In 2008, many cringed as the federal government stepped in to bail out some of the biggest financial institutions in the nation. The subsequent fear was not necessarily directed towards the floundering balance sheets that haunted banks and left them in ultimate desperation, but a result of the government taking such totalitarian power. The federal government can, and has, taken monstrous control of so many aspects of our day-to-day lives, but there was still one thing in our minds they couldn't touch. The banks.
Banks, like JP Morgan (NYSE:JPM), have more say, more power than any other sector. They decide the fate of our economy and the fate of practically every citizen. From determining whether or not you receive that loan to keeping your checking account in order, banks remain at the forefront of everyday life. Good or bad, friend or foe, they're always there. Which is precisely why the government wants so badly to gain the upper hand with the institutions that still seem to be in their way.
Wasn't it odd, for example, that President Barack Obama never came out directly after the announcement of the $2 billion trading loss and condemn the bank's actions or at least hand some assurances to investors or JP Morgan customers? Instead he, like most in Congress, have remained pretty much on the sideline during the whole debacle. Why? Because they want to see the bumbling antics of such institutions come to light unopposed in order to prove to voters they could assuredly do no worse.
Approve of stricter regulations or not, the term is a mere cover for socialism. A mere facade for a government that with each and every passing days believes it can automatically do things better. For those on the outside, the blanket currently being used to mask the government's true intentions may be working, but it has already come to light in the eyes of the banks and their shareholders. A perfect example of why the majority of these institutions recently fell after reporting earnings despite the fact most, like JP Morgan, beat. Another reason why JP Morgan CEO Jamie Dimon came across as so perturbed at the trading losses and even blasted his own company and executives for being so "sloppy" and "stupid."
You can argue with and reject reality, but somehow the bad news will always come to pass. The day the federal government swoops in and takes absolute power of these institutions is perhaps closer now than it was during the financial meltdown. Especially if such ignorance is left to lead and then step down amongst a wave of humiliation and regret.
The point here is not to condone JP Morgan or their obvious lack of judgment. Still, to think the government can do a better job through control or regulation is a sign of even further arrogance. Governments simply don't know how to lead and regulate business. They only know how to take control. And the banks are without a doubt their next target.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.