JP Morgan Chase trading scandal. What's next?

The recent trading losses of about $2 billion by JP Morgan Chase has highlighted the risks still existing because of limited regulation of banking practices. CEO Jamie Dimon summed it up by refering to the saga as an "error" and "bad judgement" in trades meant to hedge risk by their staff. The market took a knock as a result of this. US Stock futures are down at the moment hence the US markets will open lower. JP Morgan Chase is down by 7% in premarket trading today.

I hope this issue isn't swept under the carpet because it exposes serious issues of systemic risks still existing in the market. These risks are the ones that led to the stock market crash of 2008. The industry's insistence on limited regulation doesn't solve the problems which could prolong the depression the world finds itself in. What I see is that the philosophical basis on how markets which could serve everyone's interests has not changed with the advent of the world financial crisis. The belief of "maximum profits by banks is good for all" is still resonating in the minds of the top bankers. Self regulation by banks is something which has failed time and again because the interests of Main street are not factored in the process of self regulation. Self interests is still a dominating force in the attitudes of bankers. Hence systemic risks which lead to too big to fail financial institutions means that the process of risk identification, analysis and mitigation will be biased towards the interests of these financial institutions.

Another issue brought about by this scandal in relation to the current debate on new regulations in the U.S., is the "Volcker rule" which is meant to limit trading by banks using their own funds. In light of this, let's hope that policy makers will make bold decisions and not blinded by the tactics of Wall Street lobbists. Let's just watch how the U.S. markets will respond when they open to get a good feel of investor sentiment. But crucially let's watch how policy makers, especially regulators and lawmakers will respond in the coming few days to see how future financial stability is going to be sustained.