Jaime Dimon and JP Morgan Chase announced a 2 billion dollar trading loss from investing in risky securities. Its killing the stock market today. This IS what lack of regulation and oversight looks like. Ironically, it takes place in the midst of its own CEO's crusade against the very regulations that brought this loss to light in the first place.
http://www.huffingtonpost.com/...
What is lost in this story is the bigger picture: this loss has not only related to the bottom line of JP Morgan Chase, it will cost the United States treasury 2 billion dollars. How? Tax deductions. Corporations have the ability using existing tax law, to write off this entire loss from the profits that they would have paid. In the end, it wont cost them a dime. And this trade will cost all of US 2 billion dollars!! In other words, we ALL have subsidized this risky and poorly executed strategy.
Is this fair?
More......
The math, for those of you concerned: Feel free to add corrections.
JP Morgan Chase paid a corporate tax rate of 31% in the last tax year.
http://xfinity.comcast.net/...
Meaning, that if Chase HAD NOT lost 2 Billion in bad trades, they would have at the minimum, paid tax on that amount in profit as opposed to being able to write it off as a loss.
2,000,000,000 (2 Billion) x .31% (the tax rate they paid) = 62,000,000. In other words, we all would have been able (as taxpayers) to collect this money from one of the 10 most profitable corporations in this country. Instead, we will now GIVE them 2 billion in tax relief.
Whats next? Chase and their minions of accountants and tax lawyers can do the following: take the maximum loss off of their MASSIVE profits (over many, many years). Chase had little to lose with this investment in a time of massive profits. The options were:
a) take the risk, potentially have a HUGE payoff or
b) if the strategy blows up in their face, lets just write it off our taxes!!!!
Just HOW profitable has the largest "too big to fail" bank in the USA?
2011
Pretax income: $24.9 billion
Provision for income taxes: $7.5 billion
Net income: $17.4 billion
Tax rate: 30.1 percent
Some would say: business has NEVER been better. Does this look like a company that needs taxpayer support?
We all have the ability to deduct trading losses from our tax returns (I admit: I have taken trading losses myself). But does it make sense for the largest bank in the USA, one that has taken countless subsidies from the US Government, lobbied in every way to relax any sort of regulation that would have even made this sort of loss public, lobbied against any sort of consumer protection, sold mortgages to citizens that were ticking time bombs, foreclosed on Americans houses illegally, charges fees for even the most basic bank account, failed to give help to millions of homeowners with mortgage modifications despite receiving billions from the government to do so and I am sure now spending billions to effect elections, all without disclosure. The list could go ON AND ON!!
As the stupidity of these "genius" Wall Street CEO's is more apparent every day, I hope that we all can see the reality. Where is the media!!?? NOT ONE person in the media has realized that by enabling Chase to be able to write off this loss, we ALL have subsidized this risky behavior.
I think its time to reform the corporate tax code to better ensure that this sort of behavior (i.e "business strategy") is not encouraged. Despite what Mitt Romney may think, corporations are not people. A person did not lose 2 Billion. A corporations lost 2 billion. A corporation that uses all of OUR money to make money for themselves.
Just as BP returned to profitability after nearly destroying the ecosystem known as The Gulf Of Mexico, JP Morgan Chase is adding destruction every day to the financial ecosystem of this country. It effects each and every one of us, even if we dont have a dime invested in the stock market personally. If any of us put our life savings into a small business and it didnt survive, we would have lost our life savings. For a bank, two billion just doesn't matter. The band plays on, and on, and on, and on, and on.........
When WILL it end? FINANCIAL REFORM NOW!!!!