Posts Tagged ‘JP Morgan Chase’

Krugman on Banks and Romney

May 23, 2012

by Chidem Kurdas

Regulation advocates seem to regard the JP Morgan loss as the best thing since sliced bread. Thus Paul Krugman gleefully bawls out Mitt Romney for refusing to see it as a sign for greater government intervention.

Krugman repeats the by now well-known argument on banks, as a riff on “It’s a Wonderful Life.” The Jimmy Stewart character makes “a risky bet on some complex financial instrument,” loses the money and causes his bank to collapse. The moral: banks should not be allowed to take on much risk because “they put the whole economy in jeopardy” and “shouldn’t be allowed to run wild, since they are in effect gambling with taxpayers’ money.”

The fact is, banks make money by taking risk. That’s always been the business model. Even Bailey Building and Loan in “It’s a Wonderful Life” makes risky home loans—one might think of them as subprime. Read the rest of this entry »

Should Banks Just Buy Treasuries?

May 15, 2012

by Chidem Kurdas

There’s a widespread impression that the $2 billion-plus trading loss JP Morgan Chase announced a few days ago strengthens the case for more regulation of banks.  Below  Jerry O’ Driscoll makes this argument more thoughtfully than I’ve seen any where else.

Two basic facts are worth remembering.

Fact number one is that in 2010 Congress passed the gigantic Dodd-Frank financial regulation law, which is being translated to thousands of specific rules by coteries of government bureaucrats. The Volcker rule against bank proprietary trading is the least of it. There are numerous new rules. None of these could have prevented the JP Morgan loss or even moderated it, as best I can tell. Read the rest of this entry »

Big Bank Obesity Conundrum

March 5, 2012

by Chidem Kurdas

Is the Federal Reserve a hotbed of trustbusters? Fed officials (as well as some academics) have been calling for forcible downsizing of big banks . “I am of the belief personally that the power of the five largest banks is too concentrated,” Dallas Federal Reserve Bank president Richard Fisher said a few days ago during a visit to Mexico, according to news reports. He’s expressed similar views before, as has Thomas Hoenig, former president of the Kansas City Fed.

Here on ThinkMarkets Jerry O’Driscoll, a Federal Reserve veteran, wrote: “There is no conceivable efficiency gain that justifies the risk these gigantic, risky institutions impose on all of us,” Read the rest of this entry »

Why Public Policy Is Inconsistent

January 19, 2012

by Chidem Kurdas

Jamie Dimon, the chief executive of JP Morgan Chase, says regulatory policy is working against economic recovery and as such is contradictory. His complaint is about the new bank rules, but in fact government actions in myriad areas are at odds with each other.

Consistency does not appear to be an object in policymaking. For many years subsidies for tobacco growers co-existed with anti-smoking measures. A couple of months ago NYU law professor Richard  Epstein wrote about regulatory and legal over-reach in the anti-smoking fightRead the rest of this entry »

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