J.P. Morgan Chase CEO Jamie Dimon testified before the Senate Banking Committee yesterday about the $2 billion in trading losses suffered by his company’s London office last month.
Congress is shocked that money can be lost trading derivatives. And our legislative leaders seem to seriously think they can write rules for banks and other financial institutions that protect everyone from such losses, making certain any trading in financial securities is guaranteed to earn a profit.
“We will lose some of our shareholders’ money,” Dimon acknowledged, “and for that, we feel terrible. But no client, customer or taxpayer money was impacted by this incident.” In fact, J.P. Morgan Chase is nonetheless expected to turn a profit this quarter — as it has consistently done since the financial crisis.
Still, some politicians and policy makers fear the nation’s largest bank is “too big to fail,” that a collapse could again threaten the stability of the entire economy.
I liked what Rob Cox of Reuters TV’s Fast Forward urged Dimon to tell the senators: “We are not going to fail, but if we do, the failure will be our own. We will bear it on our bond holders, our investors and it will not be a public problem.”
Cox went on to endorse “this idea that banks can go out and they can lose money and they can make money,” adding that “at the end of the day it’s their money, not our money, that’s at risk.”
In other words, no bailouts.
This is Common Sense. I’m Paul Jacob.