UM Cary Law Professor Michael Greenberger was one of the most visible experts on national media in the days immediately after the May 10 announcement from JP Morgan Chase that it had lost $2 billion from failed derivative trades.
As the former Commodity Futures Trading Commission official told New York Times columnist Joe Nocera, the loss would never have taken place if new rules for derivatives, mandated by the Dodd-Frank Act, had been in place. The “losses would not have piled up opaquely,” Professor Greenberger said, pointing out that the Federal Reserve would have seen the trades and forced JP Morgan to stop them.
Transparency is essential because, as Greenberger told The PBS News Hour, "these complex instruments are not even well understood by the people who create them and trade them." He elaborated on the point to Gretchen Morgensson, long-time business reporter for The New York Times: "These regulations are not just protecting the United States taxpayer…They protect the banks themselves. The best friend of these banks would be laws that prevent them from shooting themselves in the foot. The fact is, they can’t do it themselves."
Professor Greenberger is convinced that another stunning loss like the one at JP Morgan could take place again. As he observed to CBS News, "JP Morgan Chase and Jamie Dimon [its CEO] are the brightest guys in the room. If they have this problem, god knows how many other people have these problems. And this could lead us right back to where we were in 2008."