On Friday Jamie Dimon, honcho of JP Morgan Bank, admitted to taking a $2 billion dollar loss. That's quite a chunk of change. The Washington regulators, itching to take control of all banks, are howling for yet more regulation to go on top of Dodd-Frank.
Why? You would think loosing $2 billion would sting anyone hard enough to prevent them ever doing it again. Why turn our banks over to the tender mercies of federal bureaucrats? Anyone think bureaucrats are smarter or more honest than bankers?
Still secret, is just how Morgan lost all that money. Presumably they were buying and selling things, and the price moved against them. Either things they bought dropped in price, or things they sold short rose in price. But we don't know what those things were. Stocks? Bonds? Greek bonds? derivatives? credit default swaps? Mortgage backed securities? Sub prime mortgages? something else?
Jamie Dimon turned up on Meet the Press this morning talking about it. He admitted to still being a democrat, which made me wonder about his judgement. David Gregory was too clueless to ask Mr. Dimon just what things Morgan bank took that loss in.
Then Gregory turned the show over to some regulators who urged a total take over of banking "to prevent systemic risk".
By which, they probably mean the risk of a huge bank failing and tipping the economy into depression. That happened in 1929 and again in 2007. In 1929 Keynes had not published yet, and the Federal Reserve and the rest of the government let the stock market crash unhindered. In 2007 the government rushed in, spent $1 trillion to support the losing players, and the market still crashed and we haven't gotten out of Great Depression 2.0 yet.
If you really think this is a problem, the answer is simply to break up the biggest banks into smaller banks. Pass a law saying that the big banks have to pay extra taxes. Pretty soon all the big banks will spin off enough divisions to make themselves small enough to become virtuous small banks exempt from the extra tax.
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