Washington Leviathan

The New York Times and other newspapers have devoted a large number of column inches to the Senate investigation of the multibillion dollar losses incurred by JPMorgan Chase in its so-called London Whale trades. See, for example, Jessica Silver-Greenberg’s Saturday Business article and Gretchen Morgenson’s Sunday business column.

Why should we care about the bank’s trading losses? Morgenson gets around to the question at the end of her column, but only the Wall Street Journal draws back to provide the big picture in an editorial that spots the relevant whale. Hint: Carl Levin is the circus master of the Senate investigation:

The clear premise of all this political activity is that taxpayers are still on the hook if Wall Street blows up again. Mr. Levin’s staff doesn’t spend a year investigating beer companies that fail to engage the age 25 to 34 demo with new advertising campaigns. Software executives don’t have to explain to Congress why they missed the scheduled launch of an important app. In those industries, big mistakes are issues for customers and shareholders, not taxpayers.

When President Obama signed Dodd-Frank in 2010, he promised, “There will be no more tax-funded bailouts—period.” And if that promise remained credible, then the whale trades would simply be a concern for Morgan customers, investors and employees. But Dodd-Frank tied Washington and Wall Street together like never before. Mr. Levin’s 50 interviews and review of 90,000 documents betray the no-more-bailouts blather of 2010….

The Levin hearing is proof that the too-big-to-fail problem continues and needs fresh thinking. And it’s also an argument that if taxpayers are looking for a serious reformer to end their exposure to these banking giants, Mr. Levin is not the guy.

One place interested readers will not find fresh thinking — shocker, I know — is in Paul Krugman’s May 2012 column on the initial exposure of Morgan’s Whale losses. According to Krugman, “much stronger regulation” is the answer.

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