Senator
Bob Corker (R-TN), a key member of the Banking Committee, has called for expeditious
hearings into the events surrounding the
JPMorgan Chase & Co. trading losses. In a letter to Committee Chairman Tim Johnson
(D-SD), he asked that the committee examine if the trades in questions were bona
fide hedging transactions or poorly managed proprietary trades. More broadly,
Senator Corker said that the hearings should consider if US taxpayers are fully
protected from losses at major financial institutions. Senator Corker is the Ranking Member on the
Financial Institutions Subcommittee.
Senator Corker
noted his belief in vibrant capital markets for debt and equity securities and
the need for balance in ensuring that the US financial system can meet the needs of a 21st century economy.
That said, the losses posted by JP Morgan were clearly significant, he noted,
and policy makers must understand in detail what transpired.
Separately, Senator Carl Levin (D-MI),
co-author with Senator Jeff Merkley (D-OR), of the Volcker Rule provisions of the
Dodd-Frank Act said that the enormous loss JP Morgan suffered is the
latest evidence that what banks call 'hedges' are often risky bets that
so-called 'too big to fail' banks have no business making. The loss is a stark
reminder of the need for regulators to establish tough, effective standards to
implement the Volcker Rule to protect taxpayers from having to cover such
high-risk bets.
In separate remarks, Senator Merkley said that the
JP Morgan situation dramatically demonstrates why the SEC and the banking
agencies must adopt regulations prohibiting hedge fund investments by large
financial institutions to be disguised as risk mitigation or market making. The
federal financial regulators must implement without delay a Volcker Rule as
intended by Congress, he emphasized, with a clear and effective firewall between
what the Senator called ``hedge fund-like trading’’ and traditional banking.