JPMorgan Chase Loss Shows Flaws Of Volcker Rule

IBD Editorials ^ | May 11, 2012 | Editor

[Kaslin]

Finance: JPMorgan Chase's surprise $2 billion trading loss brought immediate calls from Washington for still more regulation. But if anything, this shows the costly Dodd-Frank financial regulation has solved nothing.

JPMorgan Chase CEO Jamie Dimon has been a loud critic of the Dodd-Frank financial law — particularly the Volcker Rule, which limits banks' investments for their own accounts.

So no doubt there was some high-fiving in Washington over his bank's $2 billion trading loss.

Dimon was blunt in his own assessment, calling his bank's trading strategy "flawed, complex, poorly reviewed, poorly executed and poorly monitored."

"We will admit it, we will fix it and move on," he added. But that's not enough for some.

"The enormous loss JPMorgan announced today is just the latest evidence that what banks call hedges are often risky bets that so-called too-big-to-fail banks have no business making," said Democratic Sen. Carl Levin.

This is hysteria masquerading as policy.

Yes, a JPMorgan Chase trader — dubbed the London Whale — made a bad series of decisions in hedging against the company's portfolio.

[Hugin]

Dimon was blunt in his own assessment, calling his bank's trading strategy "flawed, complex, poorly reviewed, poorly executed and poorly monitored."

Now I'm sure that Dimon will take full responisbility for allowing this to happen, refuse all bonuses, and resign immediately. Right? /s

[man from mars]

loss could be as large as 20 billion dollars of the next several months

[the invisib1e hand]

lemme see, should I dig out the post on my favorite blog about how centralized risk management is a farce and a folly...

ah, why bother? It's enough to say that, when they start calling a trader a "whale", if you don't start scrutinizing him then you're negligent.

[aquila48]

“But if anything, this shows the costly Dodd-Frank financial regulation has solved nothing.”

Regulators always find the problem after it occurs. Worse than that regulations give people a false sense of security (like someone is watching out for you), making the resulting problem much bigger than it would otherwise have been.