Washington, on the other hand, sees room for government intervention in bad news, and the hand of effective government policy in good.

Since JP Morgan Chairman and CEO Jamie Dimon broke the news late last week, the Federal Reserve has begun looking into whether JP Morgan has similar risk at other units. The SEC and the FBI have initiated independent investigations, and my committee, the House Financial Services Committee, announced it will be holding hearings on JP Morgan as relates to the implementation of Wall Street reform.

Further, pundits have called for a doubling-down on efforts to increase regulation as well as for broad and limiting promulgation of the so-called ‘Volcker Rule’.

The prevailing assumption is that JP Morgan violated the spirit of the Volcker Rule’s proprietary trading restriction, giving Democrats and regulators an example to point to as they yell about how we must stop Wall Street from further destroying the economy.

We all need to take a dramatic step back.

First, what exactly happened at JP Morgan? The bank used a position in credit default swaps to hedge its exposure to investments in U.S., European, and Asian bonds.

Simply put, it was betting the market would move in one direction, but at the same time hedging that bet with investments to limit loss if that was not the case. That’s all pretty standard as far as complex investment structures go.

But, JP Morgan made two mistakes.

First, the hedging and swap structure grew so complex that, when bond markets shifted against the bank’s original position, they could not be counted on to adequately offset losses in one position with gains in another.

Second, JP Morgan’s actions signaled its strategy to other investors who predictably raced to take the other side of JP Morgan’s trades, leaving the bank with scant opportunity to sell off its position when the market moved against it. It was a perfect storm of market efficiency.

This begs the following question: Are ineffective hedges proprietary trades? Conventional wisdom would say no. In fact, the SEC’s investigation won’t even focus on the complex trading strategy JP Morgan employed but rather on when bank executives knew about the losses, at what point the losses became material information, and whether any misleading statements were made by people with a responsibility to disclose material information.
Volcker looks to not even be a consideration.

So why is Washington calling for further regulation? Why is this Administration’s solution to a common, but supersized, market misstep to increase the layers of red tape that businesses have to wade through?

Dodd-Frank was 2,300-pages of more than 400 new rules and mandates to be imposed on the private sector. To date, only 185 rules have been completed, requiring job-creators to dedicate 24,035,801 hours each year for compliance.

Every day we live under Dodd-Frank is another day we live with costly uncertainty and job-killing regulations that simply have not effected the change Obama and “Occupy” Democrats have yearned for—in fact, they have made it worse.

This president and Senate Democrats should start spending their time talking about the 30-odd jobs bills sitting at their doorstep and stop worrying about whether a private company should be allowed to invest its own money in any legal way it sees fit.

It is time we tell our elected officials that we want to hear more about jobs, and less about paperwork.