Photo: The White House
In the wake of JP Morgan’s revelation of their $2 billion trading loss, the debate is on over who is really to blame for the blunder. But Peter Goodman at The Huffington Post is pointing a finger where most have not—at the White House.In a column for the HuffPost, Goodman argues that while it may be satisfying to blame JPM CEO Jamie Dimon, he was just doing his job—trying to increase shareholder value despite risks involved. (“What are they supposed to be doing, helping blind people find their way to church?” he writes.)
The real blame, on the other hand, should be thrown on President Barack Obama because of his inaction when he had the leverage to make banks agree to stricter and tougher regulation as they received the second round bailouts from the government.
He also points to Obama’s dependence on the advice of Timothy Geithner, who ran a lax show at the New York Fed when the crisis was unfolding, and Larry Summers, who had a history of getting rid of derivatives regulation, as big faults.
Although Obama wasn’t responsible for the financial crisis, his inability to act when he could makes him responsible for JPM’s current predicament, Goodman argues—
The Obama administration had substantial leverage that it could have used to impose a sensible regulatory framework. Citigroup and Bank of America could not have survived without public largess, and AIG was a ward of the government. The administration could have attached stiff conditions to the next capital infusion, while threatening to withhold it. It could have demanded serious rules on derivatives. It could have required that too-big-to-fail institutions be broken into smaller pieces. It could have pushed for updated incentive structures at banks, with rules threatening executives with surrendering their compensation when their companies took undue risks and failed.
What do you think? Obama has been criticised before on not tagging on regulatory requirements when he handed out the bank bailouts, but this is the first time we’ve see someone connect that issue to JPM’s most recent debacle. Does pointing out past mistakes take away or contribute to the discussions that’s going on about the state of financial regulation, and is it really necessary?