The giant $2 billion trading loss at JPMorgan Chase highlights a central problem in President Barack Obama’s case for a second term: Four years after the financial crisis nearly brought the nation to its knees, very little appears to have changed.
No high-profile bank executives are in jail. Special multi-agency task forces to go after financial fraud and mortgage market abuses appeared in State of the Union addresses, only to issue a few news releases and mostly vanish from public view.
And now one of the largest banks in the United States, headed by a Democrat and operating with government guarantees, has turned in the kind of headline-grabbing, casino-style loss that drives voters crazy and that Obama’s financial reform bill was supposed to stop. It’s led to the immediate retirement of Ina Drew, the bank’s chief investment officer, along with a statement from Dimon that JPMorgan remains “strong.”
(See also: 10 facts about Jamie Dimon)
Senior administration officials make a nuanced and largely credible case that they pushed for the toughest law they could get through Congress. They say the JPMorgan trades might not have happened if banks were not lobbying like crazy to water down financial reform. And they argue that higher capital requirements mean banks can better handle large losses such as those suffered by JPMorgan. If a giant bank fails now, they say, it will be liquidated without taxpayer support.
Obama campaign officials point out that their presidential opponent, Republican Mitt Romney, wants to get rid of the Dodd-Frank overhaul legislation entirely. They launched a fresh assault on Romney’s experience at Bain Capital Monday morning, attacking their opponent with a new ad and website for the job losses and profits he made as a venture capitalist.
But average voters don’t attend Commodities Futures Trading Commission hearings or read comment letters on complex proposals like the Volcker Rule provision in Dodd-Frank that is supposed to ban banks from making such huge bets. Instead, they open newspapers and turn on televisions and see what looks like 2008 all over again.
“The guy in the street in 2008 and 2009 was worried about his or her deposits, and now it’s clear they should still be worried,” said Charles Geisst, a Wall Street historian and professor at Manhattan College. “An average person looks at this and thinks, ‘What exactly happened here? How could this happen again?’ And they don’t want excuses as to why it happened. They just want it to go away. But it’s not going away.”
JPMorgan CEO Jamie Dimon’s comments Sunday on NBC’s “Meet the Press” did not help the administration’s case that its financial reform bill has improved the system. Dimon said he didn’t think JPMorgan had broken any laws — but he wasn’t really sure.
“So we’ve had audit, legal, risk, compliance, some of our best people looking at all of that. We know we were sloppy. We know we were stupid. We know there was bad judgment. We don’t know if [violating laws or rules] is true yet,” he said. “Of course regulators should look at something like this — that’s their jobs. So we are totally open to regulators, and they will come to their own conclusions.”