By Peter Schroeder - 05/16/12 09:00 AM EDT
Lawmakers on Tuesday offered strikingly different opinions on the JPMorgan controversy, with reactions falling far from predictable party lines.
Senate Majority Leader Harry Reid (D-Nev.) took jabs at the nation’s largest bank, arguing its trading activities would be more at home at the craps table than the trading floor.
“I would suggest JPMorgan take their business to Las Vegas,” he said. “It is just a gamble.”
When headlines emerged last week that the Wall Street giant had engaged in complex transactions that would end up costing it billions of dollars in a matter of weeks, it looked to be the start of a fresh round in a well-trod partisan fight over financial regulation.
But in the days since, the political response has been nuanced.
The range of reactions highlights the complexities of the matter at hand, as well as the delicate role the financial sector plays in the political realm.
Some liberal politicians, such as Sen. Bernie Sanders (I-Vt.) and Massachusetts senatorial candidate Elizabeth Warren, pounced on the trade to push for new legislation that would further curb the banking sector.
Other Democrats, like Sen. Carl Levin (Mich.), are using the issue to ramp up pressure on regulators to write tougher rules implementing Dodd-Frank, but are stopping short of calling for new legislation.
“Is there something that lawmakers should be doing? Yeah, putting as much pressure as they can on regulators,” Levin told The Hill.
Even though Wall Street has been long been a popular punching bag, its fundraising prowess is still vital for both parties.
For example, Schumer has raised nearly $3 million from the financial sector during the last five years, while Senate Banking Committee ranking member Richard Shelby (R-Ala.) has raised over $800,000 from the industry during the same time, according to the Center for Responsive Politics.
Obama, meanwhile, spent Monday night at a fundraiser hosted by a top private-equity executive.
The JPMorgan news has sparked a flurry of press releases, though some members are taking a wait-and-see approach.
“I’d rather wait and get the facts first,” said Sen. Mark Warner (D-Va.).
“Obviously, you never want to see a $2 billion loss,” said Sen. Kay Hagan (D-N.C.). “It’s something that we are still being briefed on.”
The Republican response has also been varied, with some GOP lawmakers sounding a cautious note.
House Agriculture Committee Chairman Frank Lucas (R-Okla.) announced Tuesday that his panel would be postponing a markup of three bills that would alter Dodd-Frank provisions on derivatives, the complex financial tools that played a key role in JPMorgan’s loss. Lucas said the bills were unrelated to what caused the loss, but the news prompted a closer look at the measures.
“As always, Washington has a tendency to overreact,” he said. “This committee will take the time … to ensure there are no unintended consequences of the legislation that would encourage recklessness.”
But other GOP legislators have taken a more aggressive approach, using the news to push for probing hearings to get to the bottom of the trades.
Sen. Bob Corker (R-Tenn.) was the first lawmaker to publicly call for hearings on the botched trade.
“I think we ought to have continual hearings,” he said on MSNBC Tuesday. “No one really understands what happened.”
Senate Banking Committee Chairman Tim Johnson (D-S.D.) responded to Corker’s request by saying the panel would hold hearings “over the next few weeks” on the implementation of Dodd-Frank. Regulators would testify, and JPMorgan would be a topic of conversation, alongside reforms to money market funds and the European debt crisis.
On Tuesday, Shelby took things a step further.
Asked if he wanted JPMorgan officials to testify before the committee, he said, “Absolutely, [so we can] find out what really happened.”
Even while Reid was prodding JPMorgan, the Nevada Democrat offered up kind words for its head, Jamie Dimon, saying he had the “greatest respect” for him.
During a visit to ABC’s “The View,” President Obama heaped praise on JPMorgan officials.
“JPMorgan is one of the best-managed banks there is,” he said. “Jamie Dimon, the head of it, is one of the smartest bankers we’ve got, and they still lost $2 billion and counting.”
The administration has sought to toe a delicate line on the trading snafu, saying JPMorgan’s losses highlight the need for the financial reform law to protect taxpayers, while not demonizing executives at the firm.
Ina Drew, one of JPMorgan’s highest-ranking officials, retired following the financial blunders.
Some have questioned why Congress should have an interest in the JPMorgan matter to begin with, since the firm can bear the brunt of the losses and is not expected to require taxpayer support to see through the snafu.
Shelby said the point is not to take risk out of the marketplace, because “then you have no market.”
But Reid suggested the trading loss represents a taxpayer threat still posed by the financial system.
“If they make a bad bet, Uncle Sam picks it up, and we have to stop that,” he said.