Earlier this month, JPMorgan disclosed that it lost at least $3 billion in trading as a result of sheer mismanagement. “We ended up with a strategy that was flawed, complex, poorly conceived, poorly vetted and poorly executed,” JPMorgan Chase CEO Jamie Dimon told investors. “This should’ve never have happened.”  The news ignited a fresh debate on financial regulation — specifically on the Volcker rule, a measure Dimon had vocally opposed.
Yet it’s not certain the final Volcker rule would prohibit the kind of trades that led to JP Morgan’s losses. What’s more, four years after the financial crisis, it’s not clear that the country possesses the regulatory tools to prevent fiascos like JPMorgan’s in the future.
How are banking regulations written in the first place? Paul Schultz, Professor of Finance at the Center for the Study of Financial Regulation at Notre Dame, explains.