JP Morgan loss to be investigated; Wall St needs reform: Obama
New York: US President Barack Obama has said the USD 2 billion trading loss by "one of the best managed banks" J P Morgan will be investigated and it demonstrates the need for reform at Wall Street.
Had a bank not as strong as J P Morgan made the losses through betting, the government would have had to step in, said Obama, who was in the city to give the commencement address at Barnard College and attend fundraisers event.
Despite J P Morgan being run by one of the "smartest" bankers, it still lost money, making a strong case for Wall Street reform, he added.
"J P Morgan is one of the best-managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost two billion dollars and counting," Obama said in an interview with ABC's 'The View'. The full episode will air on Tuesday.
"We don't know all the details. It's going to be investigated, but this is why we passed Wall Street reform," said the President.
Obama said Wall Street reform is "important" as financial giants like J P Morgan are able to weather an error that the bank's own CEO called "egregious," but smaller institutions would not be able to take such huge hits.
"This is the best, or one of the best-managed banks. You could have a bank that isn't as strong, isn't as profitable making those same bets and we might have had to step in," Obama said, adding, "That's exactly why Wall Street reforms so important."
While touting his efforts to rein in the Wall Street behaviour that led to the massive taxpayer bailout of the banks following the 2008 financial crisis, he said his administration is still fighting for tough reform.
Obama said, "Now we are still fighting this battle because all these regulations are being put in place as we speak, a lot of the financial industry is still fighting, they have hired tons of lobbyists to push back on this stuff and I hope that everyone who is watching is lettering their members of congress know, you know what we want these rules in place to make sure this stuff does not happen again."
He added that had all his proposals passed by the Congress and implemented into law, such a thing would not have happened, he said. "But this, again, is going to be part of what the election is about," Obama said.
The president said Wall Street reform is one of the many critical areas where Obama and his Republican challenger, presumptive GOP nominee Mitt Romney, differ.
"We have got real differences here, because Governor Romney, some of the Republican members of Congress and the financial industry have been arguing that this is unnecessary, that this is impeding capital formation," Obama said.
He added, "...But what makes us the best financial industry is transparency, accountability, rules so that small investors feel like if they put their money into Wall Street, it?s not going to suddenly just disappear. They're not going to be defrauded."
Addressing graduating women at Columbia University's Barnard College, Obama made a reference to the J P Morgan loss and talked of regulation of the financial services industry.
"We know that we?re better off when there are rules that stop big banks from making bad bets with other people's money and when insurance companies aren't allowed to drop your coverage when you need it most or charge women differently from men," he said.
In the wake of the derivatives-trading loss, J P Morgan has announced that its Chief Investment Officer Ina Drew would retire. Drew had been at the helm of the bank's office that invested the firm's own money.
Apart from being a big blow for the banking giant that tackled the 2008 financial meltdown well, the whopping derivative-trading loss has also ignited fresh concerns on the risk taking ways of the Wall Street.