Washington DC, December 13, 2012—
“As recently proved by JP Morgan’s bets with federally insured depositors’ money, called the ‘London Whale,’ the handful of the biggest banks that rely on taxpayer support have to be banned from gambling,” said Dennis Kelleher, President and CEO of Better Markets, an independent nonprofit organization that promotes the public interest in the financial markets.
“JP Morgan’s speculative high risk derivatives bet has cost it more than $6 billion so far and it could have been much worse. Citigroup’s bets in the years before the financial crisis cost it almost $40 billion in 2008, which pushed it to the edge of bankruptcy. More than $475 billion in federal bailouts was required to prevent Citigroup from collapsing and bringing down the entire financial system,” Mr. Kelleher continued.
“That type of high risk speculative betting is what the Volcker Rule’s ban on proprietary trading by the biggest banks is supposed to end,” said Mr. Kelleher. “Stopping such high risk trading is easy: prohibit all compensation from proprietary trading and swiftly impose very large sanctions on all individuals for violations of the rule, importantly including senior executives,” said Mr. Kelleher.
“It is important to remember that the Volcker Rule is narrow in application and limited in scope,” Mr. Kelleher said in his written testimony for the House Financial Services Committee hearing on the Volcker Rule on Thursday, December 13th at 9AM. “It only applies to the few biggest banks that are so large that their failure would threaten the entire financial system and the country’s economy – as they did in the financial crisis of 2008, and it is targeted only at a particular pernicious, dangerous and, indeed, lethal type of trading, proprietary gambling.”
Mr. Kelleher also reminded the Committee that the cost of that financial crisis will be more than $12.8 trillion, as detailed in a recent study by Better Markets. “Financial reform and the Volcker Rule are designed to prevent Wall Street and the too big to fail banks from crashing the global financial system again and causing yet more economic wreckage for the American people,” said Mr. Kelleher.
Mr. Kelleher’s full testimony can be found here
The Cost of the Crisis Report can be found here
About Better Markets
Better Markets is an independent, nonprofit, nonpartisan organization that promotes the public interest in financial reform in the domestic and global capital and commodity markets. Better Markets advocates for transparency, oversight and accountability with the goal of a stronger, safer financial system that is less prone to crisis and failure thereby eliminating or minimizing the need for more taxpayer funded bailouts.