JP Morgan Chase, the nation's largest bank, ignored external controls and manipulated documents as it racked up trading losses last year, while its influential chief executive, Jamie Dimon, briefly withheld some information from regulators. A new Senate report states JP Morgan has more assets than any other bank in the country and that it has lost a lot of money over the past six weeks. The loss won't sink the bank, not even close. But the loss does raise all kinds of questions about the regulation of banks, the value of trading instruments called derivatives, the size of the world's largest firms and the systemic risk they may pose to the financial system. This is not good news for investors who own long-term impact on the banking sector. But the loss, and the way JP Morgan handled it, has the potential to tarnish the reputation of the bank, and especially its CEO, who successfully steered the firm through the 2008 financial crisis.
Until the big banks understand that they have responsibilities to customers, employees, and other stakeholders beyond simply maximizing shareholder and senior management value, you can assume that business as usual will continue.
1- Does this case indicate that JPMorgan and the federal government were in acollaborative partnership or working at arm’s length? Why do you think so?
2- Were the regulations of derivatives trading legislated by Congress in 2010 anexample of economic or social regulations? What were the arguments in favor of and opposed tothese regulations?