During the 2008 crisis, I argued that we should take over the big banks and restructure them. Instead, we bailed out the banks with tax payer money and with an unprecedented increase in the Fed’s balance sheet. We did nothing to get rid of banks that are “too big to fail” or to severely restrict their activities (which might lead them to break themselves up).
So yesterday, JP Morgan Chase had to announce a $2 Billion trading loss from what they claim was a hedge gone wrong in Credit Derivatives but looks awfully like rogue trading activity. This particular error may be one the bank can absorb but I don’t understand why we would let this go on until we are at another crisis that can only be resolved by a government bailout.
It will be interesting to see how this issue makes its way into the upcoming presidential election campaign here in the US. While I have been disappointed with many aspects of President Obama’s first time I hope he makes this a part of his agenda going forward and in a second term would actually do something about it. His support for gay marriage is a welcome sign of what might be a more principled stand (hope springs eternal).