Is piling on JP Morgan necessary?

September 17, 2013 09:45 AM
Shareholders must take action or be victimized

A regulator's job is never easy, but it needn't be silly either. Take, for example, the impending $800+ million settlement by a group of regulators with JP Morgan Chase over the "London Whale" trading fiasco (the Commodity Futures Trading Commission is following its own path and will not join that settlement).

How dare JP Morgan Chase lose an estimated $6.2 billion on those trades! We must extract another billion or so to teach it a lesson! This is not what lawyers call "disgorgement" where illicit profits are clawed back, nor is it "restitution" - the bank itself was the victim.

Or, more accurately, the burden of both the trading losses and the regulatory settlement, not to mention future payments in private litigation that is likely due to the bank's admission of fault, falls on shareholders who see their investment erode while having no complicity is any of the challenged actions. They are like the rich uncle who bails out the errant nephew, over and over again.

There must be a better way. As long as corporate managers can fob off the cost of their mistakes to shareholders with impunity, regulatory actions of this genre are little more than "shooting first and aiming later."

Whatever the CFTC decides on its own to do in this matter, we can only hope that it will assign blame correctly and not further victimize the innocent shareholders.

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