When I was a kid, I often lost things, like mittens and shoes. This infuriated my mother, who responded to such losses by making me feel like I'd committed a terrible crime. But I never lost $2 billion, and although this strikes me as a far more serious crime, I have this nagging suspicion that our elected officials are going to respond to JPMorgan's stunning loss of $2 billion by throwing their hands up in the air and saying that it's regrettable, but nothing can be done, either to punish JPMorgan, or to prevent future mishaps.
What I love about JPMorgan's $2 billion lose is that their CEO Jamie Dimon is considered one of the smarter bankers, and his bank is considered one of the better banks. Which raises the question: Can you really be considered smart if you head up a company that loses $2 billion? Can your bank really be considered a good bank if it loses $2 billion? I mean, that is a lot of money! Losing that much money is basically the opposite of what a bank should be doing.
Nevertheless, we're already seeing the same stories and op-eds we saw four years ago when the banks ruined the global economy, examining how this could have happened, whether more regulation is needed, whether the banks are too big, etc. I feel like I'm living in the movie "Groundhog Day," except in my scenario a financial catastrophe occurs every two years, prompting everybody to wring their hands and wonder what hit them.
Anyway, Alex Parenee at Salon is pretty sick of this cycle, too, and proposes putting Jamie Dimon on trial, and forcing him to explain why a megabank that loses $2 billion is good for the economy. He writes:
"I am just not really clear on the role JPMorgan has in a healthy and functioning economy, whether it is making billions in high-stakes gambling or losing billions in high-stakes gambling. It seems like America was actually doing pretty well with there not being any such thing as credit-default swaps, which JPMorgan invented, in the 1990s, right before investment banks were allowed to merge with retail banks and do whatever they wanted with everyone’s money.
I’d also like Mr. Dimon to have to explain whether he knew he was about to have to admit to losing billions of dollars when, on May 3, he complained about the “discrimination” faced by bankers. Dimon also argued a few days later that the economy would’ve added twice as many jobs in the last 24 months if it weren’t for a 'constant attack on business' from various unnamed hippies and government bureaucrats. I would like to know how many jobs were created when JPMorgan accidentally lost some unknown amount of money that is likely to end up being more than $2 billion? Also did Dimon lie during his first-quarter earnings call last month, or did he have no idea what sort of things his chief investment office was up to (even after their actions were reported in the press)? If he didn’t have any idea, shouldn’t he maybe step down to run a smaller bank, where he can keep a closer eye on everything? Dimon said initially that the stuff that lost all the money wouldn’t have violated the Volcker Rule, even though it plainly violates the spirit of the Volcker Rule but also he’s not sure if the bank broke any laws? Jamie, I think maybe you should consider retirement; this bank is too complicated for you."
I, too, have long been mystified by credit-default swaps, and what they're good for. My sense is nothing, but of course I'm not as smart as Jamie Dimon and all the other people who play with complex financial instruments all day long. Of course, I've never lost $2 billion, so I have that going for me.
Click here to read Parenee's whole piece.
Meanwhile, Kevin Drum at Mother Jones explains the influence Wall Street lobbyists have in Washington.