Jason Laws, of the University’s School of Management, on the $2bn loss announced by major international investment bank, JP Morgan.
“The £1.2bn trading loss by JP Morgan on Credit Default Swaps, a type of Credit Derivative that provides insurance against bond default, provides a significant boost to supporters of tighter banking regulations.
Whilst regulation can be seen as stifling innovation, JP Morgan’s loss provides ammunition to those who want the reintroduction of the Glass-Steagal-Act (GSA), which ended the separation of commercial and investment banking activities and was repealed in 1999.
This lack of separation has been blamed by Paul Volker, former headof US Federal Reserve as one of the causes of the 2007-08 financial crisis.”
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