By Chicago Tribune
Just as the rules for financial services are being rewritten in Washington, D.C., JPMorgan Chase & Co. Chief Executive Jamie Dimon has given the world a lesson in Wall Street hubris.
Morgan stunned practically everybody when it revealed that its trading desk had lost at least $2 billion of the bank’s money in a massive credit derivatives transaction gone sour. By the time the trade is unwound in the months to come, the damage probably will be greater.
The bank easily can afford to cover its financial loss, but the loss of face could prove much more costly.
Dimon is arguably the world’s most prominent banker, and he has taken an outsized role in bashing those who want stricter regulation of his industry. He has led a particularly pointed attack on the provision of America’s Dodd-Frank financial reform legislation known as the Volcker Rule.
That rule is aimed at restricting banks from making speculative bets with their own money. It attempts to address a predicament that emerged during the financial meltdown of 2008.
Traders collected huge rewards when their strategies worked. When their trades failed, as in the mortgage-backed securities debacle, taxpayers were faced with the ugly choice of either propping up the financial system with public cash or allowing the banks to collapse. It was no choice at all, and both President George W. Bush and President Barack Obama were stuck funding the bailout. [read more]