis,” and “hold accountable those who broke the law.”
Of course, no one’s been held accountable.
And why should the government try to put someone in jail when, instead, it can demand multi-billion-dollar payments?
Just yesterday, hedge fund SAC Capital was found guilty of insider trading and will pay a $1.2 billion fine.
Yes, you read that right — the company was found guilty, but apparently no actual person did anything wrong.
It’s pretty clear that government today is all about the money. ObamaCare is basically a handout to health insurance companies. Tax hikes on the wealthy appease the voters and get more loot in the coffers.
Heck, even bank reform is a thinly veiled money grab.
For instance, just the other day, Fed Chief Bernanke said he was considering forcing U.S. banks to raise their capital bases again.
Sounds good, as the more money banks have on hand to back their loans, the more stable they should be, right?
Well, banks don’t keep cash on hand. They keep same-as-cash Treasury bonds!
So now that our dim-witted Congress has impaired the full faith and credit of the United States by threatening default, and foreign demand for Treasury bonds wavers, the Fed can simply force banks to pick up the slack and buy more.
Brilliant!
And as it happens, banks have more than tripled their Treasury holdings over the last few years as they have expanded their capital bases.
And so the banks help fund the U.S. deficit at the same time they meet new regulations.
It’s the Taxpayer Who Pays
The biggest problem of all here is that it’s always the taxpayer — the U.S. citizen, you and me — who foots the bill.
In the case of the $13 billion JP Morgan settlement, the fines don’t get paid by the executives who profited wildly.
They don’t pay a cent.
No, the settlement money comes from the company, which is owned by the shareholders. They are on the ones on the hook.
Same goes when banks raise their capital base: In many cases, the banks have to sell off divisions to raise cash that they trade for Treasuries. So the banks lose growth and the shareholders lose return on equity.
It’s all being siphoned off by our Mafia government.
And sadly, there’s not much we as citizens can do about it…
Sure, we can vote the bums out. But we’ll be voting new bums in, and they will be just as beholden to the almighty dollar.
The only way we can protect ourselves is to keep as much of our money out of the government’s hands. And surprisingly, there’s an easy way to do it: You can set yourself up with an account that will generate as much as 15% a year in income that’s completely tax-free.
It’s a great way to make more money and stick it the government at the same time.
But don’t be surprised if this tax-free loophole gets closed sometime soon…
Get the details here before that happens.
Until next time,
Until next time,
Briton Ryle
@BritonRyle on Twitter
The Wealth Advisory on Youtube
The Wealth Advisory on Facebook
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.
