JPMorgan’s Shocking Loss Proves Regulatory Failure

JPMorgan surprised markets last Friday by announcing that one of its trading groups lost $2 billion. This massive loss comes three years after America’s financial industry almost collapsed due to corruption and lack of oversight. But JPMorgan appears to be proving that the reforms implemented in the aftermath are failing.

JPMorgan Chase ceo Jamie Dimon offered a mea culpa to his company’s shareholders: “We ended up with a strategy that is flawed, complex, poorly conceived, poorly vetted and poorly executed. This should never have happened. I can’t justify it.”

JPMorgan Chase is the largest bank in the United States. It was the only bank to remain profitable during the 2008 financial crisis. This had given Dimon some credibility at the time, when he opposed stricter government regulations. But losing $2 billion has now shredded that credibility.

Regulators already implemented a law in 2010 that was aimed at policing Wall Street better. But it is becoming obvious now that the new law isn’t much of a safeguard. The Justice Department is investigating the loss, and government officials are pointing to JPMorgan as a poster child for more banking reform. Treasury Secretary Tim Geithner said on Tuesday that it “helps make the case” for more government banking regulations.

While many say the solution to fixing the financial system is additional regulations, the truth is that our greed-based and corruption-riddled system will not and cannot be fixed. Additional banking rules will not cure our sick, debt-based financial system. To see the bigger picture, and to learn how to avoid such maladies in your own finances, read our article “Storm-Proof Your Financial House.”