Sen. David Vitter backs more hearings as U.S. House responds to JPMorgan loss
Washington -- The U.S. House is delaying action on a bill to scale back restrictions on high-risk investments in light of JPMorgan Chase's disclosure that it lost $2 billion in recent trades. "As always, Washington has a tendency to overreact," said Rep. Frank Lucas, R-Okla., who announced his House Agriculture Committee will delay votes on measures to pull back provisions of the 2010 Dodd-Frank legislation enacted after high-risk investments contributed to the 2008 economic crisis.
View full sizeJPMorgan Chase disclosed that it lost $2 billion in recent trades. "While the news of JPMorgan's trading loss is unfortunate, the bipartisan legislation the committee was scheduled to consider is unrelated to the cause of the trading cause," Lucas said.
Still, he said the committee should take time "to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions."
Louisiana Republican lawmakers have generally supported calls to reduce some of the Dodd-Frank restrictions.
Vitter, Scalise comment
But Sen. David Vitter, R-La., who voted against Dodd-Frank, said he agrees with Lucas that more hearings should be held first.
"I think it'll be important to bring the heads of JPMorgan before the Senate Banking Committee to determine what went wrong, and if this furthers our need to push back against the 'too big to fail' culture of Washington and Dodd-Frank," Vitter said. He said the Dodd-Frank bill fostered bigger financial institutions whose failures could be seen as having such a drag on the economy as to lead to more federal financial bailouts.
Rep. Steve Scalise, R-Jefferson, made similar arguments.
Sen. Mary Landrieu, D-La., who supported the Dodd-Frank bill after modifications were added to reduce restrictions on smaller community banks, said Congress shouldn't act hastily.
"Reckless trading by the largest Wall Street banks is precisely what led to the financial meltdown in 2008 -- and we are still recovering from that mess," Landrieu said. "These reforms remain critical to prevent a repeat of the high-risk practices that caused America's worst recession since the Great Depression."
Among the House bills slated to be taken up this week, and now delayed, is one that would limit some restrictions on risky trading by the international divisions of banks. JPMorgan was among several large banks arguing that applying such rules to their overseas offices would put them at a competitive disadvantage.
At a House hearing Wednesday, lawmakers debated the implications of the JPMorgan losses.
"There's no doubt that this week's news of JPMorgan's trading losses has raised significant questions about the supervision of risk within an institution," sa id Rep. Shelly Moore Caputo, R-W.Va., who presided over the hearing by a House Financial Services subcommittee.
"The story is still unfolding and although it appears that the firm had sufficient capital to absorb the significant loss, one of the questions I would ask is, would a less capitalized institution survive a similar loss?"
No big deal
Rep. Spencer Baucus, R-Ala., downplayed the JPMorgan losses.
"Even with this loss, I believe they're one of the most profitable financial institutions in the country," Baucus said at the House Financial Services Committee hearing. "There is no risk from the loss to depositors or to the taxpayers."
Bruce Alpert can be reached at balpert@timespicayune.com or 202.450.1406.