Too big to hedge.
That may be the lesson of the debacle at JPMorgan Chase. And if regulators take the lesson to heart, they could close a gaping loophole in the Volcker Rule, which is supposed to ban speculative trading by banks that take insured deposits.
When he disclosed a $2 billion trading loss last week, Jamie Dimon, the chief executive of JPMorgan, said the trades were intended to hedge the firm’s credit exposure — that is, reduce the risk of investments it had made. This week, speaking to shareholders, he modified that, saying: “What this hedge morphed into violates our own principles.”
