Skip to: Content
Skip to: Site Navigation
Skip to: Search


JP Morgan losses send Wall Street back to Capitol Hill (+video)

Congressional critics plan hearings to probe how America's largest bank posted $2 billion in trading losses – and whether new financial regulations, still being implemented, go far enough to rein in Wall Street abuses

By Staff writer / May 14, 2012

JP Morgan Chase corporate flag flies at its New York headquarters on May 14. JP Morgan, the largest bank in the United States, is seeking to minimize the damage caused by a $2 billion trading loss, disclosed Thursday by CEO Jamie Dimon.

MARK LENNIHAN/AP PHOTO

Enlarge

WASHINGTON

JP Morgan CEO Jamie Dimon will go before shareholders at the bank's annual meeting Tuesday having already offered mea culpas for his firm’s $2 billion hedging loss to financial analysts and on set of NBC's "Meet the Press."

Skip to next paragraph
The losses have provoked Congressional investigation.

While it’s unclear whether he’ll be making a trip to Congress to atone for the loss, JP Morgan's “terrible, egregious mistake” has generated pink slips at the highest levels of the venerable bank and put Wall Street reform and two of its most controversial provisions back on the front burner on Capitol Hill.

The Senate Banking Committee will have “additional hearings” in coming weeks to discuss topics including the loss at America’s largest bank, the committee’s chairman, Sen. Tim Johnson (D) of South Dakota, said in a statement Monday afternoon.

RECOMMENDED: Top 9 reasons Congress is broken

The committee hasn't made a decision about whether to invite executives from JP Morgan, according to a Democratic aide.
 
And congressional concern is bipartisan. Sen. Bob Corker (R) of Tennessee, a member of the banking committee, sent a letter to Senator Johnson on Friday asking for hearings on the matter.

“I have been vocal in my belief that we need a vibrant capital market for debt and equity securities and about the need for balance in ensuring that we have a financial system that can meet the needs of a 21st century economy,” Mr. Corker wrote. “That said, clearly the losses posted by JP Morgan are significant, and as policy makers we should understand in detail what has transpired.”

Corker raised two questions in his letter. First up: “Are we confident,” Corker asks, “that taxpayers are fully protected from losses at major financial institutions?”

The concern is a key one for Congress in light of the Dodd-Frank financial reform package, passed in 2010. Ever since, it has been the object of furious lobbying from financial institutions hoping to soften or simply stall some of its key provisions.

Democrats contend that the soul of the law is its attempt to avoid taxpayer bailouts similar to those handed out during the 2008 financial crisis.

JP Morgan’s loss is “strong evidence that having these rules of the road in place are essential to making sure that taxpayers don't get left holding the bag and that poor decisions on Wall Street don't undermine our financial system in the way that happened in 2008,” said Jay Carney, White House spokesman, during a gaggle with reporters aboard Air Force One Monday. “We have to remain ever vigilant.”

Key to that vigilance is a Dodd-Frank stipulation giving the Federal Deposit Insurance Corporation authority to wind down failed banks.

Democrats argue that the estimated $22 billion cost of implementing this provision over the next decade would be more than recouped by avoiding the type of taxpayer-funded bailouts necessary during the financial crisis.

Permissions

Read Comments

View reader comments | Comment on this story

  • Weekly review of global news and ideas
  • Balanced, insightful and trustworthy
  • Subscribe in print or digital

Special Offer

 

Doing Good

 

What happens when ordinary people decide to pay it forward? Extraordinary change...

Endeavor Global, cofounded by Linda Rottenberg (here at the nonprofit’s headquarters in New York), helps entrepreneurs in emerging markets.

Linda Rottenberg helps people pursue dreams – and create thousands of jobs

She's chief executive of Endeavor Global, a nonprofit group that gives a leg up to budding entrepreneurs.

 
 
Become a fan! Follow us! Google+ YouTube See our feeds!