JP Morgan Chase CEO Jamie Dimon Says Losing $2 Billion Was Not “Too Risky”
JP Morgan Chase CEO Jamie Dimon this week announced that the bank he heads lost $2 billion making risky trade under the guise of “hedging” (which is meant to reduce risk). Dimon has been one of the biggest critics of the Volcker Rule, which is meant to prevent banks from making massive bets with federally insured dollars.
Dimon appeared today on NBC’s Meet the Press, where he was asked by host David Gregory if JP Morgan’s massive loss shows that the banking system — just a few years after a financial crisis that nearly brought the global economy to its knees — is still too risky. Dimon replied, “I don’t think so.”
Because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.
Activity like this is exactly what the Volcker rule, which effectively banned risky proprietary trading by federally insured institutions, was designed to prevent. It will be argued that this trade was a technically a hedge, and therefore exempt from the Volcker rule.
This episode underscores the need either for a strong, loophole-free Volcker rule, or an outright return to the Glass-Steagall Act.
(Source: ThinkProgress.org, NBC News and RollingStone.com)