THE NEW YORK TIMES
Wednesday, May 16, 2012 | 2 a.m.
Sen. Harry Reid has harsh words when it comes to how JPMorgan — once the administration’s favorite poster child of a bank that wasn’t big and bad — lost $2 billion in a trading mistake meant to offset its own risk.
On Tuesday, Reid accused JPMorgan and its CEO, Jamie Dimon, of making an irresponsible gamble. He likened the $2 billion trading debacle (which has since precipitated the loss of another $20 billion in the value of its shares) to a betting streak gone bad.
“I would suggest that JPMorgan take their business to Las Vegas because it’s just a gamble,” Reid said. “Clearly they were betting like you would do at a craps table in Las Vegas, and they bet the wrong way.”
But so far, he’s stopped short of joining the chorus of calls from Democrats who think Congress should respond to the banking blunder by revisiting, and strengthening, banking regulations.
In 2010, the Dodd-Frank bill trotted out some of the most stringent regulations the banking industry had seen in decades. In 2012, it remains one of the most hotly debated Obama achievements on the campaign trail.
Part of that is rooted in politics. Most Republicans argue that the regulations in Dodd-Frank have so complicated the practice of banking that the industry will likely be hamstrung into failure as a result. Democrats think the changes are necessary to keep profit-minded giants accountable.
But part of it is also lodged in practice.
Most of the provisions of the Dodd-Frank bill haven’t been finalized or taken effect. That includes the all-important Volcker rule, which would restrict big commercial banks from engaging in the sort of hedge bets that led to JPMorgan’s $2 billion loss. The Volcker rule doesn’t go into effect until July, and even after that, companies have a two-year grace period to comply with the new order.
Reid directed an accusing tone at the rule-writers when asked if Congress had a role to play in responding to the JPMorgan crisis beyond holding hearings, which will take place in the Senate this week.
“We shouldn’t have to wait until July,” Reid said, complaining that the Federal Reserve Board was taking too long to finalize Dodd-Frank rules. “It’s been a year and a half. They should be working more overtime.”
Reid does have some congressional influence to exert as far as the Fed is concerned. He’s expected to push the Senate to confirm two pending nominations to the Federal Reserve Board, citing the importance of having “a fully functioning Fed” to keep the Dodd-Frank regulation drafting process moving.
In the meantime, however, Reid appears content to aim much of his rhetoric at Wall Street.
“The problem is the way Wall Street’s been working is that heads, they win; tails, we lose,” Reid said. “This is a bad deal.”