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White House says bank loss shows need for rules

ABOARD AIR FORCE ONE — The White House says a $2 billion trading blunder by JPMorgan Chase shows the continued need for rules that protect the taxpayer when Wall Street makes mistakes.

White House press secretary Jay Carney says the loss is a reminder of why controls installed after the 2008 financial crisis are necessary, and why they should not be undermined. He says “Wall Street lobbyists” are trying to gut those protections.

Carney told reporters traveling to New York City with President Barack Obama on Monday that Washington can’t prevent “bad decisions being made on Wall Street.” But he says government can protect taxpayers from taking the hit in the form of huge government bailouts. He notes that in this case, it’s the bank and its shareholders taking the hit.

One comment

  1. The derivative hedging game played by JPMorgan Chase is no different than that played by AIG in 2008.
    Yet Jamie Dimon tells us that JPMorgan had merely “made a terrible, egregious mistake.” He might as well have said that the bank was wrong to keep raising in a poker game when it was apparent that it should have folded.
    And why was JPMorgan busy betting in the first place — right after our economic meltdown, and while fighting government regulation?
    One answer is that JPMorgan had figured it could bear the gambling losses.
    That’s right. With $2 trillion at hand, JPMorgan can yawn when $3 billion goes down the tube.
    Nonetheless, Dimon tells us that he sees no problem with the government dismantling big failing banks. This is nice to know because the government might want to look into dismantling big banks before they fail — and before they have another chance to take us down with them.
    The important lesson from the JPMorgan fiasco then is not that stringent regulations are still needed to reign in on derivatives, but that banks big enough to remain standing after taking huge hits are ripe enough for us to chop down to size.

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