At the May 22 hearings of U.S. Senate Banking Committee on swaps regulation, both Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler where asked when and how they became aware of JPMorgan Chase’s hedging difficulties.
Their answers: They each heard it first through the media.
The financial crisis (and subsequent events such as this) keep providing prima facie evidence that regulators do not have the tools to see into risks being taken on by the financial institutions they are charged with overseeing.
But there is hope that a global initiative known as the legal entity identifier (LEI) project will.
At the hearings, New York Senator Charles Schumer asked Chairman Gensler about whether the risks will be clearer – more transparent – once a system for clearly identifying all participants in financial transactions and their parent companies is in place.
Specifically, the LEI system.