Today, Congressman Stephen F. Lynch joined Rep. Earl Blumenauer (D-OR) and eight House colleagues in calling on regulators to implement a clear, strong Volcker Rule. The Volcker Rule was included in the Dodd-Frank Wall Street Reform and Consumer Protection Act to prevent banks from gambling with customer money by using it to engage in risky proprietary trading for the bank’s own gain.

“As the JPMorgan Chase ‘London Whale’ trading debacle proves, big Wall Street megabanks continue to make reckless bets while at the same time trying to delay and water down critical reforms such as the Volcker Rule in the Dodd-Frank Act,” said Lynch. “I agree that it is long past time that the regulators put in place a strong Volcker Rule that is both clear and easy for banks to follow and free of unnecessary loopholes.”

A copy of the joint statement can be found below:

Last week’s report by the Senate Permanent Subcommittee on Investigations on JPMorgan Chase Whale Trades, along with a hearing on the same topic held on Friday, March 15, serves as a reminder to regulators about the importance of implementing a strong Volcker Rule and establishing a firewall between our nation’s core banking system and high-risk investment banking practices.  

It is clear that JPMorgan Chase was using depositors’ money to engage in high-risk trading practices. According to the Senate report, “without alerting regulators, JPMorgan Chase’s Chief Investment Officer used bank deposits, including some that were federally insured, to construct a $157 billion portfolio of synthetic credit derivatives, engaged in high risk, complex, short term trading strategies, and disclosed the extent and high risk nature of the portfolio to its regulators only after it attracted media attention.” The report also finds that JPMorgan Chase mischaracterized high-risk trading as hedging, hid its massive losses, disregarded risk, dodged oversight and mischaracterized its portfolio to investors, regulators, policy makers and the public.

Such conflict-ridden, high-risk trading activities played a central role in big banks’ accumulation of the failed toxic assets that helped freeze credit to businesses and families as a result of the 2008 financial crisis, and lead to trillions of dollars of bailouts of the largest financial firms. Congress established the Volcker Rule as part of the Dodd Frank Wall Street Reform and Consumer Protection Act in 2010 to separate such high risk trading from commercial banking and to ensure that taxpayers never have to bail out these kinds of bad bets again.  

This rule was supposed to be finalized by regulators in July 2012, but is still stagnating, unimplemented. The recent findings of the Senate Committee should serve as a wake-up call to regulators to cease the delays and immediately implement a strong Volcker Rule to protect depositors and taxpayers and strengthen U.S capital markets.

Rep. Earl Blumenauer (OR-03)

Rep. Peter Welch (VT-At Large)

Rep. John Conyers (MI-13)

Rep. Louise Slaughter (NY-25)

Rep. Suzanne Bonamici (OR-01)

Rep. Stephen Lynch (MA-08)

Rep. Henry C. “Hank” Johnson (GA-04)

Rep. Jan Schakowsky (IL-09)

Rep. Jim Moran (VA-08)

Rep. Jim McGovern (MA-02)