Rick Santelli, in a recent “Santelli Exchange” on CNBC (link to video by way of Zerohedge: http://www.zerohedge.com/news/epic-santelli-rant-un-american-federal-reservetreasury-incompetence) offers his outrage over the recent LIBOR scandal and the possibility that The Federal Reserve Bank and The Bank of England had some foreknowledge that there were problems and possible skulduggery in the setting of one of the most important interest rates on the planet.
For the uninitiated, LIBOR stands for the London Interbank Offered Rate. It's a benchmark rate that is determined by several major banks in London which is, in turn, used to establish the level of interest that they would be charged if they were borrowing money from other banks. It has a dramatic impact on the global economy in that it can affect how much you pay in interest on everyday things like mortgages, car loans, credit cards, etc.
Mr. Santelli goes on to tell us of his outrage (righteously so) over the lack of due diligence on the part of the Fed regarding the handling of the $1 trillion in TARP (Troubled Asset Relief Program) funding that was used to bail out Wall Street.
While this is all well and good, there are a few things that Mr. Santelli is either unaware of or neglecting to tell us.
The first is that the Federal Reserve Bank of the United States is a private bank. It is not part of the Federal Government. As the old joke goes, it’s as Federal as FedEx.
The second is that Mr. Jamie Dimon, CEO of JP Morgan Chase, sits on the board of directors of the NY branch of the Fed. Mr. Dimon’s bank has received billions of dollars in virtually free taxpayer money, money that he was free to do anything he wanted with (how this is not a conflict of interest defies human comprehension). It has become obvious that the thing that Mr. Dimon wanted to do with this money was to continue speculating (i.e. gambling) in the unregulated and opaque $700 trillion global derivatives market. JP Morgan Chase, a FDIC (i.e. taxpayer) guaranteed institution, has reportedly lost almost $6 billion dollars gambling, sorry, I mean “speculating” in the derivatives market.
The third concern with Mr. Santelli’s discourse is his sums. The Fed has not given $1 trillion to Wall Street. It has given $16 trillion to Wall Street. It has been estimated that every sub-prime mortgage in America could have been bought and retired for $1.4 trillion. But that would have been “Socialism.” Much better to give over 11 times as much money to Wall Street – the very people who engineered this crisis - free and no questions asked to do as they like. Or as it’s better known in America, “Capitalism.”
The fact that Mr. Santelli, who works for a financial news network, would be shocked that the Fed, a private bank that has Jamie Dimon as one of its Board of Directors, would carelessly give an almost infinite amount of money unconditionally to other private banks is pretty galling.
Mr. Santelli then goes on to wonder why the media is not doing its job and is not more upset over all of this “injustice.” This is pretty rich even for someone who works at CNBC.
He complains how the press is more concerned with trivial matters and not the big stories. He laments how the main stream media covered stories on Mitt Romney’s jet skiing on a recent holiday and his record of off-shoring and outsourcing American jobs while at Bain Capital, and how the media reported these activities as “un-American.” Mr. Santelli, in Mitt Romney’s defense, screamed, “Like hell it’s un-American!”
I agree with you Mr. Santelli. Nothing says “I love America” more than destroying the Middle Class by permanently sending good high paying jobs overseas.
Mr. Santelli then goes on to tell us exactly what he does think is “un-American.” Bank regulation, primarily in the form of the Dodd-Frank Act.
So are we to believe that the reason we are in this crisis is because we didn’t deregulate banks fast enough? Did Mr. Santelli forget that under the Glass- Steagall act, the U.S. went almost 60 years without a major banking crisis?
There is an incoherence to Mr. Santelli’s arguments in that on the one hand he is crying about how the Government didn’t do a good job of oversight (even though it was the Fed, a private bank which is not part of the Government, that gave all that money no questions asked to Wall Street). On the other hand he is crying about how it’s wrong that the Government is trying to do its job of oversight by regulating the banks.
And what’s worse, by many accounts, Dodd-Frank does nothing to get to the heart of the problem. Banks, which are insured by the FDIC, have become far too big for their own good, and they are engaging in far too much speculation in the unregulated derivatives market.
It is only a matter of time before financial markets will collapse again. It is, by their very nature, what financial markets do. Mr. Santelli is right to be angry. But he should be directing his anger where it is warranted.