David Harsanyi

When banks generate huge profits, they are exploiting the American people, engaging in unadulterated greed and, needless to say, in need of more regulation. And when banks lose too much money? Yep, they're being insatiably greedy -- but stupid, too -- and, naturally, in need of more regulation.

The unscrupulous can't win for losing, apparently.

So when JPMorgan Chase & Co. suffers about $2 billion in losses (probably more) via complex derivative trades that were used by an obscure unit within the bank to hedge against risk, everyone in Washington seems quite excited about the political possibilities. JPMorgan's problems prove that finance works without any meddling from Washington.

Rather than have someone point out the obvious -- "hey, that's how it's supposed to work"; "that'll teach 'em"; "neat, someone made 2 billion bucks on JPMorgan's stupid bets" -- we have the Justice Department opening an inquiry into the matter, the president calling for tighter regulations, Republican Sen. Bob Corker calling for hearings and a bunch of pundits falsely claiming that if the Wall Street reform bill had been fully implemented, we wouldn't have these kinds of "risky" transactions -- as if we should want to stop them in the first place.

The $2 billion hasn't sunk JPMorgan (and with $127 billion in equity, it hasn't come close), but if this kind of thing constitutes a national emergency, we should have better sense than to allow folks who squander $2 billion on their lunch breaks to concoct the solution.

Unlike our friends in Washington, JPMorgan Chase paid a price for its bad choices; in this case, it cost a couple of billion dollars, caused the company's stock to drop, caused some executives to lose their jobs and damaged the reputation of the firm (though not very much) -- and if shareholders don't like how their money is being handled, they can take their business elsewhere or vote to make changes. This is how it would occasionally work without politics distorting the process.

New York Times columnist Paul Krugman, who believes trillions of taxpayer dollars should spread haphazardly around the economy as stimulus, believes that a $2 billion loss by a private equity firm is why Washington "must regulate." "Banks are special," you see, "because the risks they take are borne, in large part, by taxpayers and the economy as a whole." (Banks are special. Select car companies are special. The health care sector is special. The energy sector is special. Boeing is special. Etc. You may have noticed many industries getting special attention.)


David Harsanyi

David Harsanyi is a senior editor at The Federalist and the author of "The People Have Spoken (and They Are Wrong): The Case Against Democracy." Follow him on Twitter @davidharsanyi.