May 24, 2012
Does JPMorgan's Multi-Billion-Dollar Trading Loss Justify More Regulation?
JPMorgan Chase recently announced that its London office suffered a $2-billion trading loss from a flawed hedging strategy, with the losses expected to get worse. In a conference call, CEO Jamie Dimon said, "The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought. ... There were many errors, sloppiness and bad judgment." This trading debacle has led to frantic, knee-jerk calls for more regulation. AFL-CIO President Richard Trumka says that JPMorgan's trading loss shows "that financial regulation is more needed now than it ever was." According to Representative Barney Frank (D-Massachusetts), "[w]hen a supposedly responsible, well-run organization could make such an enormous mistake with derivatives, that really blows up the argument, 'Oh, leave us alone, we don't need you to regulate us.'" And Paul Krugman argues that "we've just seen an abject demonstration of why Wall Street does, in fact, need to be...(Read Full Article)