NEW YORK (TheStreet) -- No borrowers, bondholders, regulators or taxpayers were hurt from the JPMorgan Chase (JPM) trading debacle; only shareholders and bank employees got hurt, which is how it should be.During the two trading sessions following JPMorgan CEO James Dimon's announcement late Thursday of a $2 billion second-quarter trading loss, the market lopped off 12% of the company's share price, and JPMorgan announced on Monday that Chief Investment Officer Ina Drew had resigned.
According to Harris, "it would be impossible for regulators to determine with any degree of accuracy if a bank is hedging or speculating," and that "what is needed is adequate capital so that whenever they make a mistake, the shareholders end up paying for it, and not the government or the bondholders." Along with the effect on bank employees, this is exactly what has happened, although we will see further government involvement, through various investigations and possible Congressional hearings. Harris says "it is undesirable for the government to regulate everything. It is easiest to regulate capital, so that when banks make mistakes, the mistakes don't propagate to other people." Even with the estimated $800 million after-tax hit to second-quarter earnings -- with the $2 billion hedging loss partially offset by $1 billion in gains on available-for-sale securities -- the effect on JPMorgan Chase's strong capital position is likely to be negligible. During his announcement on Thursday, Dimon said the firm's estimated March 31 Basel III Tier 1 common equity ratio would decline to 8.2% from a previous estimate of 8.4%. While it is understandable that members of Congress who worked to draft the Dodd-Frank legislation in the wake of the credit crisis that began in 2008 and the industry bailout through the Troubled Assets Relief Program would express concerns over JPMorgan's trading loss, Harris says that "none of us are hurt because the bank has enough capital," and that "the issue is not the Volker Rule ," which bans 'proprietary trading' as part of Dodd-Frank. "The issues is that banks have enough capital, so that when banks make mistakes, as they inevitably will, the shareholders end up owning the mistakes, instead of the U.S. Treasury." -- Written by Philip van Doorn in Jupiter, Fla. To contact the writer, click here: Philip van Doorn. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.