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JPMorgan Chase-ened

Meanwhile, there will be calls in Congress to enact even further restrictions, but Republicans will almost certainly resist. Also, the White House might ultimately prove reticent to admit shortcomings in the law it passed when Democrats controlled both sides of Capitol Hill.

An unheralded impact may be on the implementation of key derivatives provisions. Consider the prospect of having no legislation to limit the extraterritorial application of Volcker and new derivatives rules, nor to eliminate the Lincoln "pushout" amendment of the DFA, which forces derivatives-trading out of banks and perhaps into less-profitable holding-company affiliates. Without such legislation, regulators will have a harder time reaching a policy outcome that will ensure a level playing field for U.S. banks active in Europe and Asia.

Just as important, it will now be much harder for the OCC to update the list of permissible investments for a national bank, which will be the only way to significantly reduce the number of derivative asset classes that must be spun out of the bank. This could cause complications for Goldman Sachs (GS), Bank of America (BAC) and Morgan Stanley (MS), which would otherwise have benefitted from allowing their derivatives positions to be based inside their bank structures.

America's "Big Four" commercial banks and two remaining global investment banks need that like a hole in the head.

In any event, we now face inevitable House and Senate hearings. As we await the next move from the White House and bank regulators, the debate continues over whether the Volcker Rule, fully implemented, would have prevented JPMorgan's delayed-fuse-but-now-exploding humiliation. The effect of that discourse might only be expected to make the banking group seem un-investible near-term.

At the time of publication, Gabriel had no positions in the stocks mentioned.

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