Washington, DC – Oregon’s Senator Jeff Merkley released the following statement after the Senate’s Permanent Subcommittee on Investigations released a report on J.P. Morgan’s “London Whale” losses:
“Today’s report is yet another reminder to regulators that it is past time to get the job done on a strong, simple Volcker firewall. High-risk trading simply doesn’t belong in our nation’s core banking system. Deadlines have come and gone, and two and a half years after the passage of the Merkley-Levin provisions in financial reform, middle class Americans’ savings continue to be put at risk by the kind of bets that led to the failure of our largest banks and wrecked our economy.
“J.P. Morgan’s huge losses continue to cast a whale-sized shadow over these extended delays, and remind us once again just how important it is to separate risky, hedge-fund-style trading from the banking system that Main Street depends on.”
Senator Merkley and Senator Levin (D-MI), Chairman of the subcommittee that released today’s report, were the chief authors of the Volcker firewall provision of the 2010 Dodd-Frank Act, which required banks that make loans and take deposits to end their high-risk trading. The provision also reins in high-risk bets at systemically significant non-bank financial companies and limits conflicts of interest in trading. The rule was supposed to be finalized by regulators in July 2012.
In May 2012, J.P. Morgan announced huge losses from a bet that had been made on the direction of the European economy. These “London Whale” losses eventually totaled $6.2 billion. The bet had been made supposedly as a “hedge” to reduce risk, leading Senators Merkley and Levin to speak out about hedging loopholes in regulators’ preliminary draft of the Volcker Rule.