As was was widely reported this morning, JPMorgan Chase today released its quarterly earnings statement, disclosing $5 billion of net income after accounting for a pre-tax loss of $4.4 billion due to poorly-executed securities trades made this spring. I previously discussed the political fallout from this episode in an op-ed published by The American Spectator.
Regulators and members of Congress expressed concern that the trading losses illustrated possible systemic risk which could undermine the stability of the financial system and even spark a liquidity crisis, precipitating a financial meltdown, resulting in a global depression.
My basic point was then and is now that even the possibility of crisis virtually never existed. The large, fundamentally sound bank (which under the leadership of Chairman, President, and CEO Jamie Dimon avoided entanglement in the CDO and CDS markets at the center of the housing meltdown and financial crisis) absorbed the hit, made the appropriate “personnel adjustments,” studied what had happened, learned what it could, applied the lessons to its operations, and moved on. This process was well underway before anyone outside of the firm knew about the losses, which Dimon chose to disclose.
Free market advocates are not shills for big banks like JPMorgan Chase, which play politics as well as firms in any other industry. Yet even in this fallen world of crony capitalism, we appreciate the visible contrast between the basic competence of private action conditioned by market signals and the fecklessness and amateurish self-importance of bureaucrats and lawyerly politicians.