Almost four years after Americans became obsessed the idea of "too big to fail," JPMorgan found a way to lose $2 billion in one quarter without breaking a sweat — or any securities laws. Ever since Lehman Brothers collapsed in 2008, Wall Street and Washington have been doing battle about the best way avoid similar meltdowns and the massive financial losses that often end with taxpayers cleaning up the mess. But yesterday's "egregious mistakes" have some wondering it it's a hopeless cause.
One of the most contentious issues with financial regulation over the last three years has been the Volcker Rule, a regulation built into the Dodd-Frank reform act, that's intended to prevent exactly what JPMorgan did: using its own money (not its customers' money) to make risky investments in an effort make profit for itself. (That's what's known as "proprietary trading.") Morgan says it was simply "hedging," making investments in an effort to offset risk in other parts of it business, which could technically still be allowed by the Volcker Rule. What experts are saying now is that the difference between the two tactics is almost indistinguishable ... and that's a big problem.