The so-called "London Whale" trade—which cost mega-bank JP Morgan Chase upwards of $6 billion—was, by all accounts, a disaster for the firm. It invigorated interest in financial reform ideas that had been set on the backburner. It dented the reputation of the bank and its CEO, Jamie Dimon, as the savviest on the Street. And, of course, it put a notch in JP Morgan's bottom line.
But last May now feels like a long time ago.
In fact, the Whale trade is so far in the past that JP Morgan and Jamie Dimon are now receiving accolades for it. In what the Wall Street Journal called "the Oscars, sort of, for the U.S. investor-relations industry," IR Magazine gave JP Morgan and Dimon awards for their management of the crisis surrounding the Whale Trade. The executive who accepted the award quipped, "Can I just say, 'Crisis? What crisis?'"
It may be good times again at JP Morgan, but the episode is emblematic of the sad state of affairs when it comes to Wall Street reform. This crowning of JP Morgan comes just one week after a new report by the Senate's Permanent Subcommittee on Investigations found that those involved in the Whale Trade willfully misinformed regulators as to what they were doing. But any momentum that the Whale trade gave to the reform effort has withered away. More than half of the provisions in Dodd-Frank, the financial reform law approved in 2010, have yet to be implemented. President Obama seems to have lost interest in pressing reform any further.
And this week, a bipartisan coalition of lawmakers in the House of Representatives banded together to blow new holes in Dodd-Frank. A slew of legislation weakening the derivatives reform title of the law was passed out of the House Agriculture Committee; six of the seven bills had enough support to pass on a simple voice vote (meaning no recorded vote was held because no lawmaker had an objection).
The lone vote that actually occurred was on a provision that "is explicitly designed to expand taxpayer backing for derivatives," as the Huffington Post's Zach Carter described. Remember, derivatives were, according to the Financial Crisis Inquiry Commission, "at the center of the storm" that gripped the financial system in 2008.
Prior to the vote, House Agriculture Committee ranking member Collin Peterson, D-Minn., warned, "You're putting taxpayers on the hook … You can vote any way you want, but this could come back and haunt you." Sen. Carl Levin, D-Mich., added, "It is incredible that less than a week after new JPMorgan Whale hearings detailed how the bank's London office piled up risk, hid losses and dodged regulatory oversight, that some House members are again supporting the weakening of derivative safeguards."
The Senate's report on JP Morgan should have shown lawmakers that the problem with Dodd-Frank is not that it is too burdensome for banks, but that it is too weak. It doesn't do enough to ensure that the nation's biggest firms can't engage in the risky trading that nearly sank the economy. "Too many members of the House Agriculture Committee seem to have their heads buried in the sand," said Americans for Financial Reform, a pro-reform organization. "The 'London Whale' revelations show that the biggest of the too-big-to-fail banks have yet to be deterred from the 'business as usual' practices that created the financial crisis."
There has been some very slight, bipartisan agreement recently that the biggest banks are ripe for breaking up. But as JP Morgan's glitzy new hardware and the Agriculture Committee's bipartisan deregulation-fest show, Wall Street is a long way from having to face any real comeuppance for the mess it caused in 2008.
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