Posted 2 years ago on May 11, 2012, 1:13 p.m. EST by SparkyJP
from Westminster, MD
This content is user submitted and not an official statement
Four years after the financial crisis, another major bank gets caught making huge, risky bets that went sour. Critics say it's time for a serious crackdown!
On Thursday, J.P. Morgan Chase CEO Jamie Dimon revealed that the banking giant lost a whopping $2 billion due to a massive trade that went sour, and that the losses could climb by another $1 billion in the coming days. Dimon attributed the loss to "errors, sloppiness, and bad judgment," and asserted that "we will fix it and move on." But critics of the financial industry say the loss is more than a mere error, and that J.P. Morgan is engaging in precisely the type of risky behavior that brought the financial system crashing down in the fall of 2008. Specifically, the loss stemmed from a complex deal involving credit default swaps — insurance-like contracts that essentially allow firms to bet on whether a given asset will rise or fall.
They have been described as "weapons of financial mass destruction," and in 2010, Congress passed the so-called Volcker rule, part of the Dodd-Frank Act, to prevent companies from using their own money to make such bets. However, the Volcker rule has yet to be implemented, and banks continue to lobby against it. Will J.P. Morgan's loss rejuvenate the push for financial reform?