At the same time, millions of working peopleconsidered by Washington not too big to failface rising long-term unemployment.
Goldman Sachs Group reported a record-high profit of $4.95 billion for the fourth quarter of 2009 and $13.4 billion for the entire year. JPMorgan Chase, the nations second-largest bank, said it more than quadrupled that quarters profit to $2.38 billion, making $11.7 billion in 2009. Wells Fargo made $2.8 billion in the fourth quarter, even while repaying $25 billion to the U.S. Treasury on its bailout loan.
The massive profits come as the Obama administration continues to serve these banks in numerous ways. Besides funds given to them through the Troubled Asset Relief Program beginning in late 2008, banks can borrow money at close to zero percent interest from the Federal Reserve. They then use these funds to buy Treasury securities yielding 3 percent interest instead of making what they consider uncertain loans to consumers and businesses.
To take advantage of these government policies, investment banks were allowed to redefine themselves as commercial banks, with special access to Federal Reserve funds, noted the Weekly Standard.
Transferring toxic assets
Toxic assets, for the most part worthless mortgage-backed securities, are being transferred from the banks books to the government ledger. The Federal Reserve holds more than $900 billion in mortgage-backed securities, reported Crains New York Business, with plans to boost this to $1.25 trillion through the end of March.
With Paul Volcker, former chair of the Federal Reserve Board, at his side, Obama announced January 21 what he claimed would be common-sense reforms of the banking system. For months Volcker had been shuffled to the background by the White House in favor of Treasury Secretary Timothy Geithner and others more closely identified with big investment houses. Volcker calls for prohibiting commercial banks from owning or investing in hedge funds and limiting the use of federally insured deposit funds for speculative and risky investments, such as mortgage-backed securities.
Commercial banks, however, could continue to engage in such trading as long as they could show regulators that they are doing it for their clients, not their own proprietary accounts, reported MarketWatch Web site.
Volcker has been calling for reinstating the Glass-Steagall Act, in hopes that legally separating commercial and investment banks will halt the debt-driven frenzy inherent to the workings of capitalism. The U.S. rulers were forced to impose Glass-Steagall in 1933 in response to the wave of bank failures in the early years of the Great Depression. It was repealed under the William Clinton administration in 1999.
In a reflection of how little confidence the capitalists have that they have solved the financial crisis, doubts are being raised in Congress about ratifying a second term for Federal Reserve chairman Ben Bernanke, one of the leading proponents of the governments use of hundreds of billions of dollars to bail out giant banks and the American International Group insurance company. His term expires January 31. Many in capitalist circles, however, are signaling that changing the head of the Federal Reserve could trigger greater financial calamity. A prolonged delay would unsettle markets; a rejection could be even worse, noted the Wall Street Journal.
Meanwhile, the number of workers facing long-term unemployment continues to rise. In December 6.1 million people had been without a job for more than six months, according to the Labor Department. The official unemployment rate in December was 10 percent, 15.3 million workers. But this does not count the 2.5 million persons the government claims are marginally attached to the labor force.
U.S. rulers prepare deeper social cuts
Workers face more economic uncertainty
Working-class answers to crisis
Canada: Joblessness still high in so-called recovery
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