WASHINGTON (AP) — A key House Republican says the $2 billion trading loss at JPMorgan Chase raises critical questions about how banks control their risks. But Republican lawmakers rejected calls from Democrats for stricter regulation.
Rep. Shelley Moore Capito, R-W.Va., chairman of the House Financial Services subcommittee, noted the loss during a hearing about how best to regulate banks big enough to bring down the broader financial system.
Lawmakers said a firm's character should count when regulators determine if they are "systemically important financial institutions." Such a designation would subject them to a stricter level of oversight.
The panel's hearing on a key tenet of the 2010 regulatory overhaul was scheduled well before JPMorgan revealed its trading misfire last week.
Republicans on the subcommittee denounced the overhaul's requirement for financial firms to be tagged as "systemically important." They said it really means a firm is considered "too big to fail" — the doctrine that brought taxpayer bailouts of Wall Street during the 2008 financial crisis.
"These firms will never fail," said Rep. Spencer Bachus, R-Ala., chairman of the full Financial Services Committee.
News of the surprise loss at JPMorgan, the only major bank to stay profitable during the financial crisis, has renewed calls for tougher oversight of Wall Street banks. Treasury Secretary Timothy Geithner said Tuesday that JPMorgan's loss bolsters the case for stricter rules.
But Bachus and other Republicans insisted that the overhaul law, which most Republican lawmakers had voted against, won't prevent another crisis and will drive financial business overseas.
Democrats say regulations are needed "that will essentially prevent a company from losing money or taking risk," Bachus said. "No law can do that."
Regarding JPMorgan, Bachus said that "even with this loss, I believe they're one of the most profitable institutions in the country ... There is no risk from this loss to depositors or taxpayers."