Merkley: J.P. Morgan’s Trading Losses Show Need for Strong Volcker Rule

[ProSense]

Merkley: J.P. Morgan’s Trading Losses Show Need for Strong Volcker Rule

Washington, DC- Oregon’s Senator Jeff Merkley, cosponsor of the Merkley-Levin provision in Dodd-Frank that put into law the Volcker Rule, issued the following statement after news that J.P. Morgan lost at least $2 billion in portfolio hedging trades made by their risk management division.

“What yesterday’s announcement makes abundantly clear is that even J.P. Morgan, supposedly the best risk manager on Wall Street, can make bets that go spectacularly wrong. This is exactly why the banks that our businesses and families depend for loans should not be in the hedge fund business.

“Moreover, it is essential that bank regulators issue rules that do not permit hedge fund investments by Wall Street banks to be disguised as ‘market making’ or ‘risk mitigation,’ as this case so dramatically demonstrates.

"I ask, once again, that regulators implement without delay a Volcker Rule as intended by Congress, with a clear, effective firewall between hedge fund-like trading and traditional banking.

"American families and businesses should not be subsidizing these types of risks or victimized by these types of losses. We need a wholesale change of culture at our banks and at our regulatory agencies, which is precisely what the Volcker Rule firewall is intended to create."

http://www.merkley.senate.gov/newsroom/press/release/?id=14790A0A-6018-4331-AF15-7D8B842C9CF8

I notice the articles and commentary about this incident mention the Volcker rule, but fail to mention that it hasn't been implemented yet.

[RB TexLa]

1. That is the stupidest reaction to aggressive trading I have ever heard

[ProSense]

2. ? n/t

[dkf]

4. Someone else suggested maybe they were too risk averse.

It's true that hedges don't always work out...look at airlines trying to hedge oil prices or refiners.

Also look at the some of the endowment funds or states trying to hedge against interest rate risk right before the crash. They got crushed.

[doc03]

3. I seem to recall a few months ago where it was suggested people either by or

sell their silver to stick it to J. P. Morgan. Does anyone else remember the particulars on that? Did it have anything to
do with their loss?

[spanone]

5. they are taking their clients money to vegas, they should be in jail