What's good for JPMorgan is good for America

Brad DeLong,

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," President Obama told Steve Kroft of 60 Minutes. In a narrow sense, that may be true. But Obama did run for office in part to keep the unemployment rate from rising to -- and staying above 10 percent. And his pursuit of that end has aligned the president with the fat cats.

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Bur for indirect government policies to boost spending, they must boost asset prices--especially long-term, risky asset prices. And guess who owns the most long-term, risky assets? Guess who benefits most when those long-term, risky asset prices rise?

Yep. It's fat-cat bankers. That's what fat-cat bankers do: they raise money--mostly by borrowing--from people who want to keep their wealth liquid and relatively safe, and they use this money to buy long-term risky assets, relying on their technical skill and judgment to preserve a margin between what they are paid by borrowers and what they must pay, in turn, to their creditors.

In a crisis like the present, if you avoid the nationalization and extravagant deficit-spending route, and you still succeed in avoiding persistent mass unemployment, you will have done so by a process that boosts asset prices and enriches fat-cat bankers.

The fact that the policies you undertake to avoid persistent mass unemployment also help fat-cat bankers doesn't mean that you can¹t implement other policies to place burdens on them. Progressive income and wealth taxes, tight capital and regulatory requirements, impositions of enormous risk on financiers in order to remove the possibility that they will retain their wealth even as their organizations go bankrupt these are all policies that make fat-cat bankers' lives less fat and less feline. And I am strongly in favor of enacting all of these long-term structural reforms.

But there¹s no point in pretending that the policies that avoid persistent mass unemployment are not the same policies that enrich fat-cat bankers. They are. At this moment, what is good for JPMorganChase is good for America -- and vice versa.

In effect, Obama did run for office to help out a bunch of fat-cat bankers on Wall Street. He just may not have realized it at the time.

He can ridicule them, though. Makes 'em mad.