"Obama: JP Morgan Loss Shows ‘Exactly Why Wall Street Reform’s So Important’"
JP Morgan Chase’s $2 billion trading loss is “exactly why Wall Street reform” is so important, President Obama said in his first interview since the bank announced the massive loss last week. Obama signed the Dodd-Frank Wall Street Reform Act, which could ban risky trades like the one that hit JP Morgan, in 2010.
JP Morgan CEO Jamie Dimon announced the loss last Thursday, sparking stock losses and reminders of the 2008 financial crisis across Wall Street. In Obama’s interview, which will air this morning on ABC’s “The View,” the president referenced the federal bailout that resulted from that crisis and said a similar loss at a weaker bank may have caused yet another bailout, ABC News reports:
“JPMorgan is one of the best-managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion and counting,” the president said. “We don’t know all the details. It’s going to be investigated, but this is why we passed Wall Street reform.”
“This is the best, or one of the best-managed banks. You could have a bank that isn’t as strong, isn’t as profitable making those same bets and we might have had to step in,” Obama said. “That’s exactly why Wall Street reform’s so important.”
What Obama didn’t mention was how successful Dimon and JP Morgan were in watering down Wall Street reform. The bank has spent nearly $10 million since the beginning of 2011 on lobbying, focusing largely on the Volcker Rule, a regulation that would largely prohibit risky proprietary trading at federally-insured banks. The trade that caused JP Morgan’s losses would likely still have been legal under the Volcker Rule, but only because of a loophole that JP Morgan lobbied for.
Obama is right that JP Morgan’s situation demonstrates the need for Wall Street reform. But it also makes clear that the new rules need to be strong and immune from Wall Street’s lobbying influence if we don’t want a repeat of the 2008 crisis.
JP Morgan’s loss “helps make the case” for tougher financial regulations, Treasury Secretary Tim Geithner said this morning, according to the Washington Post. “The Fed and the SEC and the other regulators — and we’ll be part of this process — are going to take a very careful look at this incident of course, and make sure that we review the implications of what that means for the design of these remaining rules,” Geither said, adding that the review will be “not just for the Volcker Rule, which is important in this context, but the broader set of safeguards and reforms.”