The following editorial appeared recently in the Chicago Tribune:
JPMorgan Chase and its chief executive, Jamie Dimon, deserve the heat they're getting for underestimating the magnitude of their derivatives trades gone wrong, but one important fact keeps getting overlooked.
Losing $2 billion on trading is bad. Losing $2 billion if you don't have it would be much worse. Morgan has the $2 billion to lose, and a lot more.
A bank as big as Morgan can cover its losing bet out of cash on hand — even if the amount of the loss ultimately were to double, as it might before it's finally booked in the months ahead.
There is no risk to the financial system. No taxpayer bailout is needed. No taxpayer money is involved at all. This is not a repeat of Lehman Bros., the big bank that failed four years ago.
Who loses? Above all, Morgan shareholders. But even after the bank puts this latest gaffe behind it, it will be solidly in the black, as it has been for years.
For all the rancor directed at big banks because of their leading role in the financial meltdown of 2008, no one should forget that they're big for a reason. The global economy is big. Some of Morgan's most important customers are big. To operate efficiently and raise large amounts of capital when they need it, big companies need big banks.
Lawmakers who talk about breaking up big banks should recognize that big is not automatically bad. With proper management and oversight, the biggest can be the best.
Unfortunately for the banking industry, the biggest, best bank on Wall Street was, until last week at least, reputed to be Morgan. And the biggest, best banker? Dimon.
Dimon and his bank were the living embodiment of why government should let bankers be bankers. His bank was well-run. He was a credible spokesman for his industry.
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The loss for Morgan could wind up being measured in more than dollars if it drives Washington to overregulate. The rules are being written now for the Dodd-Frank financial reform legislation.
Lawmakers and regulators who want stricter rules have been emboldened. The banks were counting on Dimon to stand up against poorly conceived regulatory proposals that would undermine U.S. financial markets. American financiers need the latitude to excel in a competitive global marketplace. Their strongest voice has been muted.
Morgan can cover its trading loss. We hope the banking industry can afford the regulation of the future.