WASHINGTON -- The senators behind the Volcker Rule warned Friday that regulators implementing it have proposed a loophole that would have allowed JPMorgan Chase & Co.'s $2-billion trading loss.
"That loophole should be closed," said Sen. Carl Levin (D-Mich.).
Levin and Sen. Jeff Merkley (D-Ore.) wrote the provision in the 2010 financial reform law designed to limit trading by depositary banks for their own accounts. The Federal Reserve and other agencies are drafting the specific regulations covering that proprietary trading.
The law was intended to prevent the type of broad, risky bets that led to JPMorgan's huge loss, Levin and Merkley told reporters Friday.
But JPMorgan Chief Executive Jamie Dimon and other industry officials have lobbied regulators heavily to loosen the restrictions. Draft regulations would allow such bets because JPMorgan characterized it as a hedge, the senators said.