When the TARP was presented to Congress, Secretary Henry Paulson and others argued that the situation was dire, and that the failure of major financial institutions posed a systemic risk to our economy. The stated goal was to unfreeze credit so that banks can make loans to businesses and individuals. It was never contemplated that banks use their capital to make donations to organizations founded by a controversial figure like Jesse Jackson.
Shakedown artist Jesse Jackson is back at it. As Visa’s prepares its $17 billion initial public offering, s expected to be the largest ever in the United States, Jackson is bending ears and twisting arms in an attempt to cut minority-owned investment banks in for a greater share of the underwriting fees. He’s even threatening to have his allies on Capitol Hill launch a Congressional investigation if he isn’t shown the money. And he’s got a specific number in mind: he wants his favored banks to get 10% of the deal, according to DealBook’s report.
“There must be some sense of ‘equanomics’ in the I.P.O. deal — where the representation of minority investment banking firms compares favorably to our consumer use of credit cards,” Mr. Jackson wrote in letters he sent last Friday to Jamie Dimon, JPMorgan’s chairman and chief executive, Senator Christopher Dodd (the chairman of the Senate Banking Committee) and Barney Frank (the chairman of the House Financial Services Committee).
Does that make any sense at all? Larry Ribstein, who says he has “no quarrel with Jackson’s main argument that it would be good to give minority-owned banks a bigger piece of the action on Wall Street,” doesn’t think so.
The fact that a bank is an issuer or an acquirer of card debt doesn’t have much or anything to do with whether it will do a good job managing the underwriting or selling its securities, and therefore whether it should have a cut of the fees. Indeed, one might argue that bringing in an issuer or acquirer as an underwriter is a form of kickback, or perhaps more benignly a price cut. Visa should be nice to its users, including members of minority groups. But the way for Visa to be “nice” is through the price and quality of its services – not by paying kickbacks to banks.
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