You have three men in a room, a business man, a politician, and a bureaucrat. What are the chances that either the politician or the bureaucrat ate the smartest person in the room? Squat. Only the business man got his job by perceived ability and demonstrated ability do his job.
A politician has little interest in anything other than his re-election and the bureaucrat’s only needed skill is the ability to blame-shift.
J.P. Morgan hired the best the brightest, and paid them very well, to manage their business. Well at least in one case, the best and the brightest failed, and some will now be looking for a new job. I have not read any explanation of how JP Morgan two billion dollar “London Whale” went down.
Yet dim witted politicians, like Barney Frank, and screaming that the solution is yet more regulation. As banking is simply above Frank’s pay grade, how doss he purport to be able to write statutory law which would remedy a problem he does not understand?
Look at it like this, if you don’t like the way JP Morgan handles money, and such is your right, then don’t bank with them and don’t invest in them. Simple.
JP Morgan lost two billion dollars. The company survived. The markets survived. Individual managers did not. In other words, the system worked.
Addendum I: Peter Suderman, Reason [1]:
Would tougher regulation of the financial sector have prevented JPMorgan’s loss? That’s not at all clear. The Washington Post‘s Allen Sloan, who favors many stricter financial sector rules, says [2] that because there’s no likely loss to taxpayers, the blown deal proves mostly that the bank should be embarrassed. Bernstein argues [3] that Dodd-Frank would have prevented the loss if “properly implemented and enforced.”
But “proper” implementation is always harder than it sounds. And I’m not sure we have any more reason to trust that regulators have the wisdom and judgment to prevent such losses any more or better than the bankers themselves.
Writing regulations, appointing regulators and enforcing regulations is not a process, at least in Washington, that does anything to create wisdom.
Addendum II: from Johnathan Macey, Wall Street Journal [4]:
Regulators, politicians and news reporters are hysterical at the news of J.P. Morgan’s recent $2 billion trading loss. The Securities and Exchange Commission is investigating to see whether laws were broken.
We appear to be on the verge of making it a crime for a business to lose money. The truth is that nobody should care about J.P. Morgan’s loss—nobody except J.P. Morgan stockholders
Regulators and reporters have no incentive to learn, because they not responsible for the money they lose.