Money and politics have become as closely related as love and marriage. Just check out OpenSecrets.org, the web site that chronicles campaign contributions from private donors, and you'll find that financial institutions have been the biggest donors to political campaigns over the latest election cycle for 2013-2014.
Nomi Prins, author of the new book All the Presidents' Bankers: The Hidden Alliances that Drive American Power, is not surprised. She tells The Daily Ticker in the video above that the relationship between bankers and presidents is historic and runs deep.
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In late 2008, during the last big financial crisis, the CEOs of the country's biggest banks, plus the U.S. Treasury Secretary and Fed chairman, met several times to rescue the U.S. banking system.
Shotgun marriages were arranged between JPMorgan and Bear Stearns and between Merrill Lynch and Bank of America, but not for Lehman Brothers, which was allowed to fail. The Treasury and Fed chair injected $250 billion into the biggest banks, if they wanted it or not, the government guaranteed more than $1.5 trillion in new senior bank debt and insured $5000 billion in non-interest bearing accounts.
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Almost 80 years earlier it was the heads of the biggest banks that gathered at the House of Morgan at the bequest of Morgan chairman Thomas Lamont to pool their funds and save the banking system just before the 1929 crash.
Historically there have been "close contacts between key bankers and key presidents," says Prins. "Today those relationships are slightly less personal but very, very functional, and the result of all these decades of receiving help from Washington...is that there is so much more money on the table and so much more risk that [bankers] are taking because they have [government] backing." That includes FDIC insurance as well as $4 trillion-plus worth of Treasury securities issued by the Federal Reserve to help support the banking system.
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"They've learned over history they can do a lot of speculative activity and have the government save them" when they run into trouble, says Prins about the big banks. And now "there are a bazillion lobbyists and lawyers talking to senators and creating laws that benefit the banking community."
And the ties could grow even closer between bankers and the government as a result of Wednesday's Supreme Court decision eliminating the cap on the total amount that any individual can contribute to federal candidates in any two-year election cycle.
But the relationship between big banks and big government now is different than it once was. In the 1930's the heads of National City Bank [now Citigroup] and Chase [now JPMorgan Chase] were friends with FDR and they supported the Glass-Steagall Act, which separated speculative activity of banks from deposits, says Prins. "There's no way Jamie Dimon today would hang out with President Obama and say, 'We need to pass a law that splits up our trading activity from the rest of our deposits and by the way we don't want backing from the government if we mess up next time. That would just not happen."
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