Let’s bring back Glass-Steagall.

May 15, 2012, 2:16 p.m. EDT

Dimon may be ‘stupid,’ but he’s right on banks

Commentary: Regulation will never stop stupid trades and big losses

Stories You Might Like

• Stay of execution for Greece in the offing
• J.P. Morgan owners deserved more
• Drew exit won’t fix J.P. Morgan’s risk problem

322 Comments

Share

new

Portfolio Relevance

LEARN MORE

By David Weidner, MarketWatch

NEW YORK (MarketWatch) — Jamie Dimon is right: Regulation is making things worse on Wall Street.

The Dodd-Frank Act has cost banks hundreds of millions in profits and has done nothing to prevent:

• J.P. Morgan Chase & Co.’s big trading loss.

Reuters

President Barack Obama shakes hands with J.P. Morgan Chase Chief Executive Jamie Dimon in this file photo.

• MF Global’s implosion and $1.6 billion in lost customer funds.

• Goldman Sachs Group Inc.’ s GS +0.10%  scandal-a-quarter pace.

Let’s stop the foolishness and let Wall Street be. Let the free markets be free. Let J.P. Morgan Chase JPM +1.26%  lose $2 billion on what Dimon has called a “stupid” trade. Let it make $2 billion on a good trade.

This, after all, is exactly what Wall Street wants. It wants a supercharged high-risk/high-reward market system where banks can blow billions in a morning trade and make it back in the afternoon.

There’s no point in fighting the powers that be. No matter how many rules we slap on the industry, it will always find a way around them. The incentive of greed, creating wealth without work, is just too powerful.

Click to Play

Is Jamie Dimon too powerful?

A look at those calling for J.P. Morgan Chairman and CEO Jamie Dimon's two jobs to be broken up. Also, is Yahoo's appointment of an interim CEO just the start of stabilizing the company?

So, rather than slap more ineffective and easily gamed rules into the system, let’s just divide the system. We the people will keep our traditional banking — the monetary and economic side of the equation. We’ll let casino capitalism run wild on the other side.

Let’s bring back Glass-Steagall.

You remember Glass-Steagall. It was the Depression-era law that separated investment banking and trading activities from retail and commercial banking. It split, for example, J.P. Morgan’s empire into a bank, J.P. Morgan & Co., and a brokerage, Morgan Stanley.

When the law was repealed in 1999, the brokerages and banks were allowed to come together again.* And, of course, that’s when the problems began, the biggest of which was the use of traditional banking assets as chips in the casino, mortgages as mortgage-backed securities, for instance.

* Actually by 1999, most traditional commercial banks were doing some form of securities dealing through loopholes created in the 1990s. J.P. Morgan, for instance, had actually migrated to an investment bank, and a minority of its business was commercial banking.

After the financial crisis in 2008 and 2009, regulators and lawmakers tried to scale back the free-for-all that “financial modernization” had wrought. The Dodd-Frank Act clocked in at 849 pages in an effort to basically regulate every little piece of the financial markets.

Page 1 Page 2

end quote from:http://www.marketwatch.com/story/dimon-may-be-stupid-but-hes-right-on-banks-2012-05-15?link=MW_story_popular

 

I agree with this article. Let's Bring Back Glass-Steagall so " those banks too big to fail don't bring down the the whole U.S. economy one day in one fell swoop!"