A $2 billion loss can produce a moment of humility even in a fabled master of American banking and international finance.
Jamie Dimon, formerly known as the King of Wall Street, was a little less than his normally fighting self when he got to the Senate Banking Committee last Wednesday. He even admitted he'd been "dead wrong" when he tried to blow off news of JPMorgan Chase's colossal screw-up earlier this year. Or, at least, the people he'd relied on were dead wrong. (The surest sign of a chief executive who doesn't need to be one is a tendency to pass the buck to subordinates.). .
It's a rule in the military: A commander is responsible for everything his unit does -- or fails to do. In business and government, another rule applies all too often: It was somebody else's fault. CEO Dimon, you see, was simply misinformed by his underlings. Yes, and all this administration's problems with the economy are George W. Bush's fault.. .
At one point Mr. Dimon did grant that, yes, a ban on banks-cum-investment houses like JPMorgan Chase playing the market, formally known as Proprietary Trading, "may very well have stopped parts of what this portfolio morphed into."
Then again, changing the law may very well not have prevented this little $2 billion slip-up -- given the outsized egos of international financiers and the ingenious ways that ambitious gamblers (excuse me, investors) always find around the rules. The way so many did after the wall that once separated commercial from investment banking in this country was dismantled by financial masterminds like Bill Clinton (D.-Ark.) and Phil Gramm (R.-Texas) at the end of the last century.
Who says bipartisanship is dead? A bad cause always seems to unite the worst instincts of both parties. In this case, both Republicans and Democrats united to rev up the economy and the power of hybrid banks/investment houses. It proved a ghastly miscalculation. We're still living with the results.
The old Glass-Steagall Act, itself the result of lessons learned in the Great Depression, had stood for half a century, but the appetite for pelf and power proved too much to keep it in place. And, soon enough, the Great Recession demonstrated once again that lessons don't stay learned. People may learn; governments never seem to.