Rep. Barney Frank (D-Mass.) says that JPMorgan Chase's $2 billion loss earlier this month reaffirms the argument for regulating Wall Street.
In an interview with the Daily Beast published online on Saturday, Frank signaled his belief that if the banking fiasco occurred five years ago, there "would have been a lot more panic and nervousness in the economy." He spoke about the matter in the context of the Dodd-Frank financial reform legislation being signed into law.
The Democratic congressman added that JPMorgan's loss also "reaffirms that derivatives are inherently risky, and even the best-run banks -- and JPMorgan is one of them -- cannot avoid the risk."
Frank made similar remarks on the matter earlier this month. "When a supposedly responsible, well-run organization could make such an enormous mistake with derivatives, that really blows up the argument, 'Oh, leave us alone, we don't need you to regulate us,'" he said, according to the Associated Press.
President Barack Obama echoed the stance articulated by Frank during a recent appearance on ABC's "The View." Addressing JP Morgan's loss he said, "You could have a bank that isn't as strong, isn't as profitable, managing those same bets and we might have had to step in." He added, "That's why Wall Street reform is so important."
Massachusetts Democratic Senate Candidate Elizabeth Warren, whose brainchild was the Consumer Financial Protection Bureau, recently asserted that big banks "cannot regulate themselves" and argued, "What has happened here is not just about JPMorgan Chase."
In speaking with the Daily Beast, Frank noted, "Ben Bernanke, Sheila Bair, and Hank Paulson -- three Bush appointees are essentially supportive of the things we’re talking about here. If you go by the Treasury, you’ll see the portrait outside Geithner’s office of Paulson, and he takes credit for a lot of the Dodd-Frank stuff. Generally, he pushed a lot of it."
Addressing the political nature of the issue he said, "But you have extremists today who really believe the free market should stand alone, and some of them say even if that causes a problem, that’s where you’re supposed to be." He added, "The Democrats’ position is the private sector should create the wealth, but you need rules to govern its behavior. The Republicans say no, leave them alone, they’ll do better without it."