NEW YORK (TheStreet) -- It's time for Congress to provide more guidance to bank regulators on exactly what kind of hedging activity will be permitted by banks, in the wake of JPMorgan Chase's (JPM - Get Report) $2 billion trading loss announced last week.
JPMorgan's $2 billion loss on hedging trades -- announced by CEO James Dimon last Thursday -- is "a potential opportunity for the policy makers to conduct a public hearing to really understand exactly what went wrong here," according to Frank A. Mayer, -- a partner in the Financial Services Practice Group of Pepper Hamilton LLP -- who adds that "you don't want to make policy based on myth."
At issue is the Volcker Rule, which the Federal Reserve is still struggling to implement, nearly two years after the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. The Volcker Rule prohibits bank holding companies from engaging in most forms of proprietary trading while severely limiting banks' investments in private equity funds and hedge funds. The Federal Reserve has had difficulty in defining which hedging activities banks will be allowed to continue engaging in.