JP Morgan Chase, the nation’s largest bank, first reported a $2 billion loss last Thursday, adding new fuel to the already fiery debate surrounding financial regulation and oversight, and prompted an SEC investigation into the firm’s practices.
The debate in Washington is: what to do with large banks that live and breathe risk.
Listen to Mr. Dimon (CEO JP MORGAN CHASE) describing those bad trades: “[They were] flawed, complex, poorly reviewed, poorly executed and badly monitored.” And again: “We should have been paying more attention to it.”
Many politicians believe large banks are both too complex to understand and too big to fail. The latter has become such an integral part of Wall Street’s conscience that it has its own acronym: TBTF.
Having overly complicated banks makes it all the more imperative to resolve the TBTF dilemma: how to wind down a large institution without forcing taxpayers to bail it out and destroying the financial system.
Meanwhile, the debacle also shines a light on the fact BIG BANKS are a constant threat to tip over and crush the entire U.S. economy. That will lead to more calls to break up the big banks, to take away the government’s implied backing for them, or at least make regulators more determined to force them to hold more capital against future losses. All of that will make it harder and more expensive for the banks to do business.
Your question: Should federal regulators take over our nation’s largest bank JP MORGAN CHASE to wind down a large institution without forcing taxpayers to bail it out and destroying the financial system? Why or why not?