In the U.K., a record fine for Barclays Plc has triggered outrage from lawmakers and forced resignations from the bank’s top executives. In the U.S., Wall Street’s defenders in Congress are sticking by the industry, undaunted by the Barclays fine or trading losses of more than $2 billion at JPMorgan Chase & Co.
While the U.S. Senate and House of Representatives have held hearings on JPMorgan and lawmakers have started to pay attention to allegations that banks including Barclays may have colluded to set interest rates, November’s presidential election and partisan gridlock have left little opening for legislative moves affecting banks including New York-based JPMorgan, Goldman Sachs Group Inc. and Bank of America Corp.
“In terms of legislative calendar, it’s late in the clock and there’s not a lot to be done here pre-election,” Mark Calabria, a former Republican Senate Banking Committee aide, said in a telephone interview. “Regardless of what happens at JPMorgan, Congress is leaving at the beginning of August barring the financial system itself actually collapsing. And even then, Congress would probably still take a recess.”
Through two high-profile hearings with JPMorgan Chairman and Chief Executive Officer Jamie Dimon, lawmakers’ ideological and policy fault lines remained bright and unmoved. Some House and Senate Democrats, including Senator Jeff Merkley of Oregon and Representative Barney Frank of Massachusetts, used the New York-based bank’s $2 billion trading loss as ammunition in the fight for tighter regulations on Wall Street and funding increases for their federal overseers.
The 2010 Dodd-Frank Act polarizes the parties and the presidential candidates. Former Massachusetts Governor Mitt Romney, the presumptive Republican nominee, has pledged to repeal Dodd-Frank. President Barack Obama cites the law as one of the cornerstone achievements of his first term in office.
Republicans, meanwhile, have seized on losses by JPMorgan’s chief investment office as evidence that Dodd-Frank puts too much reliance on regulators who were unable to detect the risks that led to the losses. They also argue that JPMorgan shouldn’t serve as a whipping boy because, unlike the 2008 financial crisis, the bank required no federal bailout after the losses were disclosed in May.
“This is how the system is supposed to work,” Representative Spencer Bachus, the chairman of the House Financial Services Committee, said in his opening statement of the panel’s June 19 hearing with Dimon. “Those who take the risks are the ones who suffer the loss or realize the gain.”
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