Durbin: Bankers gambling with taxpayer-insured money

(CBS News) JPMorgan Chase was "gambling with taxpayer-insured money" when it made the set of trades that lost the firm more than $2 billion, the Senate's number two Democrat charged Tuesday.

"It just isn't a loss for the stockholders or the investors. It's a potential loss for American taxpayers and middle income families," Durbin said in an interview on "CBS This Morning."

JP Morgan announced Monday that the top executive who headed the unit responsible for the losses had resigned in the wake of the last week's revelations.

Chief executive Jamie Dimon faces shareholders Tuesday in Florida, where he is expected to face tough questions about what he personally knew about what Ina Drew's unit was doing.

The story has become a central theme in the political arena, where President Obama is pushing back against Republican efforts to weaken regulation of Wall Street and rival Mitt Romney is arguing that too many regulations stifle economic growth.

Durbin said "the Republicans in Congress have got to stop their effort to slow down this reform and to starve out the agencies responsible for reform."

"What we have seen in Congress is an effort to shortchange the Securities and Exchange Commission, the Commodities Futures Trading Commission, so they don't have the resources and personnel to write these rules and regulations. That isn't fair. Let's do this and do it right so we don't end up in another embarrassing circumstance and need another bailout," Durbin said.

Dimon has been one of the most vocal opponents of the new rule aimed at preventing risky trading that was proposed in the wake of the 2008 financial crisis. 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 Wall Street regulation, 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 would be prohibited.

The JPMorgan Chase trade 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.

Shares of JPMorgan Chase fell more than 3 percent Monday.