The scales of financial justice are tilted by avarice and the power the investment bankers continue to assert. JP Morgan Chairman and CEO Jamie Dimon pleads mea culpa for his part in the US$ 2 billion (and counting) derivative trading loss.
Financial Year
Dimon and his staff were not hedging, they were speculating and came unstuck. What we have is another warning of the "too big to fail" syndrome. In this case size does matter because when leviathan banks are exposed and need propping up, the taxpayer foots the bill and public services are cut.
Budget Deficit
JP Morgan's multi-billion punt is the latest evidence that the financial sector remains a minefield five years on from the initial crisis. Despite the efforts of regulators there is a vacuum at the heart of financial global governance. We have global financial markets and global electronic trading with enormous flows of capital across borders but the supervisory mechanism is flawed. The Financial Stability Board does not have the necessary powers of enforcement -- it is a policeman without a baton. The European Union now has the European Banking Authority and surely the time has come for a Global Banking Authority which is independent and has real teeth, able to identify emerging risks. We do not just need a cop on Wall St or a bobby on the London Square Mile beat. What is required is a new financial global policeman or an Interpol for financial supervision to catch the financial jaywalkers and serial offenders.
The necessity of regulation and structural change to the world's banking system has been recognized by a raft of new legislation and proposals, the foremost being the Dodd-Frank legislation in the United States, Sir John Vickers' Independent Commission on Banking in the United Kingdom and the European Commission which has launched a high level consultation on reforming the structure of the EU banking sector. A move in the right direction but one which will not succeed without a change in banking culture and the bank bosses have made it abundantly clear that they will fight to maintain the status quo. Those working for sensible regulatory change should prepare for a renewed lobbying onslaught by bankers determined to influence the process to keep "business as usual".
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