Of the big banks, JPMorgan Chase arguably came through the crisis best. And its CEO, Jamie Dimon, has been using the credibility built up during that period to fight the Volcker rule. “Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon told Fox Business earlier this year. “He has proven that to me.”

JPMorgan Chase Chairman and CEO James "Jamie" Dimon speaks during a Fortune 500 event at the New York Stock Exchange on May 7. (Jemal Countess/GETTY IMAGES FOR TIME)

Dimon, for his part, doesn't see the relevance. “Just because we’re stupid doesn’t mean everybody else was,” he said on a Thursday conference call. “There were huge moves in the marketplace but we made these positions more complex and they were badly monitored.”

But the point of the Volcker rule -- and of financial regulation more generally -- isn't to punish banks for being evil. It's to protect the rest of us from banks being stupid. And if the most prudent of the big banks can't keep itself from being this stupid this soon after the financial crisis, then it's pretty clear we're going to need very strong rules to keep them from being stupid in the years to come, when the lessons of the financial crisis have faded more completely.

As Reuters' Felix Salmon writes, "JP Morgan more or less invented risk management. If they can’t do it, no bank can. And no sensible regulator can ever trust the banks to self-regulate."

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Top stories

1) A massive bet gone wrong cost JP Morgan Chase at least $2 billion. "A massive trading bet boomeranged on J.P. Morgan Chase & Co., leaving the bank with at least $2 billion in trading losses and its chief executive, James Dimon, with a rare black eye following a long run as what some called the 'King of Wall Street.' The losses stemmed from wagers gone wrong in the bank's Chief Investment Office, which manages risk for the New York company. The Wall Street Journal reported early last month that large positions taken in that office by a trader nicknamed 'the London whale' had roiled a sector of the debt markets. The bank, betting on a continued economic recovery with a complex web of trades tied to the values of corporate bonds, was hit hard when prices moved against it starting last month, causing losses in many of its derivatives positions. The losses occurred while J.P. Morgan tried to scale back that trade." Dan Fitzpatrick, Gregory Zuckerman, and Liz Rappaport in The Wall Street Journal.

The loss is putting the spotlight on the Volcker Rule. "JPMorgan Chase’s $2 billion trading loss, which was disclosed on Thursday, could give supporters of tighter industry regulation a huge new piece of ammunition as they fight a last-ditch battle with the banks over new federal rules that may redefine how banks do business...The centerpiece of the new regulations, the so-called Volcker Rule, forbids banks from making bets with their own money, and a final version is expected to be issued by federal officials in the coming months. With the financial crisis fading from view, banks have successfully pushed for some exceptions that critics say will allow them to simply make proprietary trades under a different name, in this case for the purposes of hedging and market-making. The missteps by JPMorgan could highlight that murky line between proprietary trading and hedging. The bank unit responsible for losses takes positions to hedge activities in other parts of the bank." Nelson Schwartz in The New York Times.

@lizzieohreally: Dimonfreude.

@BCAppelbaum: If losing $2 billion in your trading operations doesn't violate the Volcker Rule, is it possible that we might need a broader rule?

@ezraklein: At this point in time, I feel comfortable predicting Jamie Dimon will not replace Tim Geithner as Secretary of the Treasury

2) The U.S. ran a monthly surplus for the first time since 2008. "The federal government posted a budget surplus in April as tax receipts rose, the first month that revenue has outpaced spending in more than three and a half years. The Treasury Department, in its latest monthly budget figures out Thursday, said the government ran a surplus of $59.12 billion during April, compared with a deficit of $40.39 billion a year earlier. Economists surveyed by Dow Jones Newswires had projected a $30.00 billion surplus. The federal government has historically run a budget surplus in April, when many Americans file their tax returns. Over the past 58 years, there have been 44 April surpluses, a Treasury official said. But from late 2008 up until two months ago, the government ran steady deficits amid weaker tax receipts and heavy spending following the financial crisis. The government last ran a monthly surplus in September 2008, the same month that Lehman Brothers Holdings Inc. filed for bankruptcy." Jeffrey Sparshott in The Wall Street Journal.

@DaveedGR: Obviously, the April surplus is due to taxes coming in. Remarkable that there hasn't been a surplus in any April since 2008...

3) Republicans may not offer a comprehensive replacement for Obamacare. "Republicans might not offer a comprehensive plan to replace President Obama’s healthcare law if the Supreme Court strikes it down this summer. House Republicans had said they would have a healthcare bill ready to go by the time of the ruling to present a clear alternative to the Democrats’ Affordable Care Act. But now, with the high court’s ruling just weeks away, some conservatives are urging the party to abandon that strategy, fearing voters will recoil from another sweeping revamp of the healthcare system...Ditching a comprehensive proposal could also make it easier for Republicans to steer the public’s focus away from popular elements of the Affordable Care Act that are unlikely to make the cut in a GOP plan...But a piecemeal strategy on healthcare could present its own risks. Republicans campaigned in 2010 on 'repealing and replacing' Obama’s law, but have struggled to clearly articulate a healthcare platform of their own." Sam Baker in The Hill.

4) Europe delayed a loan payment to Greece. "Euro-zone governments held back part of a big scheduled loan payment in a warning shot to Greece Wednesday, as outside pressure mounted on the country's politicians to pull together a pro-euro coalition to take charge of the government. Greece's euro-zone partners agreed to release only €4.2 billion ($5.5 billion) in previously agreed financing, to be paid out Thursday, holding back €1 billion at least until June. That would be paid only if Greece keeps to pledges it made to secure a bailout. With Athens in political turmoil after a fractured result in weekend elections, and a new vote likely by June, German politicians cautioned that further aid could be withdrawn if Greece abandons austerity targets--even if that pushes the country from the bloc...Thursday's payment is needed for Greece to pay €3.3 billion it owes the European Central Bank next week. The aid was agreed in March by euro-zone governments as part of Greece's €130 billion second bailout program." Alkman Granitsas, Laurence Norman, and Matthew Dalton in The Wall Street Journal.

5) Almost 250,000 Americans will lose their unemployment insurance this weekend. "More than 230,000 jobless Americans will lose their unemployment insurance by this weekend as reductions in the federal program that provides extended benefits to the long-term unemployed take broader effect. The new round of reductions is hitting eight states this month, meaning that about 400,000 long-term unemployed Americans in 27 states will have been cut off of the federal government’s extended unemployment benefits program this year, according to an analysis by the National Employment Law Project, which advocates for the unemployed. The cuts stem from a congressional agreement this year that will reduce the maximum duration of unemployment benefits from 99 weeks to 79 weeks as the nation’s jobless rate declines. Most states provide 26 weeks of benefits, and the federal government provides the rest, partially through a complicated formula that requires jobless rates to be both high and increasing to reach the benefit limit." Michael Fletcher in The Washington Post.

6) The House passed the GOP's sequester replacement bill. "The House approved sweeping legislation on Thursday to cut $310 billion from the deficit over the next decade -- much of it from programs for the poor -- and shift some of that savings to the Pentagon to stave off automatic military spending cuts scheduled for next year. The legislation has no chance of passing the Senate or of becoming law. The White House issued a stern veto threat, saying the bill would 'fail the test of fairness and shared responsibility.' But the legislation’s prescriptions and priorities could define the 2012 Congressional elections -- and are likely to affect the race for the White House...The bill’s political sensitivity came through in the 218-to-199 vote. Democrats were united in their opposition. Sixteen Republicans sided with the Democrats, and one Republican voted present. 'I voted my conscience, and I voted my district,' said Representative Mike G. Fitzpatrick, a Republican from suburban Philadelphia, who voted no." Jonathan Weisman in The New York Times.

Top op-eds

1) REICH: J.P. Morgan Chase makes the case for Glass-Steagall. "Ever since the start of the banking crisis in 2008, Dimon has been arguing that more government regulation of Wall Street is unnecessary. Last year he vehemently and loudly opposed the so-called Volcker rule, itself a watered-down version of the old Glass-Steagall Act that used to separate commercial from investment banking before it was repealed in 1999, saying it would unnecessarily impinge on derivative trading (the lucrative practice of making bets on bets) and hedging (using some bets to offset the risks of other bets)...What just happened at J.P. Morgan - along with its leader’s cavalier dismissal followed by lame reassurance - reveals how fragile and opaque the banking system continues to be, why Glass-Steagall must be resurrected, and why the Dallas Fed’s recent recommendation that Wall Street’s giant banks be broken up should be heeded." Robert Reich.

2) KRUGMAN: Talk of structural unemployment is an excuse for inaction. "So now we’re in another depression, not as bad as the last one, but bad enough. And, once again, authoritative-sounding figures insist that our problems are 'structural,' that they can’t be fixed quickly. We must focus on the long run, such people say, believing that they are being responsible. But the reality is that they’re being deeply irresponsible...So what’s with the obsessive push to declare our problems 'structural'? And, yes, I mean obsessive. Economists have been debating this issue for several years, and the structuralistas won’t take no for an answer, no matter how much contrary evidence is presented. The answer, I’d suggest, lies in the way claims that our problems are deep and structural offer an excuse for not acting, for doing nothing to alleviate the plight of the unemployed...All this talk about structural unemployment isn’t about facing up to our real problems; it’s about avoiding them, and taking the easy, useless way out. And it’s time for it to stop." Paul Krugman in The New York Times.

3) ALTER: Obama and Romney offer differing views of capitalism. "A more useful distinction may be between venture capitalists and human capitalists. Romney came up as a private-equity investor. Like his party, he believes in his heart that the way forward for the U.S. is to slash taxes for the wealthy even further so that they have more venture capital to invest in businesses. Obama came up as a community organizer. Like his party, he believes in his heart that a great nation must invest in human capital through education, health care and infrastructure...Last week brought a classic example of the differing approaches. The tussle over doubling interest rates for student loans (scheduled for July 1) was a controversy ginned up for the Obama campaign, but it was also an acid test. Democrats wanted to pay for the lower rate with a modest business tax; Republicans responded with plans to scuttle the preventive health-care part of Obamacare, despite much evidence of its efficacy for both people and budgets. " Jonathan Alter in Bloomberg.

4) CARPENTER AND KNEPPER: Occupational license reform would spur economic opportunity. "Since the 1950s, the number of U.S. workers needing an occupational license--effectively a government permission slip to work--has grown from one in 20 to nearly one in three, according to a 2010 study by Morris Kleiner (University of Minnesota) and Alan Krueger (Princeton). The burdens these licenses impose on would-be workers and entrepreneurs are substantial...The risk of a few bad haircuts seems worth a roll of the dice if the upside is more economic opportunities. But the truth is that consumers are capable of judging the quality of many services for themselves. If lawmakers in Michigan and elsewhere want to help more Americans find jobs, they should start by reducing or removing burdens that do little more than protect some people from competition by keeping others out of work." Dick Carpenter and Lisa Knepper in The Wall Street Journal.

5) BAKOPOULOS: Greek voters didn't have a chance to reject austerity without rejecting Europe. "It’s clear that Greeks -- derided throughout the Continent as lazy and corrupt, hobbled by the bailout deal’s austerity measures and humiliated by the troika (the European Central Bank, European Commission and International Monetary Fund) -- have put their trust outside the mainstream...But an election usually asks: who, or what, are you for? Not this one. If voters were given any choice, it was this: either accept the austerity measures or be forced to leave the euro zone. A double bind, this either-or option is unable to give expression to the complexity of both yes to Europe and no to austerity. Just before the vote, the German finance minister issued a warning: If Greek voters did not elect a government that would abide by the terms of the deal, 'then Greece will have to bear the consequences.' But the consequences are unclear. Vote correctly, or else. Or else what?" Natalie Bakopoulos in The New York Times.

Top long reads

Binyamin Appelbaum profiles financial blogger Joe Weisenthal: "Weisenthal is often -- perhaps more often than anyone else -- the first person to describe new data on Twitter. And almost as quickly, he repeats the thought, with a new headline, on Business Insider. When the government reported that only 120,000 jobs were created in March, well below expectations, he quickly rewrote the draft of his tweet: 'DISASTER: MARCH JOBS REPORT MISSES EXPECTATIONS AT 120K. (Analysts expected +205K)' A search on Twitter suggests that this, at 8:30 on the dot, was the first line published on the subject. Weisenthal managed to post a complete sentence before one of his main rivals, a blogger whose handle is ZeroHedge, tweeted just this: '120k.'...And then Weisenthal and his audience moved on to the next thing. Around 10 a.m., he posted a new article. The headline read, 'FORGET THE JOBS REPORT: The Most Important Number of the Day Hasn’t Even Come Out Yet.'"

James Bandler and Doris Burke investigate the struggles of HP: "Dr. Phil could fill a month's worth of shows just examining HP's board, whose dynamics have resembled those of rival junior high school cliques more than what is supposed to be a sage guiding force. At times, as we'll see, HP directors have refused to be in the same room with one another and have accused each other of lying, leaking, and betrayal. Time and again they've failed in their choice of CEO -- their most important task -- selecting a new leader whose most salient trait is that he or she is the opposite of the last one. All of this has impeded the company from tackling the fundamental problem it faces: Simply put, Hewlett-Packard has lost its way. The company is in the midst of an existential crisis. It remains a behemoth, No. 10 on the Fortune 500, with $127 billion in sales last year and $7 billion in earnings. But the trajectory is ominous. Those profits, for example, were 19% lower in 2011 than in the previous year."

'60s nostalgia interlude: Jimi Hendrix plays "Rock Me Baby" live at Monterey 67.

Got tips, additions, or comments? E-mail me.

Still to come: CEOs push for deficit reduction; an abortion rights leader is stepping down; low scores on a science exam; oil independence may not be a realistic goal; and bear cubs hop aboard the love train.


A rise in imports widened the trade deficit. "The U.S. trade deficit widened in March but other data Thursday reflected two conditions that could spur the economic recovery: strong American exports and falling oil prices. The March trade gap expanded 14.1% from February to $51.8 billion, the government said. Growing demand from consumers and businesses for goods and services from abroad, along with high oil prices that have since retreated, sent imports surging 5.2% to a record $238.6 billion. But exports also showed strength, rising at the fastest pace since last summer to set their own record. Despite Europe's fiscal woes and Asia's slower growth, the U.S. sent abroad $186.8 billion in goods and services in March, up 2.9% from February. Exports have climbed for the past four months, defying forecasts of slower growth due to the recession in the euro zone. U.S. manufacturers appear to have been helped by a historically weak dollar as well as subdued wage growth at home." Josh Mitchell in The Wall Street Journal.

The House passed the first appropriations bill of the year. "The House on Thursday approved the first appropriations bill of the year, a measure that spends $51 billion on the Departments of Commerce and Justice, NASA and other related agencies. The spending bill, H.R. 5326, was approved in a 247-163 vote in which eight Republicans voted against it, reflecting opposition to the amount spent in the bill. But it also picked up the support of 23 Democrats...The bill is among the least controversial of the 12 annual appropriations bills but has little chance of becoming law on its own. The White House has said President Obama will veto any and all of the 12 bills until the House renounces the top-line spending level in the overall budget written by Rep. Paul Ryan (R-Wis.). The legislation cuts spending by about 3 percent compared to current levels, which Republicans said shows their ongoing commitment to trim spending. The GOP said spending by agencies covered by the bill has been cut by 20 percent over the last three budget cycles." Pete Kasperowicz in The Hill.

CEOs are making a new push for a deficit deal. "Top business executives, many of whom sat on their hands during last year's frantic debate about raising the federal debt ceiling, have begun mobilizing and plan to be more vocal in urging Congress to reach a bipartisan deficit-reduction deal by the end of the year. Executives have been meeting privately with lawmakers, urging them to start laying the groundwork now so they can reach an agreement after the November elections to avoid the large tax increases and heavy spending cuts scheduled to take effect in January. They worry those measures could tip the economy back into recession and create turmoil in financial markets, according to people who have attended some of the meetings. J.P. Morgan Chase & Co. chief executive James Dimon hosted a lunch for several dozen chief executives and two U.S. senators late last month, one of the latest in a series of private meetings aimed at drumming up support for a political agreement." Damian Paletta in The Wall Street Journal.

Subsides are fueling gains in manufacturing. "As chairman and principal owner of Revere Copper Products, Mr. O’Shaughnessy runs one of America’s oldest manufacturing companies, started by Paul Revere himself, a fact that exerts considerable pressure. As he put it: 'What kind of a message are you sending to the people of the country if you abandon America?' But spend a day with him, and a more complex picture emerges. He wonders sometimes about the less patriotic alternative of relocating production to Asia or closing the factory entirely on the ground that Revere’s profit margin here is too thin -- less than $1 million on $450 million in annual revenue...What staves off those alternatives are labor concessions and a substantial government subsidy, something he and others in the United States say is increasingly important to fuel a nascent recovery in manufacturing...With such support, the key measure of manufacturing’s presence in America is ticking upward." Louis Uchitelle in The New York Times.

@jbarro: Just got woken up. I swear I was in the middle of a dream where I was arguing w/ a reporter about transfer taxes.

Engineering interlude: A real life Mario Kart.

Health Care

The leader of an influential abortion rights advocacy group will step down. "At the end of this year, Nancy Keenan will step down from her post as president of NARAL Pro-Choice America, the country’s oldest abortion-rights advocacy group. The 60-year-old Keenan said she is leaving out of concern for the future of the pro-choice movement -- and thinks she could be holding it back.Nancy Keenan will retire as president of NARAL Pro-Choice America at the end of the year. In recent years, Keenan has worried about an 'intensity gap' on abortion rights among millennials, which the group considers to be the generation of Americans born between 1980 and 1991. While most young, antiabortion voters see abortion as a crucial political issue, NARAL’s own internal research does not find similar passion among abortion-rights supporters. If the pro-choice movement is to successfully defend abortion rights, Keenan contends, it needs more young people in leadership roles, including hers." Sarah Kliff in The Washington Post.

An F.D.A. panel backed the preventive use of a H.I.V. drug. "A drug already used to treat H.I.V. infection should also be approved to prevent it, an advisory panel to the Food and Drug Administration said on Thursday. The recommendation is the first time that government advisers have advocated giving antiviral medicine to healthy people who might be exposed through sexual activity to the virus that causes AIDS. One panelist called approving the drug 'an amazing opportunity to turn the tide on this epidemic.' Studies have shown that people who take the medicine, Truvada, every day have a greatly reduced risk of infection. The F.D.A. usually accepts the advice of its advisory panels, which are made up of outside medical experts...Experts say better methods of prevention are needed because there are 50,000 new H.I.V. infections a year in the United States. Several speakers emphasized Thursday that that number had not budged in 15 to 20 years." Denise Grady in The New York Times.

Domestic Policy

Scores remained low on a national science test. "U.S. eighth graders made modest gains on the latest national science exam, but more than two-thirds still lacked a solid grasp of science facts, according to figures released Thursday that renewed concerns American schools are inadequately preparing children for college and the workforce. The 2011 National Assessment of Educational Progress, an exam administered by the U.S. Department of Education, showed that 32% of students were proficient in science, compared with 30% the first time the new version of the science exam was administered, in 2009...Teachers and education-advocacy groups cite various possible causes for weak scores, including a lack of qualified science teachers, budget cutbacks and a narrowing of the curriculum prompted by the No Child Left Behind law. That 2002 U.S. statute caused schools to be evaluated solely on math and reading tests, which persuaded some to reduce science education." Stephanie Banchero in The Wall Street Journal.

Congress is considering subsidizing the deductibles on crop insurance. "It's a deal that most businesses would relish: Buy an insurance policy to cover losses or falling prices, and the government will foot most of the bill. Such an arrangement has been enjoyed for more than a decade by the farmers who grow crops such as corn and soybeans, and the companies that insure them. And it's about to get even better. The farm bill now before Congress includes a provision -- estimated to cost about $3 billion a year -- that would help cover the losses farmers suffer before their crop insurance policies kick in. Those losses, termed deductibles, can run in the tens of thousands of dollars for a typical mid-size farm. Supporters say it's a money saver because it would replace an existing subsidy costing $5 billion a year. That subsidy, known as direct payments, pays farmland owners a set amount regardless of whether they've planted crops on the land." Kim Geiger in The Los Angles Times.

Adorable animals being adorable together interlude: All aboard the (bear cub) love train!


Oil independence may not be possible. "Over the past few years, the United States has experienced a boom in oil and gas production. And that’s led a few commentators to declare that the country is on the verge of ending its dependence on foreign energy and supply disruptions. Alas, that’s never fully possible...Even if the United States goes further and somehow manages to produce every last drop of the oil and gas it needs to run its economy, the country would still be vulnerable to events in the Middle East, tensions in Iran, strikes in Venezuela and other disruptions in the oil markets.... As the CBO explains, oil prices are set by the global oil market. 'Disruptions in oil production in one country will cause the world oil market to readjust so that all countries and firms continue to receive oil at the new prevailing price.' Even if the United States produced 100 percent of its own oil, the price would still go up if rising demand from China outstripped the ability of supplies to keep up." Brad Plumer in The Washington Post.

@AndrewRestuccia: A lively version of "Chain of Fools" is playing before confernce call with Grover Norquist, Rep. Pompeo, Sen DeMint on energy tax credits

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.