Vladimir Putin may have just handed American bankers their next bailout opportunity. Alleged Russian hack attacks on JPMorgan Chase (JPM) are giving bankers the excuse they need to demand yet more of your tax dollars.
An Obama executive order could authorize a multi-billion dollar bank bailout within weeks — a bailout so cleverly disguised that most Americans will never notice. Our Congress certainly won't stop it, either, but I can tell you how it will unfold.
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Two months ago the Securities Industry and Financial Markets Association (SIFMA) engaged retired National Security Agency Director Keith Alexander
to "consult" with the trade group on cybersecurity matters. I said at the time that Alexander's main job would be to divert taxpayer money
toward covering what should be normal overhead costs for the banks.
Their logic is that top banks are so critical to the American economy, yet so exposed to cyberattacks, that protecting the banks is essential to the national defense. All they needed was an example. Now they have one.
We don't know for sure if last month's attack on JPMorgan originated in Russia, but Russia is a perfect villain for the dramatic steps that bank lobbyists want Congress to take. Consider this quote from Edward DeMarco, general counsel of the Risk Management Association, a professional group of the banking industry.
"I can't foresee a situation where the president wouldn't do something via executive order," DeMarco said, according to Bloomberg. "All we're talking about is the difference between the destruction of tangible property and intangible property."
Ah, yes. "All we're talking about," according to Mr. DeMarco, is a statute duly passed by Congress that is now the law of the land. He wants this law changed by an Obama executive order, in the unlikely event Congress fails to do his industry's bidding.
We think of Wall Street bankers as swashbuckling risk takers. They are actually quite the opposite. Top bankers become wealthy by transferring their risks to unwary people who don't understand what they are buying.
The insurance industry has hiked the rates for cyber terrorism insurance to a level Wall Street doesn't want to pay. To reduce this cost, the bankers seek to amend the Stafford Act, which governs the Federal Emergency Management Agency's disaster insurance programs. FEMA presently covers only "tangible" property losses. Bank profits don't qualify.
Should U.S. taxpayers have to rebuild beachfront mansions owned by people who knew a hurricane would strike someday? I don't think so — nor should taxpayers protect banks looted by hackers.
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The bankers who freely chose to build systems vulnerable to cyberattacks are big boys. They can pay their own security costs and buy their own insurance. If they don't like the price tag, they should find another business. What they should NOT do is stick taxpayers with the bill yet again.
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