Obama: JPMorgan shows need for strong Wall St. rules

People arrive at JPMorgan Chase headquarters in New York Monday, May 14, 2012. JPMorgan, the largest bank in the United States, is seeking to minimize the damage caused by a $2 billion trading loss, disclosed Thursday by CEO Jamie Dimon.

/ AP Photo/Mark Lennihan

UPDATED 6:01 p.m. ET

(CBS News) The White House said Monday that JPMorgan Chase's admission last week that it lost more than $2 billion in one set of trades is reason to continue to push for stronger, not weaker, regulation of the nation's financial system.

Appearing on ABC's "The View," President Obama called JPMorgan "one of the best managed banks there is" before noting that it "still lost $2 billion and counting."

"You could have a bank that isn't as strong, isn't as profitable managing those same bets and we might have had to step in," he added. "That's why Wall Street reform is so important."

White House spokesman Jay Carney told reporters aboard Air Force One that the situation showed why "[i]t's so important that we resist the efforts of Republicans and Wall Street lobbyists" to water down the 2010 rewrite of the rules of Wall Street."

"It is amazing, given the events we've seen the last few days that there are still those who are out there arguing that we should repeal Wall Street reforms, that we should let Wall Street write its own rules again," Carney said. Mr. Obama is set Monday to attend a fundraiser hosted by Tony James, a top executive at Blackstone, the private equity firm founded by prominent Republican backer Stephen Schwarzman.

The largest U.S. bank by assets said last week that it had lost more than $2 billion in a set of trades that chief executive Jamie Dimon later called "flawed, complex, poorly reviewed, poorly executed and poorly monitored."

CBS MoneyWatch: What JPMorgan's loss means to you
SEC chief: Regulators "focused" on JPMorgan
JPMorgan chief investment officer leaving

In an interview that aired Sunday on NBC, Dimon said he was "dead wrong" to dismiss concerns raised a month earlier about the bank's trading practices as a "tempest in a teapot."

In 2010, Congress passed sweeping changes to the way the nation's financial system is regulated, though it left many of the most important details to various regulatory agencies to decide.

In the intervening two years, financial firms have flooded the regulatory process in an effort to make those rules more favorable to their industry, arguing that increased regulation stifles economic growth.

Dimon has been one of the most vocal opponents of one of the highest profile new rules aimed at preventing another taxpayer bailout of the big financial firms by preventing risky trading in the first place.

Protesters from the Occupy DC movement, marching in solidarity with Occupy Wall Street in New York's Financial District, demonstrate in front of the White House in Washington, Sunday, Oct. 9, 2011.

/ AP Photo/Cliff Owen

Named after former Fed chairman Paul Volcker, the "Volcker rule" essentially would have banned the banks from using their own money to invest in the financial markets.

First proposed two years ago as part of the overhaul of the Dodd-Frank legislation, the details of the rule have not been finalized and the fight over what would and would not be allowed is still ongoing before the July deadline to decide precisely what will be prohibited.

The JPMorgan Chase losses may have inadvertently showed how the banks planned to get around the forthcoming regulations. The rule included an exception for so-called "hedging," which is typically used to prevent losses from getting too large. But the banks were using the "hedge" to gamble, which would essentially nullify the primary reason for the rule.

And that could provide ammunition to critics who say the banks need tougher rules.

Massachusetts Senate candidate Elizabeth Warren, one of the most vocal critics of the financial services industry and the driving force behind the creation of the Consumer Financial Protection Bureau that was created as part of the law, called on Dimon to step down from his role as a director of the New York Federal Reserve Bank, which oversees the nation's largest banks.

The banks still believe that they should not have outside oversight, the liberal Democrat said Monday in an interview with "CBS This Morning."

"And I think that is just fundamentally wrong. It's wrong and dangerous," said Warren, who headed the congressional panel that oversaw the 2008 bank bailout.

Additional reporting by CBS News White House correspondents Peter Maer and Mark Knoller..

[TimeToEvolve]

This criminal Bankster house is the symbol for everything that has gone wrong with America since Reagan. Our financial system has devolved into an unregulated vulture capitalist disaster.

[TimeToEvolve]

SO the idiot Dimon gets on there after losing $2 billion of his shareholders money and says we need LESS regulation. Give the bozo idiot a raise.

And then you have Robmee, the plastic parasite, STILL talking about the fake free market that Reagan proved was a scam for people like Mitler and his fellow Wall Street robbers and raiders.

[marychgo]

A modest proposal: No FDIC-insured institution should be permitted to trade in "naked" or "synthetic" derivatives. A derivative trade CAN be a legitimate "hedge" if the bank trading the derivative actually owns the underlying security. If the bank DOESN'T OWN the underlying security or the underlying security DOESN'T EXIST, the trade is NOT "hedging"; it's gambling!

[sandiegopete]

CaptainSmollett posted: thought JPMorgan was a privately owned business. Why does Obama see fit to regulate everything?
-------------------------------------------------------------
This comment illustrates the major roadblock to meaningful regulation of the financial sector. The fact that we have so many people that are so ignorant of how our financial institutions work and how they are intertwined with the people of the United States.

Money that working people deposit into banks fall into two basic categories: those that are federally insured; and those that are not federally insured. When a bank fails those deposits that are federally insured are covered up to the insurance limits. Those deposits that are not federally insured are not covered but will likely be covered by the taxpayer because the failure of one of the too big to fail banks would lead to economic caos. So, in the final analysis, taxpayers have an interest in ensuring banks operate in a fashion that does to place undue risk upon the depositor because when the banks fail it is the taxpayer, not the executives, that pay the price.

Banks have no business telling the federal government to butt out of their business because the federal government, which is supposed to be composed of the citizens of the United States, guarantees the solvency of the banks.

Get it, all you CaptainSmolletts out there?

[sandiegopete]

Should be: operate in a fashion that does not place undue risk upon the depositor.

[darkhorseky]

Go to a Cridet Union If you can. They cannot operate like a bank and is Federally insured, No stock holders. Also I dont think they can play in securities.

[TimeToEvolve]

This is just how stupid and lost the Republicons are. There fake and artificial free market myth that was championed by their brain dead hero Reagan has failed miserably.

And their Top 1% corporate masters are still pushing the same pathetic lies on us. Do they think we are all that stupid?

[darkhorseky]

Well i think President clinton removed most of those banking laws.

[sandiegopete]

darkhorse: So, you think the Republicans will enact significant regulation of the banks. How do you arrive at that conclusion?

[CaptainSmollett]

I thought JPMorgan was a privately owned business. Why does Obama see fit to regulate everything?

[sjc_1]

JP Morgan is a publicly traded company on the NYSE and the nation's largest bank with over $2 trillion in assets. THAT is why any president would take an interest, so that they an others can not bring down the U.S. yet AGAIN.

[TimeToEvolve]

They are Wall Street Bankster criminals that conspired with each other to take down the world economy. But they made their billions off of the 99%.

[commenter777]

I was in an elevator this past friday along with about 5 other people that work for JP Morgan. One of them was Jamie Dimon. They were talking the $2,000,000 loss the day before. One of them said to Jamie,"This may make it easier for regulations to be passed". Jamie laid down on his back kicking and screaming like a 3 year old and yelled at the top of his lungs, "Oh lord no, I don't want to have to travel to Las Vegas to do my gambling and I don't want to have to gamble with my own money. I want to be able to continue to gamble with the economy of the whole world because I'm so special."!!!

[icuping]

Starting with Mr.Obamma....

[sandiegopete]

What, more partisan hot air? Each and every Republican and each and every Democrat is owned by banks like JP Morgan Chase. Don't you get that?

[Rick03466]

Incredible the man that Wasted 5 TRILLION DOLLARS , of the Next 3 generations of Tax Payers wants more rules because a group Private Investors lost 2 Billion what an arrogant deluded fool

[fedup12]

WOW you are right.

I thought it was because a bunch of ignorant bankers showed that they didnt learn from a HUGE crash that occurred just 4 short years ago. And then were doing the same crappy business practices that brought everything crashing down.

But you sure may be right.

[sjc_1]

It was the $100 billion bet that led to the $2 billion loss. Being the biggest bank in the U.S. allowed them to make such a HUGE bet, which distorts the markets and increases risks. This is where too big to manage and break them up comes in.

[fedup12]

I really dont think that regulation is the way to go.

I dont think the regulators have the people or expertise to watch dog this.

I think that you put some rules in place so that these banks never get too big to fail. And laws against using taxpayer money to bail these people out for bad business practices.

[sandiegopete]

So, if the bank where you have your money fails you are ok if you just lose your money. That's fine for you. Evidently you don't need money anyway. The rest of us want to be able to withdraw our funds from a bank when we need it. That is why people want banks regulated: so they have less of a chance of losing their money.

One thing has been proven time and again: left to their own devices banks will not retain sufficient capital to avoid runs.

As far as you claim that people in the federal government do not have the expertise to oversee private businesses, baloney. Ask any senior executive of any Fortune 500 company how he or she likes going up against the Employee Benefits Security Administration.