Too big to fail anxiety fuels Jamie Dimon circus.

Agenda-Setting Financial Insight.
June 13 2012 5:09 PM

Too Big to Fail Anxiety Fuels Jamie Dimon Circus

Protesters started calling Jamie Dimon, CEO of JPMorgan,a crook at a Senate Banking Committee hearing on Wednesday.

Photo by KAREN BLEIER/AFP/GettyImages

One thing binds the politicians, pundits, protesters and investors outraged by JPMorgan’s loss of some $2 billion on dodgy trades. None of them believes that U.S. taxpayers are really off the hook for Wall Street’s future, and probable, failures. The real loser of the debate - which today saw the CEO of a well-capitalized, profitable private financial institution hauled before the Senate - is the Dodd-Frank Act. 

First, the loss - though painfully embarrassing for a bank that prides itself on risk management - still pales against the $5.4 billion earned last quarter and the $4 billion expected for this one, according to consensus estimates compiled by Thomson Reuters. 

Yet, ever since Jamie Dimon told the world about the boneheaded trades in May, JPMorgan has become the focal point for frustration and anger among those who believe the United States wasted a financial crisis by keeping alive the notion that certain banks are too important to let fail. On Wednesday, protesters started calling Dimon a crook at a Senate Banking Committee hearing before he could even tell lawmakers how the bank stumbled. 

Calls for a modern-day Glass-Steagall Act - the Depression-era legislation that kept commercial and investment banking separate - have grown louder as many across the political spectrum say the landmark financial reform passed two years ago has made matters worse. Complicated rulemaking such as the Volcker Rule is unwieldy and calling big banks systemically important reinforces the belief that the government still implicitly backs Wall Street. 

Sure, regulators now have the explicit ability to wind down big, complicated financial institutions, but it’s untested. And if JPMorgan is too big to manage, what makes anyone think the government can break it or other large banks up, if need be, without sending shock waves through the financial system? 

Moreover, Dodd-Frank has done little to restore confidence in the nation’s watchdogs. There are still far too many regulators with overlapping jurisdictions - something Dimon complained about on Wednesday. But his seat on the Federal Reserve’s board also caused outcry this week on Columbia University’s campus since it feeds a perception that Wall Street’s guardians and bankers are still too cozy. That’s also bad for confidence in the financial system. 

In the end, JPMorgan’s CIO losses may indeed be a tempest in a teapot. It’s the reaction to them that shows the storm will continue to rage.

Read more at Reuters Breakingviews.

Agnes T. Crane is a Reuters Breakingviews columnist, based in New York, where she covers capital markets and Latin America. She joined from Dow Jones Newswires, where she was an award-winning journalist who led a team of reporters covering the credit crisis.


Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.


Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Sept. 20 2014 11:13 AM -30-
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 11:33 AM Planned Parenthood Is About to Make It a Lot Easier to Get Birth Control
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
Brow Beat
Sept. 20 2014 3:21 PM “The More You Know (About Black People)” Uses Very Funny PSAs to Condemn Black Stereotypes
Future Tense
Sept. 19 2014 5:03 PM White House Chief Information Officer Will Run U.S. Ebola Response
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.