In the aftermath of JPMorgan's $2 billion loss, which could bloat to as much as $4 billion in the coming weeks, critics of Wall Street have pressed the government to strengthen its oversight of the financial industry. But would that be enough to prevent a repetition of the financial crisis? Some say the very existence of JPMorgan and other too-big-to-fail banks represents a constant threat to the global economy — as well as the taxpayers who will have to rescue them if they collapse. Is the best solution to cut big banks down to size?
Yes. Regulation alone can't save the banks from themselves: JPMorgan's debacle shows that "there is no foolproof way to regulate banks," says Arnold King at The National Review. Government watchdogs would need "God-like powers" to prevent "errors in judgment, overconfidence, misguided innovation, or unforeseen events." At the very least, government regulators would have to know more about banking than the bankers themselves, and such brilliant regulators "might be rather difficult to find." JP Morgan is "about ten times as large as any bank ought to be," and the only way to protect the economy is to make banks smaller.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
