More heads should roll and not just at JPMorgan

It’s hard to believe that just over two years ago I spoke at a press conference at the U.S. Capitol along with Senators Dick Durbin, Jack Reed and Michael Bennet calling for the Senate to pass financial reform legislation to protect small businesses and the public from Wall Street causing another Great Recession.  The passage of the Dodd-Frank Act is the background for the current controversy involving JPMorgan.

Today we might hear of more JPMorgan senior executives losing their jobs over that big bank’s $2 billion and growing loss.  Maybe its CEO Jamie Dimon will accept responsibility and offer his own resignation.  According to former and current JPMorgan employees, the decisions to engage in the highly risky and self-destructive trading that Dimon has called “sloppy", “stupid” and “bad judgment”, were approved by Dimon himself.

But JPMorgan shouldn’t be alone in cleaning house.  Contrary to what Eric Gehrnstrom, a senior adviser to the Mitt Romney campaign, said on NBC’s TODAY this morning, the proprietary trading that is costing JPMorgan billions is not just a loss to the shareholders of that bank and therefore no taxpayer money was at risk. 

Proprietary trading was intimately involved in creating the financial meltdown that caused the Great Recession.  It was the first domino to fall.  When the banks were facing insolvency and shutting down because of their greedy gambling with their own money, the whole economy teetered on collapse forcing Congress to bail them out with taxpayer dollars. 

These big banks aren’t the small, community banks we know on Main Street.  These financial giants turned into investment gambling houses through their proprietary trading.  And they weren’t doing this to help the nation’s economy.  This was all about satisfying the greed of their CEO’s, traders and stockholders at the public’s expense.

That’s why the Volcker Rule was put into that financial reform Congress passed in 2010 to prevent another Great Recession by severely limiting proprietary trading by banks.  But that rule, along with other needed regulations passed over two years ago, still is not in effect because hordes of bank lobbyists descended on the regulators and Congress to water down the reform.

It appears that the regulators responsible for writing the rules intended by Congress have forgotten that they are public employees.  We pay their salaries to do their jobs protecting us, not the big banks.  And the bank regulators charged with overseeing JPMorgan and the other big banks obviously aren’t doing their jobs in protecting us.  According to JPMorgan insiders the current proprietary debacle has been building since 2007.

If we expect accountability at JPMorgan, we should also demand accountability from the government employees who have kowtowed to the wealthy and powerful.  The regulators at the Federal Reserve, Treasury Department and the Commodity Futures Trading Commission who have been intimately involved in overseeing JPMorgan and “negotiating” with the big banks to loosen needed regulations passed by Congress should be re-assigned or terminated. 

Now, I am supportive of government employees.  They shouldn’t be laid off or not receive proper compensation just because we don’t make multinational corporations and the wealthy pay their fair share of taxes.  Government employees are an important part of our economy spending their money with locally-owned businesses.

But I also expect these employees to work for us, not work for the big banks in hopes of a better private-sector paycheck tomorrow.

Just as heads rolling at JPMorgan will send a warning to the other big banks about irresponsible proprietary trading, some deserved-house cleaning at our regulatory agencies will send a clear message to all who we have entrusted to protect us and our economy.

Amazon not giving up

The Amazon.com lobbyists must be busy working the phones to our state legislators and emailing them copies of the story in Saturday’s State. “Amazon vote drives off two firms”, screams the headline.

The story goes on to quote Lexington County leaders who have been at the fore front in pushing for Amazon.com to be the only retailer in the state not to have to collect sales tax on in-state sales. Not one dissenting point of view was included as you would expect in a news story. Not one. Amazon couldn’t have paid for better one-sided news coverage.

In my blog on Thursday I said, “Now attention must be paid to the Senate. Amazon.com hasn’t been paying possibly six digit fees to lobbyists just to give up as long as the legislature still has a breath of life this session.” Saturday’s front page story tells me that I was correct.

But let’s make sure we all know what the Amazon proponents actually said in the story. One potential manufacturing prospect for Lexington County is “abandoning consideration”. The other was led to “suspend interest” several weeks ago because of the controversy. Neither of these prospects were in the bag as we thought Amazon was. This might simply have been a convenient excuse for the prospects to say no to Lexington County because it sure wasn’t because the state and county didn’t deliver on everything they promised in writing to Amazon.

And while we were all embroiled in battle here with Amazon, Wall Street didn’t care. The company’s stock rose 7.9 percent to reach an all-time high the same day our House voted down the sweetheart sales tax deal. According to a Seattle Times story, the jump in stock price was because investors approved of the company’s efforts to “grab a bigger share of the e-commerce market.”

And how is Amazon grabbing a bigger share of the market? By bullying states like South Carolina into giving them an unfair competitive advantage over the state’s existing brick-and-more and online stores that have to collect sales tax on in-state sales.

The House vote on Wednesday wasn’t only important for fairness to our existing small businesses, it was also important to the national effort to force all online retailers to collect sales tax regardless of the location of the customer.

Jeff Milchen, co-founder of the American Independent Business Alliance, in his commentary in the April 28th issue of Business Week recognizes South Carolina’s courageous stand against Amazon.com.

(S)state bills closing the Amazon loophole do help level the playing field for many businesses and build momentum for needed national reform such as that proposed by Senators Dick Durbin (D-Ill.) and Mike Enzi (R-Wyo.), who plan to reintroduce the "Main Street Fairness Act" during the current session. Their bill would ratify the Streamlined Sales and Use Tax Agreement, a compact developed by a coalition of state government representatives to harmonize sales tax policies. The bill also would give states the authority to collect tax on interstate sales under these simplified rules.

South Carolina should be proud of taking a leading role in leveling the playing field for all retailers. Let’s not succumb to hyperventilating about possible prospect losses and instead listen to our Commerce secretary, Bobby Hitt.

South Carolina, like our neighboring states, has similar incentives for new and expanding businesses. Incentives are but one of the reasons that companies choose to locate or expand in our state. South Carolina continues to be a national leader in work force development and has one of the most business-friendly climates in the country. A dispute over a sales tax exemption will not change the state’s international and national reputations as a desirable business location.