As JPMorgan announced a $2 billion trading loss, members of Congress called for federal regulators to scrutinize and tighten banking rules and trades. New rules are being drafted as part of the Dodd-Frank bill that prevent federal banks from making investments that might put taxpayers at risk.
“The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today,” said Democratic Rep. Barney Frank.
After the creation of the Volcker Rule, a regulatory law meant to prevent overly risky trading, JPMorgan Chase sent lobbyists to Washington to argue for loopholes that would allow for trades much like those that led to a $2 billion loss announced by the bank on Friday. Bank chief executive Jamie Dimon and other members of upper management paid regular visits to lawmakers to argue that, while they thought some parts of the rule were useful, others would hurt the bank’s ability to hedge against risk. The result, said Senator Carl Levin, was a “big enough loophole that a Mack truck could drive right through it.”