The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
TheStreet) -- In 2007, the banks gambled on mortgages and lost, causing the largest global recession since 1929. They then gambled on European sovereign debt and lost. And now we hear
(JPM) just lost $2 billion on a derivatives' bet. Should this not be the last straw?
There are important lessons to be learned from all this, lessons the bank lobbyists don't want anyone to hear.
Lesson One: More Regulation Is Not the Answer
The immediate reaction to the JPM fiasco is to look at bank regulatory filings. But note:
The New York Times
reported that neither the U.S. nor British regulators were even aware of the JPM unit that made the trades until they were tipped off by the media.
Are tougher regulations the answer? No. Banks will always be one step ahead of the regulators. We have had Basel I, II and III standards. And despite these, we have had the U.S. bank collapse, the euro near bank collapse, and this latest loss.
How about this? In addition to bank presidents signing off and taking responsibility for all bank reports, let's ask the regulators to take responsibility as well. The regulators would refuse. They have no idea what banks are really doing.
Do they know anything more than they did in 2008? I doubt it. I believe trying to regulate banks as currently constituted will never work. They are simply too complex to be effectively regulated.
Note further: The U.S. banking crisis is not over. More than 50% of the 742 banks that borrowed money from the Troubled Asset Relief Program (TARP) have not even started to pay off their debts.