Paul Greenberg

Anybody need still another argument for reviving the old Glass-Steagall Act (1933-99), with its salutary separation between commercial and investment banking? If so, JPMorgan Chase has just provided one. A big one.

The country's largest bank now has admitted losing $2 billion going on $3 billion through its investment games, aka credit default swaps.

When the problem was first spotted by wire services like Bloomberg and the Wall Street Journal last month, the bank's hot-shot CEO, James ("King of Wall Street") Dimon dismissed the story as "a complete tempest in a teapot."

Now it turns out to be a $2 billion storm, and the extent of the company's (and its investors') losses is yet unknown. What is known is that Mr. Dimon doesn't seem to know a heckuva lot about what was going on in his own far-flung company/empire.

The moral of the story: A bank that's too big to fail may also be too big to manage coherently. Where's a good antitrust law like Glass-Steagall when you need one? Answer: repealed in 1999.

If only the bank had stuck to banking -- plain, old-fashioned, conservative banking -- this trainwreck might have been avoided. If only the old wall between ordinary banking and high-flying investment banking had been maintained, this kind of thing would have been impossible, or at least illegal.

Instead, that wall was dismantled by financial masterminds like Bill Clinton and his Republican counterparts Phil Gramm and Jim Leach. The politicians and the banking lobby knew better than to trust history. And now JPMorgan Chase and investors have been handed an expensive lesson about the dangers of ignoring the lessons of the past.

Of late, the sophisticates in our chattering class -- like Thomas Mann at the Brookings Institution and Norman Ornstein at the American Enterprise Institute -- have been lamenting the end of bipartisan cooperation in this bitterly divided Congress. They grow positively sentimental about the good old days when Democrats and Republicans united to pass legislation.

If the bipartisan repeal of Glass-Steagall was an example of constructive collaboration, give me bitter polarization any time.

Whether the country will learn anything from this latest misadventure in financial empire-building remains to be seen. If our policymakers are paying attention at last, they'll once again separate banking from speculating, aka proprietary trading.

Yes, the maze known as the Dodd-Frank Act contains a watered-down version of the Volcker Rule, the modern equivalent of Glass-Steagall, but it's only a pale imitation of the real thing. And the regulators are still trying to figure out just how to enforce it, if at all.

Paul Greenberg

Pulitzer Prize-winning Paul Greenberg, one of the most respected and honored commentators in America, is the editorial page editor of the Arkansas Democrat-Gazette.