At JPMorgan: What goes around comes around

From Gretchen Morgenson at the NYTimes.com: 

What goes around comes around. Sometimes it happens sooner than you’d think.

That round wheel turned on JPMorgan Chase last week, which disclosed that it had suffered a $2 billion trading loss in credit derivatives. That such a hit had befallen the mightiest of banks was perhaps more stunning than the size of the loss.

The loss, and the embarrassment it held for Jamie Dimon, the bank’s imperious chief executive, came just one month after a private dinner party in Dallas at which he assailed two respected public figures who have pushed for policies that would make banks like JPMorgan smaller and less risky.

One was Paul Volcker, the former Federal Reserve chairman, whose remedy for risky trading by too-big-to-fail banks is known as the Volcker Rule. The other was Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who has also argued that large institutions should be slimmed down or limited in their risky trading practices....

During the party, Mr. Dimon took questions from the crowd, according to an attendee who spoke on condition of anonymity for fear of alienating the bank. One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher.

Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.”

...Mr. Dimon has gained in stature in recent years. Hailed for his management skill, he has also become the financial industry’s point man in the war against tighter regulation of derivatives and proprietary trading. Almost since the financial crisis began, JPMorgan Chase and its legion of lobbyists have swarmed lawmakers and regulators in an effort to beat back efforts to bring transparency to derivatives and to separate risk-taking activities like proprietary trading from commercial lending units....

The hypocrisy is that our nation’s big financial institutions, protected by implied taxpayer guarantees, oppose regulation on the grounds that it would increase their costs and reduce their profit. Such rules are unfair, they contend. But in discussing fairness, they never talk about how fair it is to require taxpayers to bail out reckless institutions when their trades imperil them. That’s a question for another day....

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Link: http://www.nytimes.com/2012/05/13/business/jpmorgan-shooting-itself-in-the-foot-fair-game.html