Let there be jail time – more regulation gets us nowhere
“The U.S. Justice Department and the Federal Bureau of Investigation in New York have begun a criminal probe of JPMorgan Chase & Co. (JPM)’s $2 billion trading loss, a person familiar with the matter said.
The U.S. is looking into whether criminal wrongdoing occurred in relation to the losses the bank reported last week, said the person, who declined to be identified because the matter isn’t public. The inquiry is in its most preliminary stage, the person said.”
Contrary to Obama’s predictable position, there is absolutely NO case to be made here in support of further regulation. There is plenty of regulation. If any of this is illegal, we need merely to enforce the laws we already have. Let there be jail time – more regulation gets us nowhere.
If no laws were broken, there is no need for any tears and here is what we need:
1. JP Morgan is owned by shareholders. The $2B loss will be born by these shareholders, not by taxpayers. Mgmt is adequately accountable to its shareholders. If you find yourself outraged by this loss but you aren’t a shareholder, quit your belly aching.
2. Restore Glass-Steagall. There is NO reason why taxpayers should be forced to stand behind private, shareholder owned banks who are using customer deposits to trade for profit. None. Lets get taxpayer-backed banks out of the proprietary trading business…immediately, if not sooner..
3. Any bank that is “too big to fail” must be made smaller. Failure must be an option because the potential for failure will impose discipline on decision making and business practices in ways regulation will never be able to. There is nothing wrong with failure.
4. End all bailouts, whether of banks, homeowners, college students, car makers, or any other entity. Stop handing out tax payer money to dead beats and knuckleheads or else stop levying taxes. No one pays taxes so you can keep these clowns afloat.
5. If, like Obama, you think more regulation is the answer, you’ve drunk the kool-aid. Among the very largest and most spectacular failures of the recent past are Fannie Mae and Freddie Mac. Not only were these entities created by our federal government but they were regulated by the government as well and shifts in government policy did them in. If you weren’t outraged by the failures of Freddie and Fannie, you should be because the failure of those entities cost taxpayers a fortune. And yet, in light of these spectacular failures, FHA (another government entity) stepped in to fill the void left by Fannie and Freddie. Why in the world do you think if the government is driving the bus, it won’t crash? I’d take my chances with the private sector every day of the week, but make sure we impose the conditions above.
There is nothing wrong with capitalism but failure must be an option and losses must rest with the risk-takers. Our government must stop the very legislation that enables gains to accrue to shareholders while directing losses to taxpayers. Regulation will NEVER be a proxy for the efficient allocation of capital and resources that are at the core of our economy.