JP Morgan Chase just lost at least $2 billion in derivatives trading (credit default swaps).
Now these losses won’t hurt the bank, rather the issue is that this is exactly what got AIG into trouble and then of course the taxpayer had to bail them out to the tune of at least $160 billion.
The larger problem is the swaps market is huge and if a few big players go down one can see cascading failure throughout the global banking system.
Derivatives do not need to exist so action must be taken to gradually wind down the entire market.
Congress needs to enact real reform on Wall Street, and given the JP Morgan loss, it’s pretty clear they haven’t.
Secondly, we need to start seeing some indictments and prosecutions of those responsible for illegal behavior that led to the crisis.
And trust me, the security fraud has been rampant, so the idea that the behavior was unsavory but not illegal is nonsense. Neither party seems to be willing to do much nor does the DOJ. This is not a partisan issue – time for Congress to do what is right for the country so greedy, undisciplined and selfish financial institutions do not collapse the financial system.