US lawmakers and regulators have attacked London as a source of financial crises and promised tougher crossborder rules in the wake of $2 billion of trading losses at the UK unit of JPMorgan Chase.
Gary Gensler, chairman of the Commodity Futures Trading Commission, said on Tuesday at a congressional hearing into JPMorgan’s trading losses that the US was vulnerable to risky activity in London.
He said AIGhad been hit by its financial products unit in London while Citigroup had been harmed by special purpose investment vehicles set up in the UK capital.
“So often it comes right back here, crashing to our shores ... if the American taxpayer bails out JPMorgan, they’d be bailing out that London entity as well,” he told the House financial services committee.
One of JPMorgan’s top lobbying goals is preventing the bank’s London derivatives operations being regulated by the US’s CFTC. The bank has argued that it will lose business to the likes of Barclays and Deutsche Bank if it is forced to follow tougher US rules that require it to demand collateral from clients.
Mr Gensler said he had “a different view” and hoped that rules due out this week would not “create another London loophole”.
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