Does the J.P. Morgan Loss Prove the Need for Tougher Bank Regulations? >
Elizabeth Warren: Government Must Keep Banks Like J.P. Morgan Honest
Reckless gambling by banks like J.P. Morgan can take down the entire economy
May 18, 2012
About Elizabeth Warren:
Elizabeth Warren is the Democratic candidate for U.S. Senate in Massachusetts. Warren served as chair of the Congressional Oversight Panel for the Troubled Asset Relief Program and helped create the Consumer Financial Protection Bureau.
When J.P. Morgan CEO Jamie Dimon announced a $2 billion loss from trades he called "stupid," "sloppy," and "poorly monitored" last week, he didn't change his mind about who he thinks should call the shots. Dimon said he would clean this mess up himself and indicated that it would be business-as-usual in no time at all. "We will learn from it, we will fix it, and we will move on." The message to those who think there should be more oversight of the biggest banks was clear: stay out.
After the crash of 2008, the country called for greater oversight of the biggest financial institutions to prevent another crash. But even after billions in taxpayer-funded bailouts, Wall Street resisted change. When the battle for financial reform took place in 2010, thundering herds of lobbyists filled the halls of Congress trying to undermine meaningful changes.
[Read the U.S. News debate: Should the Dodd-Frank Act Be Repealed?]
Even after Dodd-Frank Act became law, the fight wasn't over. Open public debate turned into guerrilla warfare over rules to put the law to work. For two years now, Wall Street bankers and their lobbyists have pushed regulators to water down those rules and have pushed for loopholes for their lawyers to wiggle through.
They have also urged Congress to gut the funding for enforcement at the regulatory agencies and to chip away at the independence of the new Consumer Financial Protection Bureau. And they have continued to bankroll candidates for public office and pour funds into their lobbying, hoping they can pull the strings without anyone noticing.
[See a collection of political cartoons on the economy.]
Too often, Wall Street banks act like they alone should decide if they have taken on too much risk. If the big bank CEOs ran different kinds of companies, ones that weren't big enough to take down the entire economy when they got it wrong, then oversight would be less critical. But reckless gambling by the big banks can affect the jobs, the pensions, and the tax bills of every American—and that means that those company's actions should be subject to careful oversight.
That's what government does: it passes laws to keep markets honest, and it puts a smart cop on the beat to enforce those laws. It is hard, but it isn't brain surgery. And it starts only if we have a Congress that has the guts to stand up to the big banks and their armies of lobbyists.
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- Other Arguments
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#15920
No — The solution is not tougher regulations on banks, but stronger enforcement of existing regulations
JAMES BARTH, Co-author of 'Guardians of Finance: Making Regulators Work for Us'
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#25433
No — J.P. Morgan's loss doesn't mean more regulation is needed
DAVID JOHN, Fellow at the Heritage Foundation
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#44027
No — Making "traditional" loans is just as risky as J.P. Morgan's trading loss
ALEX POLLOCK, Resident Fellow at the American Enterprise Institute.
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#54436
Yes — J.P. Morgan's gambling should be made illegal with a strong Volcker Rule
ED MIERZWINSKI, Federal Consumer Program Director at the U.S. Public Interest Research Group
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#62125
No — Let's not overreact to the J.P. Morgan trading loss
DOUGLAS ELLIOTT, Fellow in Economic Studies at The Brookings Institution
