Recently on Meet the Press, Jamie Dimon, the CEO of JPMorgan Chase, lamented that his company's then-$2 billion trading loss (which has since swelled to at least $3 billion) would "absolutely" embolden proponents of tighter regulation of Wall Street. I think that Mr. Dimon is most definitely correct; however, unlike Mr. Dimon, I think that emboldening champions of financial reform is actually a good thing.
Mr. Dimon has tried to downplay the scale of the losses; after all, the firm made $19 billion last year. But reassurances notwithstanding, the trading failure clearly has rattled a bank that is considered a financial giant, and made the public question just how much bigger the losses could have been given the lack of adult supervision of our still opaque capital markets. So it's true that a turn of event like this -- particularly when it happens so publicly, at such a critical time, and to such an outspoken critic of financial reform -- is the type of scandal that galvanizes public opinion. And it's that type of pressure that can reignite real momentum for financial reform. Some of us in Congress have been engaged in this fight on a day-to-day level here on Capitol Hill. After the fanfare that came with passing the historic Dodd-Frank law, the dust settled, and our regulators got to the tough work of actualizing the statute we passed. The job we've tasked them with is daunting, leaving many areas of the law open to regulatory interpretation. This, of course, was partially a byproduct of intense lobbying from the financial services industry, who worked tirelessly to complicate the law with exemptions and exceptions, and who wanted a second bite at the apple when it came time for the rules to be written.
And now, nearly two years since the passage of Dodd-Frank, we're still waiting for many of these provisions to be finalized. Some have naturally taken a long time to complete, given their complexity and the desire to harmonize certain regulations with those of foreign governments. But on other issues, I fear that regulators are being pressured by the industry they're meant to police.
Some of this pressure comes in the form of direct appeals to the regulators. For example, it's been widely reported that Mr. Dimon, in a closed-door meeting between Wall Street executives and officials from the Federal Reserve Board, led the charge to have the Board weaken the Volcker Rule, a provision requiring banks to separate risky, speculative bets from the ordinary business of banking (on a related point, Mr. Dimon has recently proclaimed that former Fed Chairman Paul Volcker, "doesn't understand the capital markets").
The other insidious tactical strike comes from the industry's "death by a thousand cuts" approach to limiting the fair competition and transparency provided under Dodd-Frank through efforts here on the Hill. The industry, recognizing that wholesale repeal of Wall Street reform would be a politically dangerous position to advocate, has taken to pushing innocuous-sounding, highly technical bills, mainly relating to the derivatives provisions in the Act. These bills -- on arcane issues like extra-territorial derivatives regulation and swap execution facilities -- are being proposed and pushed through the House in an attempt to influence regulator rulemakings as they enter their final stage. And in particular, the bills have been squarely directed at the regulators they feel are the least responsive to their talking points, such as Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC).
Many of us on Capitol Hill who feel strongly about the need for reform have been struggling with the sometimes-subtle, sometimes-overt, but always tenacious, attempts to undermine financial reform over the last two years. And because we're sensitive to making sure that the law we passed works in practice, even some allies of financial reform are often too quick to believe the industry when they cry wolf about the unintended consequences of Dodd-Frank.
But what JPMorgan's trading debacle last week demonstrates are the still-lingering dangers in our financial marketplace, and that, if left to their own devices, big banks will fight against regulation, even when it is in their best interests. My hope is that Mr. Dimon, always recognized as a leader among his fellow Wall Street executives, now takes on a leadership role in telling his peers to back-off on attempts to gut Dodd-Frank.
With that in mind, I make a simple request to financial industry executives: Cease pushing bills on Capitol Hill to undermine portions of Dodd-Frank, and stop pressuring regulators to weaken the rules. I'm also asking them to publicly announce their support for full funding of the CFTC and the Securities and Exchange Commission, frequent targets for a Republican-led House often quietly egged-on by industry.
I hope that Mr. Dimon and his colleagues respond favorably to my request, and signal to both their shareholders and to the American public that enough is enough.