{"id":5310,"date":"2012-05-22T00:00:00","date_gmt":"2012-05-22T05:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2012\/05\/senate_democrats_want_volcker"},"modified":"2022-04-28T12:53:17","modified_gmt":"2022-04-28T17:53:17","slug":"senate-democrats-want-volcker","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/","title":{"rendered":"Senate Democrats Want Volcker Rule\u2019s \u201cJP Morgan Loophole\u201d Allowing Portfolio Hedging Blocked"},"content":{"rendered":"<p>In a letter to the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission the Office of the Comptroller of the Currency Administrator of National Banks, and the Federal Deposit Insurance Commission, Senators Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) spoke out against what they are calling the current draft of the Volcker rule\u2019s \u201cJPMorgan loophole,\u201d which they say allows for the kinds of trading activities that resulted in the investment bank\u2019s recent massive trading loss. Merkley and Levin want the regulators to make sure that the language in October\u2019s draft version is more stringent so that \u201cclear bright lines\u201d exist between legitimate activities and proprietary trading activities that should be banned (including risk-mitigating hedging and market-making).<\/p>\n<p>According to Levin and Merkley, who are both principal co-sponsors of the Volcker rule and its restrictions on proprietary trading, the regulation\u2019s latest draft disregarded \u201cclear legislative language and clear statement of Congressional intent\u201d and left room for \u201cportfolio hedging.\u201d Under the law, risk-mitigating hedge activities are allowed as long as they aim to lower the \u201cspecific risks\u201d to a financial firm\u2019s holdings, including contracts or positions. This is supposed to let banks lower their risks by letting them to take part in actual, specific hedges. However, the senators are contending that because the language that was necessary to enforce wasn\u2019t included in the last draft, hence the &#8220;JPMorgan loophole&#8221; (among others) that will allow proprietary trading to occur even after the law goes into effect. They blame pressure from Wall Street lobbyists for these gaps.<\/p>\n<p>The senators are pressing the regulators to get rid of such loopholes and put into effect a solid Volcker Rule, with stricter language, and without further delays. They noted that despite getting trillions of dollars in public bailout money, a lot of large financial firms continue to fight against the \u201cmost basic\u2026 reforms,\u201d which is what they believe that Wall Street has been doing with its resistance to the Volcker rule. (Also in their letter, Levin and Merkley reminded the regulators that it was proprietary trading positions that resulted in billions of dollars lost during the recent economic crisis.)<\/p>\n<p><strong>SSEK Talking to Investors About JPMorgan Trading Losses<\/strong><br \/>\n<a href=\"https:\/\/www.investorlawyers.com\/jp-morgan-chase-background-information.html\">JPMorgan Chase<\/a>&#8216;s (JPM) over $2 billion loss was on a series of complex derivative trades that it claims were made to hedge economic risks. Now, according to a number of people who work at trading desks that specialize in the kind of derivatives that the financial firm used when making its trades, the financial firm&#8217;s loss has likely grown to closer than $6 billion to $7 billion.<\/p>\n<p><a href=\"https:\/\/www.sifma.org\/issues\/regulatory-reform\/volcker-rule\/resources\/\">Volcker Rule Resource Center<\/a>, SIFMA<\/p>\n<p><strong>More Blog Posts:<\/strong><\/p>\n<p><a href=\"https:\/\/www.investorlawyers.com\/blog\/jpmorgan-chase-shareholders-fi\/\">JPMorgan Chase Shareholders File Securities Lawsuits Over $2B Trading Loss<\/a>, Institutional Investor Securities Blog, May 17, 2012<\/p>\n<p><a href=\"https:\/\/www.investorlawyers.com\/blog\/2012\/03\/sec_chairman_mary_schapiro_sta\">SEC Chairman Mary Schapiro Stands By Agency\u2019s 2011 Enforcement Record<\/a><a href=\"https:\/\/www.investorlawyers.com\/our-staff.html\">https:\/\/www.investorlawyers.com\/our-staff.html<\/a>, Stockbroker Fraud Blog, March 15, 2012<\/p>\n<p> <a href=\"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/#more-5310\" class=\"more-link\">Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In a letter to the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission the Office of the Comptroller of the Currency Administrator of National Banks, and the Federal Deposit Insurance Commission, Senators Jeff Merkley (D-Ore.) and Carl Levin (D-Mich.) spoke out against what they are calling the current draft of [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3752,3958,3963],"tags":[2540],"class_list":["post-5310","post","type-post","status-publish","format-standard","hentry","category-financial-firms","category-jp-morgan-chase","category-securities-law-and-regulations","tag-volcker-rule"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Senate Democrats Want Volcker Rule\u2019s \u201cJP Morgan Loophole\u201d Allowing Portfolio Hedging Blocked &#8212; Investor Lawyers Blog &#8212; May 22, 2012<\/title>\n<meta name=\"description\" content=\"In a letter to the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission the Office of the Comptroller &#8212; May 22, 2012\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Senate Democrats Want Volcker Rule\u2019s \u201cJP Morgan Loophole\u201d Allowing Portfolio Hedging Blocked &#8212; Investor Lawyers Blog &#8212; May 22, 2012\" \/>\n<meta name=\"twitter:description\" content=\"In a letter to the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission the Office of the Comptroller &#8212; May 22, 2012\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Shepherd Smith Edwards &amp; 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May 22, 2012","twitter_description":"In a letter to the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission the Office of the Comptroller &#8212; May 22, 2012","twitter_misc":{"Written by":"Shepherd Smith Edwards &amp; Kantas, LLP","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/#article","isPartOf":{"@id":"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/"},"author":{"name":"Shepherd Smith Edwards &amp; Kantas, LLP","@id":"https:\/\/www.investorlawyers.com\/blog\/#\/schema\/person\/e0240e0754684b69f7d6a7de1b9f1431"},"headline":"Senate Democrats Want Volcker Rule\u2019s \u201cJP Morgan Loophole\u201d Allowing Portfolio Hedging Blocked","datePublished":"2012-05-22T05:00:00+00:00","dateModified":"2022-04-28T17:53:17+00:00","mainEntityOfPage":{"@id":"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/"},"wordCount":515,"keywords":["Volcker Rule"],"articleSection":["Financial Firms","JP Morgan Chase","Securities Law and Regulations"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/","url":"https:\/\/www.investorlawyers.com\/blog\/senate-democrats-want-volcker\/","name":"Senate Democrats Want Volcker Rule\u2019s \u201cJP Morgan Loophole\u201d Allowing Portfolio Hedging Blocked &#8212; 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