Sen. Bob Corker, the first lawmaker to call for a hearing on J.P. Morgan Chase Co.’s giant trading loss, said a key regulator sees the trade in question as allowable under the so-called Volcker rule.
Other lawmakers have said the trade would have violated the Volcker rule, which is a draft regulation meant to prohibit banks from certain trading activities, including making certain bets with their own money.
But Mr. Corker said the Comptroller of the Currency Office, regulator of national banks, has told him they disagree with that view. “That’s just absolutely not their perspective,” Mr. Corker, a Republican of Tennessee, said in a CNBC interview Monday. The unit that got involved in the trade was located in J.P. Morgan’s bank and thus under OCC’s jurisdiction.
The Federal Reserve has been “less forthcoming” with information about what went awry with the J.P. Morgan trade, he said.
Mr. Corker said the Fed responded to his inquiries that the issue is “way complex” and that “we want to understand more before we make any comments to you.” A Fed spokeswoman has declined to comment, saying the Fed does not discuss supervisory matters pertaining to individual institutions.
J.P. Morgan’s loss has inflamed an already heated Washington debate over the Volcker rule, an element of the Dodd-Frank financial law that restricts the kind of risk-taking commercial banks, which enjoy government banking, can undertake. J.P. Morgan claims its loss is the result of a legitimate hedge gone wrong. Critics say it was a pure gamble to make money.
Mr. Corker said his office has been talking to J.P. Morgan since the first news reports surfaced of the “London Whale,” the nickname given to the bank’s London trader who got the bank into the losing situation.
Mr. Corker said he called for a hearing because he wants lawmakers to have the facts before they jump into making policy decisions based on the bank’s major stumble.
“Policies are going to be derived out of what’s happened. I mean something this
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