More heads should roll and not just at JPMorgan

It’s hard to believe that just over two years ago I spoke at a press conference at the U.S. Capitol along with Senators Dick Durbin, Jack Reed and Michael Bennet calling for the Senate to pass financial reform legislation to protect small businesses and the public from Wall Street causing another Great Recession.  The passage of the Dodd-Frank Act is the background for the current controversy involving JPMorgan.

Today we might hear of more JPMorgan senior executives losing their jobs over that big bank’s $2 billion and growing loss.  Maybe its CEO Jamie Dimon will accept responsibility and offer his own resignation.  According to former and current JPMorgan employees, the decisions to engage in the highly risky and self-destructive trading that Dimon has called “sloppy", “stupid” and “bad judgment”, were approved by Dimon himself.

But JPMorgan shouldn’t be alone in cleaning house.  Contrary to what Eric Gehrnstrom, a senior adviser to the Mitt Romney campaign, said on NBC’s TODAY this morning, the proprietary trading that is costing JPMorgan billions is not just a loss to the shareholders of that bank and therefore no taxpayer money was at risk. 

Proprietary trading was intimately involved in creating the financial meltdown that caused the Great Recession.  It was the first domino to fall.  When the banks were facing insolvency and shutting down because of their greedy gambling with their own money, the whole economy teetered on collapse forcing Congress to bail them out with taxpayer dollars. 

These big banks aren’t the small, community banks we know on Main Street.  These financial giants turned into investment gambling houses through their proprietary trading.  And they weren’t doing this to help the nation’s economy.  This was all about satisfying the greed of their CEO’s, traders and stockholders at the public’s expense.

That’s why the Volcker Rule was put into that financial reform Congress passed in 2010 to prevent another Great Recession by severely limiting proprietary trading by banks.  But that rule, along with other needed regulations passed over two years ago, still is not in effect because hordes of bank lobbyists descended on the regulators and Congress to water down the reform.

It appears that the regulators responsible for writing the rules intended by Congress have forgotten that they are public employees.  We pay their salaries to do their jobs protecting us, not the big banks.  And the bank regulators charged with overseeing JPMorgan and the other big banks obviously aren’t doing their jobs in protecting us.  According to JPMorgan insiders the current proprietary debacle has been building since 2007.

If we expect accountability at JPMorgan, we should also demand accountability from the government employees who have kowtowed to the wealthy and powerful.  The regulators at the Federal Reserve, Treasury Department and the Commodity Futures Trading Commission who have been intimately involved in overseeing JPMorgan and “negotiating” with the big banks to loosen needed regulations passed by Congress should be re-assigned or terminated. 

Now, I am supportive of government employees.  They shouldn’t be laid off or not receive proper compensation just because we don’t make multinational corporations and the wealthy pay their fair share of taxes.  Government employees are an important part of our economy spending their money with locally-owned businesses.

But I also expect these employees to work for us, not work for the big banks in hopes of a better private-sector paycheck tomorrow.

Just as heads rolling at JPMorgan will send a warning to the other big banks about irresponsible proprietary trading, some deserved-house cleaning at our regulatory agencies will send a clear message to all who we have entrusted to protect us and our economy.