I have felt somewhat nauseated watching the news programming over the past few days as various regulatory and legislative vultures (I'm looking at you, Senator Levin) have endeavoured to leverage JP Morgan's embarrassing $2bn loss for their own ends:
Levin said Dimon had argued for the repeal of Dodd-Frank and is also against regulation of derivatives and greater oversight of overseas outposts like London. "All three of those positions have been dramatically proven to be wrong," said Levin.Really, Carl? Whom has JP Morgan's $2bn loss hurt except for the shareholders in JPM, the JPM executive and the employees in the JPM CIO? Isn't this precisely how the market is supposed to operate - the bank bears the costs of its own stupid decisions rather than offloading them onto the taxpayer.
I particularly liked Mary Schapiro's SEC claiming that it was "investigating" the loss. What's to investigate, Mary? The offending traders are based in London, and JP Morgan is a bank holding company (the number one bank holding company by total assets, beating out BoA), so its primary regulator is the Fed, not the SEC. This looks to me like the SEC trying to make mischief for the Fed and increase its own stature in DC; God forbid that anyone should look at the catastrophic regulatory failures of the SEC leading up to the 2008 financial crisis.
The estimable Prof Bainbridge puts the JP Morgan loss and its implications into a suitable perspective:
The $2 billion figure is a headline-grabber, but it posed no threat to JP Morgan's viability, let alone a systemic threat. Using it to justify more restrictive regulation is thus mere agitprop.
Meanwhile, the US National Debt has continued to increase an average of $3.95 billion per day since September 28, 2007 [...] Maybe we ought to be regulating the feds not the banks.