NEW YORK (TheStreet) -- In the monsoon of questions that has descended on JPMorgan Chase during the recent unpleasantness, there's only one that really matters: Where are the consequences?

I'm not talking about the actual impact on the bank of the $2 billion derivatives-loss-from-God-knows-what. JPMorgan is a big bank -- much too big to fail, as we all know -- so that's chump change, relatively speaking. It's just that no single event since the beginning of the Great Recession has proven the fallacy of CEO Jamie Dimon's anti-regulation posturing. In one single action, all of the hubris that he has exuded since the 2008 financial crisis has backed up like a clogged drain pipe and splattered in his face.

So what happens now? Where are the consequences for Jamie Dimon? Where are the consequences for the Volcker Rule? Where are the consequences for Mitt Romney, who has pledged to repeal Dodd-Frank and Sarbanes-Oxley? Where are the consequences for President Obama, who has failed to put the full power of his office behind meaningful financial reform?

The JPMorgan trading loss should be the catalyst for all the long-delayed reforms that are needed to prevent another financial cataclysm from taking place. But the ultimate outcome of this latest Wall Street scandal was clear even before the fateful conference call on May 10, during which Dimon began the phony-contrition campaign that continued during Tuesday's annual meeting.

There aren't going to be any consequences.

What we're seeing here is the cycle of scandal being played out in real time. That's the pattern of shock, horror, wheel-spinning and amnesia that has followed every Wall Street scandal since the Great Depression. It's a bit like the stages of mourning: denial, grief and, ultimately, acceptance. The intermediate steps vary, but there will always be acceptance. That means there isn't going to be a Hollywood ending to this. The bad guys will win again. It happened after the financial crisis of 2008, when the financial sector was the only winner in the recession that followed, and it is going to happen again.

Dimon may step down. His credibility as the Street's regulation-denouncing scold has been permanently crippled by the trading loss, and there are indications that JPMorgan's trading strategy -- whatever it was; we still don't know -- was

known to the highest echelons

of the bank's management. But even if Dimon falls on his sword or is removed from the board of the New York Fed, as some have demanded, what will change?

Certainly JPMorgan won't change. Whether the trade in question was a "hedge" as claimed, or a proprietary trading strategy, is immaterial. It was business as usual. As Chris Whalen

pointed out

in ZeroHedge on Tuesday, "what JPMorgan was doing is precisely how the bank makes more than half of its annual profit."

That involves risk -- risk to the rest of us as well as JPMorgan. And if the rest of us don't like it, well, we can just take a hike. When President Obama gave his famous speech on financial reform in Federal Hall in September 2009, Dimon and other bankers didn't even bother to show up. Why should they? The bankers have built a fortress to prevent themselves from the only thing that is going to keep the financial system from unraveling again: consequences. No consequences for them and none for their enablers, none for the Romneys and Geithners.

What needs to be done is not rocket science. The Volcker Rule, to prevent proprietary trading by banks, needs to be enacted without loopholes. But even the Volcker Rule and the reinstatement of Glass-Steagall, desirable as it surely is, won't necessarily prevent another horror from occurring. What's needed is that the big banks need to be split up. JPMorgan needs to be split off from Chase, and if the remnants are too big, they need to be sliced and diced again until the risks that pour from their recklessness can only hurt themselves.

The same needs to be done for every other major bank whose failure poses a systemic risk. Behemoths like

Bank of America




Wells Fargo


Goldman Sachs


Morgan Stanley

are not just too big to fail. They are too big to be trusted. Since bankers seem incapable of controlling their behavior, that's the only thing that is going to work.

How small should a bank be? Here's a good test: If a bank can take a $2 billion loss without suffering, it's too big. If the same loss can result in direct consequences to the bank, without hurting the rest of us, if it can be allowed to fail, then the bank is just the right size.

Until the banks face meaningful consequences, another meltdown is guaranteed. That's the lesson of the $2 billion trading loss. Jamie Dimon knows it, and that's why I think there's a reasonable chance that he's history. I'd really hate to see him go. Every day he spends on the job, unrepentant, is another lesson in the failure of government to protect the American public.

Gary Weiss's most recent book is AYN RAND NATION: The Hidden Struggle for America's Soul, published by St. Martin's Press.

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