Clarence Page: Risk ran amok at JPMorgan Chase

Clarence Page, Chicago Tribune

Like a sequel to a bad horror movie, the great vampire squid is back.

That was gonzo author Matt Taibbis description in a 2009 Rolling Stone article of Goldman Sachs, the financial giant that played a central role in the 2008 financial meltdown. The worlds most powerful investment bank, he wrote, was a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Today, that hungry description is beginning to sound a lot like JPMorgan Chase, which, at best, has been swimming around in the same troubled waters.

Chairman and CEO Jamie Dimon has come under fire after disclosing significant losses estimated at $2.3 billion in a portfolio of credit investments. Dimon blamed errors, sloppiness and bad judgment for the terrible, egregious mistake.

The disclosure recalled Wall Streets 2008 meltdown and the mammoth financial houses that were bailed out at taxpayers expense, judged too big to fail without bringing down a sizeable portion of the global economy.

Yet as squids go, JPMorgan has had a reputation for managing its tentacles well until now. The recent disclosure has re-ignited debate over what new rules are needed to limit risk at government-insured banks. It also raises big questions about whether a bank that supposedly is too big to fail may be too big to manage.

The good news about JPMorgans bad news is this: Its huge size helps it to contain its problems and avoid igniting another major meltdown.

While $2 billion sounds like a lot of money because it is it is only a drop in the bucket, compared to JPMorgans $608 billion in customer deposits. A smaller bank might be wiped out, but JPMorgan can handle it and move on, one hopes, somewhat chastened.

Yet Dimon makes an inviting target for criticism, partly because he has been one of the most prominent and vociferous opponents of the strong regulation that President Barack Obama and other critics say is necessary to prevent risky bets from causing another disaster.

More:
Clarence Page: Risk ran amok at JPMorgan Chase