WASHINGTON, May 12 (UPI) -- A $2 billion loss at a U.S. bank validates the need for tougher banking regulations, Democrats on Capitol Hill said.
JPMorgan Chase announced this week it lost $2 billion in six weeks time making bad bets on the derivatives market.
Meanwhile, the so-called Volcker Rule, named after former Federal Reserve Chairman Paul Volcker, is still being shaped by policymakers at the Federal Reserve.
The rule is meant to limit or ban banks making bets on the market with their own money -- what is generally called proprietary trading. The wording for the rule is not in its final form, however. How strongly worded it will be has yet to be determined.
The Fed asked for public comment on the rule and were deluged with criticism from the banking community, The Hill newspaper reported Saturday.
Republicans have also been chipping away at other parts of the Dodd-Frank overhaul bill at the urging of financial industry lobbyists.
But JPMorgan's $2 billion loss, "confirms our view that there needs to be regulation. It shows that if it can happen to them, it can happen to anybody," said Rep. Barney Frank, D-Mass., ranking member of the House Financial Services Committee.
"How many times do we have to be hit in the head with a financial sledgehammer to wake up and realize we've got to take action? The big banks have been fighting Dodd-Frank tooth and nail. … Regrettably, the banks have largely been successful," said Rep. Peter Welch, D-Vt.
One of the most prominent critics of the Volcker rule has been James Dimon, chief executive officer at JPMorgan.
But Democrats say the pendulum of public opinion now should favor tougher banking regulations.
Dimon once said Volcker "doesn't understand capital markets."
Frank had an answer to that this week. "I don't think Paul has lost $2 billion recently. He's going to have to stop making cracks about how Paul Volcker doesn't understand the system," Frank said.