JPMorgan: Isn't life strange?

By now, folks have heard much about the announcement that JPMorgan Chase had somehow lost $2 billion over a six-week period. In an irony of ironies, here’s what one JPMorgan risk officer had to say about the behemoth bank just a few months ago: “Our metric of success is ‘no surprises’; no surprises in terms of the impact on the firm of any individual behavior or outside event.”

 

Hmm. Actually there was good reason to say that at the time as JP had just been named Risk Magazine’s “Derivatives House of the Year.” As the Moody Blues sing: “Isn’t Life Strange?”

Here’s a little perspective: $2 billion represents 10 percent of JPMorgan’s profits for all of last year. In fact, $2 billion is more than four times the amount the U.S. government prints in one day. And, $2 billion over six weeks is more than $47 million a day!

None of this means we’re going to have a repeat of the colossal calamity of 2008. But, it’s scary isn’t it? The “scary smart,” “greed is good,” “regulations are bad” folks on Wall Street may be flying below the clouds today.

But think about why. Here we are four years after the collapse of Bear Stearns, Lehman Brothers and AIG, and we’re still working toward implementing the rules that Congress and the president put in place to keep another 2008 from happening, i.e. the Dodd-Frank Financial Reform and Consumer Protection Act.

The act itself has been around almost two years and yet, of the roughly 300 rules and regulations, less than a third have been completed — and that’s 10 months after the mandated deadline. The JPMorgan announcement reminds us that our financial markets remain susceptible to the impact and contagion of these major market players. Maybe it’s just the java jolt we need to wake folks up.

Lots of things have slowed the rulemaking process, not the least of which are lawsuits brought against regulators by the scary smart people. Remember, to some of them, regulation is a dirty word. Then there are those in Congress who never wanted financial reforms in the first place and are either trying to repeal them a piece at a time; drown regulators in their own version of red tape; or just hold back funding to the watchdogs who would keep an eye on the JPs of the world.

Four years ago, the economy was on the verge of collapse for two reasons: the high-flying, above the clouds captains of Wall Street and lax regulation. Is history repeating itself? I hope not and I don’t think so, but scary it is.

Are we more secure now than we were when the economy collapsed? To some extent, yes. There’s new transparency in markets that will allow us to see the kinds of things JP was doing to lose $47 million a day. But, could our markets suffer significantly before all the rules are in place? Unfortunately, yes. And that’s bad for investors, markets, and yes, consumers. To quote the same JPMorgan official, “Investors love not being surprised.” Isn’t life strange, indeed?

• Chilton is a commissioner on the U.S. Commodity Futures Trading Commission.

CONTACT US

  • Switchboard: 907-586-3740
  • Circulation and Delivery: 907-586-3740
  • Newsroom Fax: 907-586-9097
  • Business Fax: 907-586-9097
  • Accounts Receivable: 907-523-2230
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING

 

More

Tue, 08/22/2017 - 19:12

New JACC and Centennial Hall work together, not against each other

As Co-Chairs of the Partnership Board, which seeks to build the New Juneau Arts and Culture Center (what we call “the New JACC”), we’re excited... Read more

Our trails and parks are community assets

According to a recent local survey, the No. 1 recreational activity in Juneau is walking, hiking, biking or running our trail system. Our beautiful and... Read more

Bed tax increase could negatively affect Juneau’s economy

On October’s ballot, we may see an option to increase Juneau’s bed tax by 2 percent. Some people seem to think that 7 percent bed... Read more

Americans and the nation need health care

U.S. Sen. Dan Sullivan, R-Alaska, just sent thousands of Alaskans a long letter. Read more