As the Senate Banking Committee tip toes around the embarrassing, immoral cult of Jamie Dimon today, I am nauseated at the infantile comments and coverage.
First of all, the type of trading now under scrutiny made billions in profits for JP Morgan traders, executives and other shareholders over the past many years. Of course they are taking huge risks! Everyone on the gravy train wallowed in the glory of the upside, they have therefore no right to be shocked and offended at the inevitable outcome of a losing trade. Gains and losses are two sides of the same risk-taking coin. You cannot have one without the other. Jamie’s promise to try and avoid losses in the future is meaningless and amounts to an “as you were Sir” free pass to continue. Shareholders who have lost money in JP Morgan shares since this story hit ought to have understood the specific company risk they were taking in buying those shares, they have no grounds for outrage beyond forcing an ouster of current management if they deem fit. That is the right of shareholders. Stamping their feet and demanding compensation for loses in the share price is a childish, outrageous idea that reflects how little people understand today about “investing” in public companies.
The real story here, the reason that the Senate Committee feels obliged to go through the circus and charade of scold talk now on this, is that they have recklessly and foolishly enslaved taxpayers to underwrite the downside of these trading operations. This all goes back to the catastrophic error of removing Glass-Steagall divisions between banking and trading ops and allowing Too big to fail institutions to merge into conflicted, bottomless pits of doom for the general economy.
We must separate these institutions so that the stable old banking side is removed to a separate entity who’s depositors are backed by the taxpayers via FDIC and Central Bank operations. The other risk-seeking side is then free to trade, gain and fall on its own knife when it loses money. Its shareholders will be exposed to the up and downside of the risk they have taken on, and adults will then chose their exposure and investment strategy accordingly.
The excess complexity of Dodd Frank and other proposed bank regulations since 2008 have come from the fatal refusal to date to reinstate the simple separation of banking operations globally. Time to admit the truth.