Wednesday, May 16, 2012

Nothing to See Here

Let me get this straight: a big bank makes a bad bet and loses a couple of billion dollars. As a result, some people at the bank deemed responsible for the loss lose their jobs and the bank's stock price goes down. Therefore, we MUST have more government regulation of banks. Huh?

I'm not the only one not connecting the dots here as David Harsanyi explains that actually JPMorgan Proves We Don't Need More Regulation:

When banks generate huge profits, they are exploiting the American people, engaging in unadulterated greed and, needless to say, in need of more regulation. And when banks lose too much money? Yep, they're being insatiably greedy -- but stupid, too -- and, naturally, in need of more regulation.

The unscrupulous can't win for losing, apparently.

So when JPMorgan Chase & Co. suffers about $2 billion in losses (probably more) via complex derivative trades that were used by an obscure unit within the bank to hedge against risk, everyone in Washington seems quite excited about the political possibilities. Yet, JPMorgan's problems prove that finance works without any meddling from Washington.

Rather than have someone point out the obvious -- "hey, that's how it's supposed to work"; "that'll teach 'em"; "neat, someone made 2 billion bucks on JPMorgan's stupid bets" -- we have the Justice Department opening an inquiry into the matter, the president calling for tighter regulations, Republican Sen. Bob Corker calling for hearings and a bunch of pundits falsely claiming that if the Wall Street reform bill had been fully implemented, we wouldn't have these kinds of "risky" transactions -- as if we should want to stop them in the first place.

The $2 billion hasn't sunk JPMorgan (and with $127 billion in equity, it hasn't come close), but if this kind of thing constitutes a national emergency, we should have better sense than to allow folks who squander $2 billion on their lunch breaks to concoct the solution.

If you work at JPMorgan or are a shareholder, you have a stake in this. But for the rest of us, the uproar is much adieu about nothing and the worst thing that could happen at this point is to have attention seeking politicians "looking out for the interests of the American people" determine that there's a problem here that needs their special brand of fixing.