05/24/2012 03:21 pm ET

Richard Shelby Is Angry That Regulators He Sandbagged Didn't Stop JPMorgan Losses

Sen. Richard Shelby (R-Ala.) is shocked -- SHOCKED! -- that gambling is going on at JPMorgan, and that this gambling led to a multibillion-dollar loss on a "hedge" that was actually something that looks a lot more like an insane and irresponsible bet. But Shelby has nothing bad to say about JPMorgan. Rather, he's hopping mad at the inability of government regulators to keep sufficient watch after he and his party made sure their hands were tied in the first place.

Over at the Washington Post, Dana Milbank deftly allows this scene to unfold. Here's Act One:

"When did you first learn about these trades?" Shelby inquired.

Gary Gensler, head of the Commodity Futures Trading Commission, admitted that he had learned about them from press reports.

"Press reports!" Shelby echoed, with mock surprise. He smiled. "Were you in the dark?"

Gensler tried to explain that his agency does not yet have authority to regulate the bank, but Shelby interrupted. "So you really didn't know what was going on ... until you read the press reports like the rest of us?" he asked again.

"That's what I've said," Gensler repeated.

But Shelby wanted him to keep saying it. "You didn't know there was a problem there until you read the press reports?"

And here's the comical revelation from Act Two:

It's true that Dodd-Frank, the legislation responding to the 2008 economic collapse, hasn't worked -- because it hasn't been put in place. At the heart of the proposed reforms is the "Volcker rule," named for a former Federal Reserve chairman, which attempts to separate banks' gambling from their government-backed deposits. This mimics the situation before the Depression-era Glass-Steagall law was repealed in 1999.


Now industry-friendly lawmakers are using the scandal to discredit never-implemented regulations.

Hilarious. Clearly, the regulations -- that have not been implemented yet because Shelby and his colleagues have moved heaven and earth to block or degrade them -- are to blame here. Clearly, this has nothing at all to do with the way that Shelby's House colleagues have cut so much from the budgets of financial sector regulators that they're too hamstrung to do the work they were doing before Dodd-Frank was even conceived. (As Rep. Barney Frank (D-Mass.) remarked back in July 2011, the underfunding was such that regulators "can't even carry out some of [their old duties]," let alone any new ones.)

All this little bit of farce needs now is for the croupier to wander by and hand Shelby his winnings. Unfortunately for the scenic structure, Shelby got himself sorted out in that regard before this play even began. As Milbank notes, "JPMorgan Chase and its employees have given" Shelby $72,950 in the past five years.

Senators put federal regulators, not JPMorgan, on the hot seat [Washington Post]

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