“For all the questions that were answered by the Senate inquiry into JPMorgan Chase’s $6.2 billion “London Whale” trading loss, one big question remains: What happens now?
“A report and hearing last week in a Senate investigations subcommittee left no doubt that recklessness, tied to speculation in derivatives, still pervades the banking system and still puts the public at risk. JPMorgan’s trading losses were a bet, not a hedge, against risks in the bank’s other assets. As the bet soured, the bank ignored and then adjusted its internal risk alarms. As the losses piled up, it misled investors and the public and withheld information from regulators.
“And all this by the nation’s biggest bank and world’s largest derivatives dealer, presumably the standard-setter for other big banks.
“The subcommittee’s leaders — Carl Levin of Michigan and John McCain of Arizona — have not yet decided whether to refer their findings to the Justice Department for a criminal investigation. But even if they do, what then? Justice Department officials have made it clear that big banks are too big to indict because prosecuting them could destabilize the financial system. So either the existence of banks too big to fail is undermining the rule of law, or prosecutors are using the fear of systemic failure as an excuse to not prosecute banks and bankers. Or both.”
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