It’s impossible, after the taxpayer-backstopped interventions into the financial markets in 2008 and 2009, to read this story without getting just a little bit cranky.
JP Morgan, the giant — and mismanaged — investment bank, reported a $2 billion loss a week or so ago, because of risky trades in one of its own accounts. An account, hilariously, that was designed to be a hedge against other, riskier, accounts.
Who was in charge of risk management for the bank? From Bloomberg:
The three directors who oversee risk at JPMorgan Chase & Co. (JPM) include a museum head who sat on American International Group Inc.’s governance committee in 2008, the grandson of a billionaire and the chief executive officer of a company that makes flight controls and work boots.
What the risk committee of the biggest U.S. lender lacks, and what the five next largest competitors have, are directors who worked at a bank or as financial risk managers. The only member with any Wall Street experience, James Crown, hasn’t been employed in the industry for more than 25 years.
Okay, stipulated: JP Morgan is a publicly-traded company. If the shareholders want to get rid of the incompetents who manage the bank, they should move to do so. None of my business. (Well, actually, it’s some of my business: I own some JP Morgan shares….)
But let’s all remember this episode the next time the banks come, hat in hand, for taxpayer-subsidized bailouts.
I’ve said it before in this space, but it bears repeating: the only — only — banking regulation that’s effective is the sight of bankers selling apples on the street.
Next time, let them sink.