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Earlier this week, it was rumoured that Bruno Iksil would leave JP Morgan. And as it turns out, the rumours were true.

Iksil is a French-born trader who manned the London office of JP Morgan. Prior to the company’s loss, he was nicknamed the “The London Whale”; he made risky trades and turned extremely bullish in early 2012.

New York magazine claims, “With his bets all over the news and his bosses well aware [of his actions], the Whale was anything but a rogue trader.” Additionally, Senator Jeff Merkley warned more than a month ago, “His big bets illuminate the risk inherent in hedge fund-style trading.”

Iksil is blamed for being at the centre of the trading catastrophe, due to his outsize positions in an obscure corner of the credit markets, and is no longer allowed to trade on behalf of the bank. He is expected to leave soon, with an inside Wall Street source indicating he’s already been let go.

His departure adds to the three earlier this week; Achilles Macris, a senior London trader for JP Morgan, Javier Martin-Artajo and Ina Drew have already resigned.

In other news, Republican lawmakers have rejected calls for stricter regulation despite the questions raised by JP Morgan’s loss.

The panel’s hearing on a key tenet of the 2010 regulatory overhaul was scheduled well before the fall of JPMorgan.  The bank’s mistakes, however, were noted during a hearing about how best to regulate big banks, which can bring down the broader financial system.

Lawmakers say a firm’s character should count when regulators determine if they are systemically important financial institutions, which would subject them to a stricter level of oversight.

The systemically important tag would apply to all financial institutions with assets of more than $50 billion. Regulators have indicated fewer than 50 firms will pass the first step of the process for being designated as systemically important, but can’t report how many will make the final cut.

Republicans on the subcommittee denounced the overhaul’s requirement for financial firms to be tagged as important. They say it really means a firm is considered too big to fail—the doctrine that brought taxpayer bailouts of Wall Street during the 2008 financial crisis.

In their view, the banks won’t fail. Spencer Thomas Bachus hasn’t lost faith in JPMorgan and says, “Even with this loss, I believe they’re one of the most profitable institutions in the country. There is no risk from this loss to depositors or taxpayers.”

They insist the overhaul law won’t prevent another crisis and will only drive financial business overseas.

Treasury Secretary Timothy Geithner disagrees and says JPMorgan’s loss bolsters the case for stricter rules.

Democrats overall see the need for regulations “that will essentially prevent a company from losing money or taking risk.”

Shelley Moore Capito, Republican chairman of the House Financial Services subcommittee, asks two main questions: Where did the lapses in internal risk controls occur? And, were federal financial regulators aware of the positions the company was taking?

Democratic lawmakers and other proponents say the trades that led to the losses at JPMorgan would have violated the so-called Volcker Rule, which restricts banks from trading for their own profit. Regulators are working to finalize the rule.

It’s been widely publicized that CEO Jamie Dimon remains one of the most outspoken critics of the Volcker rule. He maintains the $2 billion loss came from a hedging strategy and not a bet with the bank’s money. Also, the banks have won an exemption in the rule that Dimon says will trades if they are hedging against risk.

Many officials are afraid the exemption encourages the kind of risk taking that endangers the broader financial system, with some pushing to go beyond the parameters of the law by placing limits on the amount of assets those firms can hold.

“Why not have smaller banks?” says Democratic Brad Miller.

Michael Gibson, director of banking supervision for the Federal Reserve, says if systemically important institutions will be required to hold bigger capital cushions against risk, they will have an incentive to avoid becoming bigger.

Originally published on Advisor.ca