BRAIN DAMAGE Would you marry a Con Man, if you knew he was a con? Then WHY WOULD YOU EVER WANT TO DEAL WITH CHASE??????????

Wonkbook: 'Just because we’re stupid doesn’t mean everybody else was'

Posted by Ezra Klein at 07:59 AM ET, 05/11/2012

 

Of the big banks, JPMorgan Chase arguably came through the crisis best. And its CEO, Jamie Dimon, has been using the credibility built up during that period to fight the Volcker rule. “Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon told Fox Business earlier this year. “He has proven that to me.”

JPMorgan Chase Chairman and CEO James "Jamie" Dimon speaks during a Fortune 500 event at the New York Stock Exchange on May 7. (Jemal Countess - GETTY IMAGES FOR TIME) And then, last night, JPMorgan Chase announced it had lost $2 billion on some very big, very dumb hedges. For proponents of stricter financial regulation, Dimon's giant loss is a huge gift. The final version of the Volcker rule is scheduled to be released in the coming months. Dimon swears that these trades would have been compliant with the previous drafts of the Volcker rule. That will give regulators a strong incentive to make sure future trades like these aren't.
Dimon, for his part, doesn't see the relevance. “Just because we’re stupid doesn’t mean everybody else was,” he said on a Thursday conference call. “There were huge moves in the marketplace but we made these positions more complex and they were badly monitored.”
But the point of the Volcker rule -- and of financial regulation more generally -- isn't to punish banks for being evil. It's to protect the rest of us from banks being stupid. And if the most prudent of the big banks can't keep itself from being this stupid this soon after the financial crisis, then it's pretty clear we're going to need very strong rules to keep them from being stupid in the years to come, when the lessons of the financial crisis have faded more completely.
As Reuters' Felix Salmon writes, "JP Morgan more or less invented risk management. If they can’t do it, no bank can. And no sensible regulator can ever trust the banks to self-regulate."