JPMorgan Redux

I have gotten hundreds of emails from community bankers commenting on JPMorgan Chase’s $2 billion trading blunder. Below is just one example of an email I received from one of our good member bankers. I think he nailed it.

As you have said…plain and simple—they are too big to manage and too big to regulate. If management doesn’t know and understand what is going on, how on earth could the regulators know and understand what is going on? These big entities should be treated as venture capital companies funded by expensive capital looking for high risk and high rewards…not as companies insured by the FDIC and ultimately guaranteed by the U.S. government.

4 thoughts on “JPMorgan Redux

  1. I have a great idea to reduce the exposure to taxpayers from a TBTF/Wall Street meltdown. Lets create a Consumer Finance Protection Bureau, so it can regulate and prosecute Banks. With the fines, fees and extortion money it makes we can continue to prop up the large “nationalized banks”.
    Oh yes, i forgot this still does not address the real problem, but who has time to address something that could negatively effect my re-election campaign finances. Lets wait and see it the TBTF/Wall Street problem goes away, kick the can.

  2. The biggest issue with JPMorgan’s trading loss is just how inconsequential it is to JPMorgan. To put in the community bank context, $2B for $2.3T JPM is $200,000 for a $230 million community bank. It happens. Not fun but neither was investing in Fannie Mae preferred. We simply should not have institutions permitted to be so large, particularly in relation to the market, that $2 billion is inconsequential. There is far too much room for mischief, intended and unintended, of all kinds with institutions of that size. Regulatory policy is pushing in exactly that direction, though, as community banks are straight-jacketed in their ability to serve their customers.

  3. This is the nail and it is the hammer. However, as we have seen in the past nothing and I mean “nothing” will be done about it. Jus another day at the office.

  4. What disturbs me are the apparent talking points as voiced by Sen. Durbin and Pres. Obama on this subject. Within the last 24 hours I’ve heard both of them speculate on what would happen if a smaller bank happened to make such a huge mistake…one that would cause the bank to fail… and the government/taxpayers would have to pay for it. Nobody seems to understand that all of us surviving banks are paying the tab for the failed banks. We have the greatest vested interest in banks operating safely and honestly….maybe we should take policing ourselves more seriously.

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