In his view:
1. Financial reform's next big step is going to be a bear to implement.
The Volcker Rule, named after its advocate and former Federal Reserve Chairman Paul Volcker, would prevent banks from trading exclusively for their own profit, or what's known as proprietary trading. Instead, they'd be limited to hedging transactions (taking positions to protect themselves from catastrophic downside) and what's called market-making, or ensuring that their customers can complete transactions quickly and easily. Currently, regulators are trying to figure out how exactly to put the rule into place.
But Dimon's $2 billion embarrassment came from a unit that's supposed to be hedging – meaning that it should have only gone down if there was a corresponding gain somewhere else. But there has been no gain.
As Sen. Richard Shelby (R) of Alabama wondered, if the unit responsible for disastrous trade generated some 10 percent of the company's total profit last year, is what JP Morgan calls hedging really hedging at all?
Dimon didn’t really answer the question, agreeing that the unit was supposed to make money but leaving the size of its contribution to JP Morgan's bottom line alone. More broadly, he later said that figuring out what's a proprietary trade and what's a hedge is a difficult task.