Rep. Spencer Bachus (R-AL) was on CNBC’s “ Squawk Box ” this morning discussing the financial services industry in the wake of JPMorgan’s trading losses.
While there were clearly risk management problems and the trading losses may threaten JPMorgan’s dividend, Bachus pointed out that “This is not an AIG” that puts taxpayers on the hook.
He still remains worried about the size of financial institutions and the potential for taxpayers to be left holding the bag in event of significant losses. “Where we have federally insured deposits and a discount window where [banks] can borrow at half a percent and then go out and gamble, that bothers me,” he said.
“I think the answer to that is you require a sufficient amount of capital and don’t let them overleverage,” he added. But doing more to limit trading activity may not be the best approach. “Distinguishing between hedging, market making and proprietary trading is difficult to do, but if we limit that those jobs will move to London,” he noted.
“To have rewards you have to have risk,” he concluded.
—By CNBC.com's Justin Menza