Joe Nocera is worth a read today on the huge trading loss by JPMorgan Chase. In short, CEO Jamie Dimon was wrong and President Obama and allies were right in trying to increase regulation of the big banks. Enjoyment at his embarrassment has been termed 'dimonfreude.'
As Michael Greenberger, a law professor at the University of Maryland — and a former official at the Commodity Futures Trading Commission — explained in an e-mail that landed in my in-box early Friday morning, it is quite likely that the loss would never have occurred if Dodd-Frank’s proposed rules about derivatives had been in place. For starters, if the trades turn out to be proprietary trades — and we don’t yet know if they are — they would have been forbidden under the Volcker Rule.
But even if JPMorgan wasn’t trading for its own account, the transparency Dodd-Frank mandates would have alerted the markets and “losses would not have piled up opaquely,” Greenberger wrote. The Federal Reserve would have seen the trades, and would likely have forced JPMorgan to back away from them.