In the world of finance, simple mistakes can turn into big financial losses. Headlines this week report on JP Morgan Chase’s $2 billion loss from a failed hedging strategy.
But this loss pales in comparison to the U.S. Postal Service’s $3.2 billion loss just in the most recent quarter.
The Heritage Foundation’s Mike Brownfield compares the two losses in today’s Morning Bell:
While JP Morgan’s loss represents a clear failure of management, it’s not a systemic problem that requires or would be fixed by additional regulation. For starters, JP Morgan is a $2.3 trillion bank with a net worth of $189 billion, meaning that this loss reduced the bank’s capital ratio from 8.4 percent to 8.2 percent. In other words, the bank can absorb the loss, and it’s nowhere close to needing any form of federal intervention.
Some more perspective could be gleaned by examining the $3.2 billion loss the U.S. Post Office experienced in the most recent quarter, or the billions lost on risky green energy bets made by President Obama and Energy Secretary Steven Chu. Only those losses weren’t incurred by private investors, but by you the taxpayer.
Tell us in the comments: with the government’s track record of running a business like the Post Office, what do you think the government’s role should be in our market economy?