Bloomberg reports that US Congress’s inquiry into JPMorgan’s $2 bn-plus trading loss has reignited the question of whether a bank can grow too large and complex for its own executives to oversee. The banking industry is taking notice that a move to cap the size of Wall Street firms is gaining traction on Capitol Hill.
'There seems to be growing interest in some type of breakup proposal', said Sheila Bair, a former chairman of the Federal Deposit Insurance Corp.
The concept is expected to arise Tuesday as JPMorgan Chief Executive Officer Jamie Dimon testifies before the House Financial Services Committee on the trading debacle. Last week he told the Senate that the losses, which carved about $23 billion from the bank’s market value, were due to a poor investing strategy coupled with management failures.
Senator Sherrod Brown seized on that admission. 'It appears executives and regulators simply can’t understand what is happening in all these offices at once', the Ohio Democrat said during the June 13 hearing. 'It demonstrates to me that too-big-to-fail banks are, frankly, too-big-to-manage and too-big-to-regulate'.
While bank lobbyists say they are still most concerned that JPMorgan’s trading loss could prompt regulators to write a stronger U.S. rule against proprietary trading, they are also closely monitoring the emerging talk about too-big-to-manage.
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