You don’t have to be a Republican to sling some mud at our lame-duck president. Sen. Kirsten Gillibrand, D-N.Y., dared suggest that student loan rates should equal those charged to large banks, 0.75 percent; she’s appalled by the “business-as-usual” mindset in Washington.

After much haggling, Congress passed bipartisan legislation that pegs student loan rates to the economy, hardly a comforting compromise for the largest debt in the economy (around $1 trillion in 2012). Amid the euphoria over a rare legislative agreement, the silly idea has been quietly laid to rest: How dare she compare mighty commercial banks to students?


The banks are doing extremely well after well-intentioned (but misplaced) taxpayer assistance.


Regardless of an estimated 8.7 percent drop in student enrollment in 2013 (compared to 2012), and regardless of graduates’ economic prospects in the new digital economy, let’s follow the mega-commercial banks. If you recall, the Emergency Economic Stabilization Act of 2008 gave roughly $700 billion to banks to avert an impending economic catastrophe. Economic historians will debate for years the effects of this act.

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Fast forward to 2013, and those banks have done tremendously well. Just look at their reports for the 2nd quarter of 2013: Bank of America’s revenue $22.9 billion, $4 billion net income ($97 billion bailout); Goldman Sachs’ revenue $8.6 billion, $1.93 billion net income ($10 billion bailout); Citigroup’s revenue $20.5 billion, $4.2 billion net income ($220.4 billion bailout); JPMorgan Chase revenue $26 billion, $6.5 billion net income ($94.7 billion bailout).

You see the picture — the banks are doing extremely well after well-intentioned (but misplaced) taxpayer assistance. Couldn’t this money have been given directly to homeowners to avoid foreclosures? Should their “prime discount rate” be fixed at 0.75 percent, while ours is so much higher?

Given this relationship between banks and government agencies that regulate them — bailouts when needed — you’d hope banks would behave like good citizens. Instead, these banks have been disregarding federal laws with a level of impunity not seen since the Gilded Age.

The latest headlines are quite telling: “Lawyers present closing arguments in former Goldman trader’s fraud case”; “Ex-stock analyst charged with insider trading in case tied to SAC indictment”; and “Morgan Stanley fined for selling exotic funds to unwary elderly.” At least these cases ended up in court. Many, though, have been settled out of court.

According to The New York Times, the Federal Energy Regulatory Commission agreed to settle with JPMorgan to the tune of $410 million. The regulator accused the bank, and senior executive Blythe Masters, of “manipulative schemes” that resulted in charging more for energy than warranted at the time (2010-2011). We should leave the details of this case and its eventual settlement to lawyers.

But should we ignore the moral hazards of ongoing abuses by bank executives, the beneficiaries of low borrowing costs and a federal safety net if they fail?

The argument about a rogue trader who takes advantage of unsuspecting investors or the public trust is one thing. When it’s a systematic behavior condoned (because it’s not stopped) by CEOs and board members, capitalism isn’t living up to the promises its founders made for its integrity.

Large commercial banks, like JPMorgan Chase, are public entities at least inasmuch as they collect individual deposits insured by the FDIC, they are publicly traded (hence publicly owned), they enjoy the largess of taxpayers (though never consulted) when they are about to fail, and they are regulated by the U.S. government. They are private insofar as their profits remain under the control of the management team whose compensation packages don’t require public (or government) consent. The choice of playing the public or private card is always at the discretion of these banks.

What should we make, then, of the $410 million settlement? Defrauding customers apparently is the new normal. Getting caught rarely happens. If it happens, fines are paid and no one goes to jail. Powerful Wall Street lawyers cut a deal that doesn’t ruffle any feathers. Neither Masters nor CEO Jamie Dimon went to jail, and the fines JPMorgan paid will be lost in the annual financial statement (at this rate of profitability, 1.6 percent of $25 billion). Likewise, the Federal Energy Regulatory Commission scored big in levying $410 million in fines in comparison to its latest settlement with a bank of $1.6 million.

Have we lost our moral outrage? Have we accepted financial scandals? We continue to deposit our paychecks in mega-banks for 0.1 percent interest and pay 6.99 percent interest for small business loans.

No wonder banks’ facades are made of marble.

Raphael Sassower is professor of philosophy at UCCS. Contact him at See also