As Yogi Berra said, “Its déjà vu all over again.” JPMorgan Chase recently announced that it lost more than $2 billion in trading complex derivatives. The news of reckless trading shook Wall Street and sent the megabank’s stocks tumbling. Where have we heard that before?
Ironically, the losses were generated in an investment office that had been focused on shielding JPMorgan from risks in its banking business. According to news reports, executives closely monitored the office’s transition to a post for making risky trades on credit default swaps.
“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,” CEO Jamie Dimon said.
Ya think? Risky credit default swaps helped fuel the financial crisis from which we’re still recovering. These dangerous bets led to a financial panic, a recession and a comprehensive restructuring of financial regulation to rein in Wall Street excesses. Dimon and JPMorgan had been among the most vocal opponents of tighter regulations, particularly Volcker Rule restrictions on proprietary trading. Well, so much for that—they’ve just thrown about $2 billion of political capital down the drain.
At ICBA, our political capital is focused on helping community banks compete. For instance, one of our top priorities is extending the FDIC’s full coverage of noninterest-bearing transaction accounts for another five years, which will prevent deposit concentration in large institutions and help community banks lend to small businesses in their communities. While it might be déjà vu all over again on Wall Street, the mission of ICBA and our nation’s community banks have remained focused on sound banking and smart financial policy.