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DODD-FRANK, FINANCE REFORM
posted at May 14, 2012 1:36 PM EDT
First: February 6, 2010
Last: May 17, 2012
“DODD-FRANK IS ALIVE AND WELL, even though the regulation drafters are moving slowly.
Paul Volcker has suddenly become a profit and somewhat of a folk hero. J P Morgan Bank has just suffered over a 2 billion dollar loss while engaging in exactly what the “Volcker Rule” is intended to prevent, the gambling by a bank with its own capital.
This event is interesting in several ways. First, it demonstrates the wisdom behind the Rule. Apparently JPM was able to do the thing before the Volcker rule was actually implanted by the regulators pursuant to Dodd-Frank.
Secondly, it gives impetus to the school of thought that some banks, JPM, Citibank and Bank of America, for example are TOO BIG TO FAIL and should be shrunk. It demonstrates that in the modern era much banking, even by “commercial” banks has become so complicated that banks are necessarily at risk.
Jamie Dimon, JPM’s chief executive has in effect declared that the transaction (credit derivatives, etc.) leading to this loss was so complicated that he is not sure whether or not the final outcome might engender a somewhat larger loss. Due to complexity, the gambling aspect may be present irrespective of whether a transaction of a big bank violates “Volcker” or not.
So, regulators, make sure that Volcker gets promptly implemented and also, while you are at it, try to shrink or bifurcate the multi trillion dollar banks.”