In the wake of JPMorgan’s loss, regulators “clearly” are looking “more skeptically at the claim about portfolio hedging and what does the word ‘aggregate’ in the law mean you have to do,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm.
Wall Street has aggressively lobbied against the Volcker Rule. The five regulators implementing the provision received more than 17,000 comment letters -- the most for any part of the law. Bankers devoted the majority of their efforts to aspects other than hedging, such as allowances for trading by so-called market-makers who buy and sell securities to establish prices and whether banks can take positions in sovereign debt.
JPMorgan employs 12 lobbyists and spent $7.6 million on these activities in 2011, according to the Center for Responsive Politics in Washington. Dimon led Wall Street bosses in a closed-door meeting with Fed Governor Daniel Tarullo on May 2 to press the central bank to ease regulations, including the Volcker Rule.
Dimon publicly challenged Ben S. Bernanke in June 2011 on tougher oversight, asking whether the Fed chairman had “a fear like I do” that overzealous regulation “will be the reason it took so long” for banks, credit and job creation to recover from the financial crisis.
Fed spokeswoman Barbara Hagenbaugh declined to comment.
The KBW Bank Index of 24 financial stocks has dropped 14 percent since July 2010, the month Dodd-Frank was passed, compared with a 16 percent gain in the Standard & Poor’s 500 Index of stocks. JPMorgan shares have underperformed both, tumbling 21 percent to $31.93 on June 1.
Bank lobbyists now say they’re on hold in reaction to the attention JPMorgan has attracted. Their complaints may only strengthen the call for tougher rules, said Oliver Ireland, a partner at Morrison & Foerster LLP.
“The problem with this event is it doesn’t do the industry’s credibility any good, so it’s not clear the industry pushing a lot harder now would do any good,‘‘ Ireland said. ‘‘It may create a backlash.’’