NEW YORK (TheStreet) -- JPMorgan Chase reports second-quarter earnings before the opening bell on Friday, and I can tell you right now that no matter what kind of numbers it reports, it is going to be dumped on.
If JPMorgan's $9-billion-and-counting trading loss is a drag on earnings, it is going to be dumped on. If it isn't, it is going to be dumped on.
As a matter of fact, you might say that JPMorgan -- and all the major banks, for that matter -- are in a pretty much no-win situation during earnings-reporting season. If they make a ton of money, it calls attention to the fact that the banking sector is thriving while the rest of the economy is suffering because of a recession that they helped create. If they don't make money, they are criticized for being inept or inattentive, just as JPMorgan has been for that credit-derivatives trading loss that keeps getting bigger.
JPMorgan CEO Jamie Dimon is the first to decry the bad rap that the banks are getting, and on the face of it, it doesn't seem especially fair or even rational. After all, it is argued, shouldn't we be happy that at least one sector of the economy is doing well -- so well that even a $9-billion-and-counting trading loss isn't likely to do the bank very much damage?The answer is "no." We shouldn't be happy. We should be furious. The public has every reason to be resentful about how the banking sector and Wall Street are flourishing when the rest of the economy is suffering and unemployment is still stubbornly hovering above 8%. There are two reasons for this: 1. JPMorgan is a government-subsidized institution, and; 2. It treats its customers like dirt. According to a study by the International Monetary Fund and some numbers-crunching by Bloomberg, JPMorgan gets a $14 billion-a-year subsidy from the U.S. taxpayer.
In recent decades, you see, the government has stepped in to be sure that all bank creditors are paid in full. See, that's one of the unseen advantages of being too big to fail. The system is so interconnected that international banking becomes like one big game of dominoes, so that the collapse of one can cause the entire banking system to go "pfffft," as the Eli Wallach character pointed out in Oliver Stone's Wall Street sequel, Money Never Sleeps.
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