Forget the particulars of JPMorgan’s $2 billion blunder, if it might have been stopped by a robust Volcker Rule or who would’ve done what differently. Here’s what you need to know about how the incident relates to the presidential campaign: Are tougher financial rules popular? Yes. Are people convinced the Dodd-Frank financial reform law completely fixed the problem? No.
As it has from the outset, Obama’s campaign will criticize Romney for wanting to repeal Dodd-Frank without a detailed plan for what should take its place, and seek to fit this critique into a broader narrative about Romney’s closeness with Wall Street. (One possible new avenue of attack for Democrats: JPMorgan employees’ prolific political donations to Romney and Republicans, although their gifts to Obama run into six-figures as well.) Financial reform is among the more popular pieces of legislation to pass under Obama, and there’s no reason to think his campaign won’t try to trade on that good will.
Romney, meanwhile, will continue to attack Obama for regulatory overreach that dampens profits and dries up lending, while (vaguely) calling for his own set of new rules. Even though Dodd-Frank is popular, the JPMorgan incident brings back the fears of 2008, and as Ben White writes in Politico, the perception that little has changed isn’t helpful for the incumbent. A close-reading of Romney’s limited statements on financial reform suggest his priorities include increased oversight of derivatives and enhanced capital requirements to limit the damage of unforeseen risk (both of which were included in Dodd-Frank, it should be noted), two measures that, along with the Volcker Rule, are definitely relevant to the JPMorgan debacle. (I for one am extremely skeptical that Romney would move to Obama’s left and call for the big banks to be dismembered.)
But it’s hard to imagine the incident will be anything more than a footnote in these larger narratives about the race. Romney needs to make the election a referendum on Obama’s stewardship of the economy–financial regulation is a relatively short chapter in that story. Obama wants to present a choice between two policy outlooks–one that protects the little guy, and one that favors corporations and the rich. JPMorgan is relevant, but not central. And both campaigns have already moved on to shinier objects.