U.S. gives JP Morgan $25 billion, JP Morgan says thanks, screw you

Before I get started, let me first note that one brave newspaper didn’t take the easy out of endorsing one or the other major presidential candidates: the Ann Arbor News flipped them both off. A paper after my own heart in a town I learned to love long, long ago. Except for the weather.

Lots of people still hold the opinion that JP Morgan the younger helped persuade Woodrow Wilson into World War I, not that the ole perfesser needed much persuading, because he had loaned a bunch of money, more than $60 million in 1914 dollars, to the Russians and the French and those loans were looking more than a tad wobbly as the Germans kicked ass across Europe. In other words, Morgan helped precipitate the slaughter of more than a hundred thousand US soldiers — with another 200,000 wounded — because otherwise he wouldn’t get his money back. This didn’t make him a popular fellow among pacificists and other opponents of the war. He had inherited a reputation as a pirate from his dad, who, like the modern day JP Morgan Chase, made something of a habit of helping out, for a price, the US government when it was in a jam, and he was bearing it out.

I don’t know whether any Morgans are still involved with the firm, but if so they must feel the tug of history. The company recently told its employees that the money given it by the government so that it would step up commercial lending will instead be tucked away from a rainy day or used to acquire some other institution that might be able to fend for itself if someone would use some taxpayer money to float it a loan.

Much like the Ann Arbor News only with no noble purpose, JP Morgan is taking the taxpayer money given it and other major banks to be in turn loaned out by them, and flipping off everyone who hoped, and all three people who expected, that it would be used for its stated purpose.

As New York Times writer Jay Nocera notes in the story linked above, a great many people took the refusal by Treasury officials to attach any conditions to the money as an indication that the agencies were mandating the banks to do whatever the hell they wanted to do with the funds. Banks know when to do as they’re told, even if it’s not strictly what they’re told.

This is why I insist on referring to the bailout as a theft, thank you very much.

To restate the situation, what we have here is a circumstance under which JP Morgan can act, and make some money doing so, to advance the interests of a great many people by providing operating capital, using someone else’s money, to credit starved companies that are profitable and create jobs, or they can sit on the money and use it purely in their own interests. And they’re going with Plan B.

Nocera also says that without explicitly saying so, the Bush administration is prompting a big-time consolidation of the banking industry.

In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, “the government wants not only to stabilize the industry, but also to reshape it.” Now they tell us.

Indeed, Mr. Landler’s story noted that Treasury would even funnel some of the bailout money to help banks buy other banks. And, in an almost unnoticed move, it recently put in place a new tax break, worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: “It couldn’t be clearer if they had taken out an ad.”

Friday delivered the first piece of evidence that this is, indeed, the plan. PNC announced that it was purchasing National City, an acquisition that will be greatly aided by the new tax break, which will allow it to immediately deduct any losses on National City’s books.

Nice work if you can get it. Theft. Theft, theft, theft, theft.