Jamie Dimon’s on the hot seat over some $2 billion in recent losses on derivatives… Fueling the fire for those pushing for yet more regulation of the financial industry…
We’re talking JP Morgan; the firm that had the wherewithal to take over Bear Stearns and Washington Mutual (with a little help from the Fed) during the 2008 credit crisis… The firm that has earned over $4 billion a quarter over the past couple of years… The firm with $2.3 trillion in assets and $190 billion in shareholder equity for crying out loud…
Now wouldn’t ya think a firm with the ability to generate some $19 billion in earnings in a given year (last year) is taking on a little risk here and there? Indeed, without that four-letter-word, could a firm even begin to generate that kind of cash? But, alas, we’re talking a big, systemically important bank… What’s to keep it from making similar mistakes going forward, that, cumulatively, could indeed threaten the system, once again? Don’t we therefore need to regulate away that sort of behavior? Well, NO… For there is yet another four-letter concept that offers all the incentive a big bank needs to better calculate its bets going forward… It’s something we call LOSS… Believe me, nothing inspires prudence like suffering a loss every now and again… Regulation, on the other hand, rather than protecting the system, inspires lobbying, cronyism and, sadly, corruption…
That said, there is this other firm that I’m thinking we do indeed need to clamp down on – big time.. This one’s upside-down by $16 trillion and burning another $1.5 trillion a year (talk about systemic relevance!)… Yet, puzzlingly, its top execs were quoted [yesterday] as saying things like: “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.” Those would be the comments of none other than Senator Carl Levin…
I’m thinking the good Senator ought to concern himself with the billions he and his team are throwing to the wind, or the sun [as it were], on “risky bets”, like Solyndra, and let Mr. Dimon deal with JP Morgan…