Jay Bookman's op-ed, writing on the $2 billion lost by a trader at JP Morgan Chase, is a good starting point to begin to understand just how the heck a bank can lose $2 billion dollars in trading credit default swaps. A bank trading? I put my money in a bank and somehow the bank is losing money. Do they put my savings at risk? For our country's financial stability wouldn't we want to have some institutions that form a financial bedrock of stability?
There should be a law. A law that does not allow banks to invest hard-earned savings in risky financial instruments. On the news, I heard the nature of the trade was a credit default swap. Seems like we have had trouble with those silly things in the past. Seems like there was a bill passed to re-regulate the banks and stop them from putting our money at risk?
There was a law. It was passed in 1933, and it was called Glass-Steagall Act, and this law prohibited banks and investment firms from putting our money at a level of risk like investors face. This law was repealed in 1999. I think we would have been better off, as a country, if the Glass-Steagall had never been.
Every time there is a bill put forth to cut down on the risk we all face the bankers' lobby fights and fights to stop the regulations. They call the president crazy names, they wine and dine the Congress, and they form super PACs to attack the regulations. Banks spend millions to stop government regulations. We as taxpayers are still in line to bail out JP Morgan Chase again should they fail.
Let's understand: They take risks and make more money the more risk they take. And, if the risk fails, we will still bail them out. But don't regulate, oh no don't regulate. You see, when you regulate then the government is too big. Now I never hear that the government is too big when the Pentagon wants to buy more hardware.
One of the aspects about the regulation/deregulation argument that has always confused me is the fighters. When the EPA wants to cut mercury emissions that comes out of power plants and subsequently into our lungs it does not surprise me that a lobby group funded by all the power companies fights the regulation. I would think they would care as people, but there are dollars involved so I sort of get it.
No, the real surprise comes from local people who whine and whine about such regulations. They may see an increase of $25 a year and get better air, but they fight hard for the big business. For me, I trust government regulation more than the collective consciousness of big business. Big business really doesn't care.