NPR asked economist Simon Johnson whether Volcker would have stopped the proprietary trading that got JP Morgan into trouble. Morgan's CEO says it wouldn't.
Simon Johnson:Well, that's an interesting question. We're going to see going forward. My understanding is that the kind of betting that JPMorgan Chase was doing is absolutely not going to be allowed. Now, the argument of JPMorgan is, no, no, no, we were actually hedging our risks. Well, I don't know many people outside of JPMorgan who regard that as credible. So we're going to have some very interesting test cases along exactly these lines, including with offshore trading, including with trading in sovereign debt, for example, which is partially or largely exempt from many of the Volcker rule restrictions.
NPR: It sounds like you feel that we won't really know how good this rule is until there's been a bunch of test cases.
JOHNSON: That's right, absolutely. It's very much in the common law tradition that we like in the United States. There will be test cases. There will be details. There will be suits and countersuits. And out of that war in the trenches, if you like, we will see how tough the regulators are and how much the banks, the very big banks, can escape the intent of this very sensible rule. ...NPR
Lotsa luck there, America. We have institutions whose lawlessness has become so sophisticated, determined, and so arrogant that we need a massive cultural change to stop it. The law can't do it alone.
